What Is an HSA Insurance?

Insurance plans come in many forms and types, including one known as a health savings account, or HSA. An HSA works with a qualifying insurance plan in which funds are deposited into an account that are then used to cover medical costs. Most qualifying plans are referred to as high deductible insurance plans. An HSA has many features that make this type of insurance option attractive to many people. Funds can be deposited into an HSA once an insurance plan becomes effective.


Contributions that are made to an HSA are tax deductible on a federal tax return. This means that money that is deposited into an HSA is subject to a tax deduction which is available to anyone. If an HSA was setup by an employer the contributions that are deposited by an employee are subject to any federal taxes. Some states may also take a tax deduction for contributions made to an HSA.

Medical Expenses

Money that has been deposited into a HSA can be spent tax free, as long as it is for a qualified medical expense. This can include paying for various types of costs such as prescriptions, co-pays or any other expense that counts towards the deductible. An HSA may also be used to pay expenses for family members that are not covered on the health insurance policy.

Premiums and Taxes

An HSA can help individuals to save money on the premiums spent for an insurance policy as well as an their income taxes. This is because an HSA is paired with a high-deductible insurance plan typically results in lower premium payments for the policy. The lower premium payments and the deductions from the HSA can result in considerable savings from year to year.

Long-Term Savings

Since individuals need to provide contributions to their HSA there is an incentive to stay health and not incur any unnecessary medical expenses. Money that is not used for medical expenses stays in the account until it needs to be used. An HSA can have a specific interest rate in which can grow money that is currently in the account. When money is withdrawn that is not used for a medical expense, it will be taxed as income.

Effects of HSAs

There are many positive effects of using an HSA for medical and insurance costs. One positive effect is the competition that can occur as more and more people start using an HSA for their insurance needs. Another effect is that an HSA attempts to encourage more people to be healthier. An HSA also allows individuals to decide how to spend the funds that are in their account. When individuals are responsible for many of the costs unnecessary expenses may not occur.