A Health Savings Account or HSA is actually a combination of two things. It combines a savings account, called an HSA, set up at a bank with a compatible health insurance policy. The money placed in the HSA is tax-deductible as long as it is used to cover the cost of medical expenses and other IRS approved expenses. The health insurance policy counts all money used from the attached HSA to pay for medical expenses against the policy’s deductible. Once the plan deductible is reached, the plan usually moves to 100% coverage. HSA’s also often provide one family deductible rather than multiple deductibles. This can lead to added savings.
It is important to note one misconception about HSA plans. The money paid for the monthly premium does not go to the HSA account itself. The money in the savings account must be placed there by the customer. That money receives the tax benefits, but it is up to the customer to fill the HSA.