As I’ve said before, I wanted a HSA¹ ever since I heard of them a couple of years ago—and that was only for the ability to keep money put into an FSA².  I could never understand why my company could not offer me the former, and always offered me the latter.

High Deductable Plan

You see, in order to be eligible for a HSA, you have to have a High Deductable Plan offered by your employer.  High Deductable means no copays.

However, it’s not as scary as that might seem.

Let me illustrate:

Suppose I went to the doctor for surgery.  The doctor charged $10,000 for the procedure, but after it got processed by the insurance company they say that I owe $8,000.  With my high deductable plan, I pay the bill up to my deductable—which in my case is $1,500 per individual, $3,000 for a family.  So, I would pay $1,500—and not pay a dime for further health care for the rest of the year.

And that $1,500 can come in the form of a check or debit from my HSA, so I can pay with pre-tax dollars.

What is a HSA?

A HSA is an account you hold with a bank—it’s a hybrid because it’s both an account where you have ATM privileges and you can write checks against it, but anything over your deductable you can invest.

You set one up yourself and link it to a qualifying health plan, and away you go.

How can I fund it?

There are multiple ways to fund it.

• You can fund it like a normal IRA, with after tax dollars.
• You can fund it with pre-tax withdrawals from your pay check like a 401k.
• You can fund it one time from another IRA—which is what I chose to do.

What if I don’t have any money in there and I get sick?

Unlike a FSA, if you have a medical bill to pay and you don’t have any money in the account (but you’re contributing through your paycheck), you cannot pay the bill from your HSA.  You can, however, reimburse yourself for medical expenses paid from your own pocket.

Simply keep the receipt (for your tax records) and write yourself a check (or hit the ATM).

1. Health Savings Account [↩]
2. Flexible Spending Account [↩]