Definition

• Available since Jan. 1, 2004, a Health Savings Account is a tax-exempt supplemental account for a high-deductible health care insurance policy. An HSA is a type of individual savings account in which the funds are set aside exclusively to cover the costs of medical expenses. Americans who invest in HSAs may withdraw the funds tax-free to offset the high costs of medical expenses not covered by their high-deductible health coverage.
  
  

What an HSA Covers

• Investors with HSAs may use funds from the account to cover payments for all qualified medical expenses. The government has established a list of expenses that qualify for HSA withdrawals. These include: all prescription medications, including prescribed vitamins and over-the-counter drugs; all visits to your primary care provider and medical specialists; all prosthetics and prescribed medical devices; dental, vision and chiropractic visits and procedures; hospital stays, including surgeries and emergency room visits; radiography services; all pre-natal and OB/GYN services, including maternal and newborn care; prescription contraceptives; operating room costs; and routine and preventative care services, such as vaccines and yearly check-ups.
  
  

What an HSA Does Not Cover

• HSA funds cannot be used or withdrawn to pay for any procedure, product or service that the Internal Revenue Service does not list as a qualified medical expense. Memberships to health clubs, cosmetic and hygiene products, transportation and life insurance premiums, diet programs for weight loss, school tuition and non-prescribed medications are some of the expenses that do not qualify as withdrawals from an HSA account.
  
  

HSAs and Copayments

• All copayments for visits to licensed medical professionals meet the requirements for qualified medical expenses for an HSA. You do not need a referral to a specialist in order to cover the copayment with funds from an HSA. You can use funds from your HSA to cover medical copayments even before you fully meet your deductible payments. You may use HSA funds to pay for copayments to regular doctors, specialists, as well as dentists, ophthalmologists, chiropractors, oral hygienists and even some alternative medicine practitioners, such as acupuncturists and acupressure practitioners.