So much confusion exists about Health Savings Accounts (HSA's) that we thought a short course would be helpful.
First, HSA's are NOT a type of insurance. Many of the insurance products today are confusing, because they use the words/letters "HSA" in the product name (e.g., BlueChoice HMO HSA). The IRS code requires that you buy a "Qualified High-Deductible Health Plan" (QHDHP), aka a "HSA Compatible Plan", in order to have the right to set up a Health Savings Account. When an insurance product includes "HSA" in the title, it is really saying that it is a "Qualified High-Deductible Health Plan". The health plan is separate from the Health Savings Account.
Anyone can set up and participate in an Health Savings Account (enrolled in Medicare), if he/she has a Qualified High-Deductible Health Plan, and is not covered by other insurance, or be claimed as a dependent on someone else's tax return.
An HSA is similar to an IRA in that you typically establish the account with a bank, and any account contributions are tax deductible up to the IRS limits for that year. You may make contributions prior to the 1040 filing deadline (i.e. April 14th when 1040 due on April 15th).
An HSA is NOT like an IRA in that you may use HSA funds for "Qualified Medical Expenses" without an early withdrawal penalty, and without any incurring income tax. After Medicare enrollment, an HSA and an IRA are similar in that both can be used for income without a penalty. However, an HSA may also continue to be used for Qualified Medical Expenses without incurring income tax.
2016 Maximum Contributions: Individual = $3,350; Family = $6,750. For individuals over age 55, a $1,000 catch up provision is added to the maximums.
*Please check with your CPA and Tax advisor for complete information.