What is a health savings account and how does it work?

A health savings account or HSA is a tax-advantaged account that lets you use pre-tax dollars to pay for health care costs. Money is the account grows free of taxes until you use it – and distributions (money paid out of the account) are also tax-free as long as they are used for qualified medical expenses.

What counts as a qualified medical expense?

The term is defined quite broadly. Health insurance premiums, hospital costs, ambulance services, prescriptions, doctor visits, medical tests and imaging, and dental expenses are all covered. Many vision expenses count as well, including eyeglasses and contact lenses. You can use HSA funds to pay for medical devices and equipment such as hearing aids, wheelchairs, crutches, even orthopedic insoles. Common over-the-counter medicines are also covered, including pain relievers, allergy and cold medicine, and many supplements.

Do you lose the money in your health savings account?

No. HSAs don’t have a “use it or lose it” rule. If you don’t use money one year, it rolls over to the next year, so funds aren’t lost. In fact, with an Affinity HSA, your money will actually earn dividends and grow.

Are Health Savings Accounts worth it?

If you pay income tax, have a high deductible health insurance plan, and expect to have medical expenses, then yes, a health saving account provides tax advantages worth having. Consider the following scenario:

You’re in a 30% tax bracket, and you pay $2,100 for doctor visits, lab tests, and prescriptions. You need to earn $3,000 gross salary to pay that $2,100 cost, because $900 goes to income tax. But if you put that same $3,000 in an HSA, nothing goes to income tax. You’d have $900 left in your account which you could use as tax-free distributions to pay for other “qualified medical expenses” - everything from a new pair of prescription glasses to vitamin supplements and over-the-counter pain and cold medicine.

What is considered a high deductible health plan for the purpose of opening an HSA?

For 2022, the IRS defines a high deductible health insurance plan as any plan with a deductible of at least $1,400 for an individual or $2,800 for a family. An HDHP’s total yearly out-of-pocket expenses (including deductibles, copayments, and coinsurance) can’t be more than $7,050 for an individual or $14,100 for a family. (This limit doesn't apply to out-of-network services.)

What is the downside of an HSA?

The main downsides are that they can only be used with high deductible health plans, and the annual contribution limits me be less than your medical expenses. Other than that, there are some recordkeeping requirements: if you are ever audited, you need to show that you used the funds for qualified medical expenses, which shouldn’t be a problem for anything you pay for with the account debit card. Finally, if you withdraw funds for non-qualified expenses, you’ll lose the tax advantages: you'll have to pay income tax plus a penalty.

Does Affinity charge a monthly maintenance fee for HSA accounts?

Like most of our savings options, HSA accounts have $0 monthly maintenance fees if enrolled in eStatements. If not, there is a monthly fee of $2 for paper statements. [Please verify answer]

Are there minimum account requirements for Affinity HSAs?

No. There’s no minimum opening deposit and no minimum monthly balance.

Can I open a joint HSA with a spouse or relative?

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How do I open an Affinity Health Savings Account?

It's easy. You have to join Affinity Federal Credit Union as a member, then apply for an HSA. Here are all the details.