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How is it possible to keep control of unused health dollars for future use? There is an investment tool people are taking advantage of in increasing numbers: the health savings account (HSA).

The HSA is proving itself to be a wise investment tool, not only for health care needs, but also for long-term retirement planning.

HSAs serve as a pre-tax and pre-FICA fund that can be used to save for the day medical expenses are actually incurred. The account is consumer-controlled. If the funds are not used, the money will continue to grow over time. One of the most attractive features of the HSA is that these funds grow through the accrual of tax-free interest.

The HSA is proving itself to be a wise investment tool, not only for health care needs, but also for long-term retirement planning. The HSA fund is tax-deductible, compounds tax-free interest and is tax-free to withdraw for medical bills (in comparison to IRA distributions that are always taxable). Also, people ages 55 to 64 can make additional contributions called “catch-up payments” to their accounts to accelerate the rate of savings.

For example, if you spend $700 a year on health care costs, anything you contribute above that is money invested for your future. Maximum allowable contributions enhance this opportunity further, particularly for those investing at a younger age.

And since an HSA can be invested in the market just like a 401(k), with tax-free interest, the opportunity for long-term growth is exponential.

Consumer-driven financial tools like HSAs encourage the development of families and communities that are incentivized to better manage health expenditures. This in turn facilitates a focus on healthier lifestyle choices, which ultimately takes some of the burden off the health care system. It only works because individuals and families have something to gain financially that also leads to living a longer, healthier life.

At any income level, a savings account that simultaneously drives participants to save money, live a healthier lifestyle and make better health care decisions is a truly valuable resource. HSAs are wise investment tools that effectively fund health care needs now and in the future. It’s a win-win for consumers and the community.


With the soaring cost of health care, many consumers are turning to the health savings account (HSA) as a way to combat rising expenses. This financial option is quickly growing in popularity and has the potential to save you a significant amount of money.

The HSA offers consumers a manageable way to take control of their health expenses.

The HSA offers consumers a manageable way to take control of their health expenses. It encourages the consumer to make healthier lifestyle choices, better health-care-related financial decisions, and to invest and save money over time for future medical needs. Consumer-driven health care has the power to change a person’s financial future while also contributing to positive change in America’s health care system as a whole.

Here are 10 reasons to love an HSA:

  • HSAs fund health care needs

  • HSAs use pretax funds

  • HSAs come with significant premium savings over traditional insurance plans

  • HSAs offer expanded coverage options for consumers

  • HSAs allow negotiating power to secure discounts on medical services

  • HSAs offer control and choices regarding health care needs

  • HSAs are portable

  • HSAs create financial incentives for managing health care expenses

  • HSAs are a powerful tool for retirement investing

  • HSAs create a health-conscious community and put market forces to work that drive down health costs for everyone


  • Your health savings account (HSA) may reimburse:

  • Qualified medical expenses incurred by the account beneficiary and his or her spouse and dependents;

  • COBRA premiums;

  • Health insurance premiums while receiving unemployment benefits;

  • Qualified long-term care premiums*; and

  • Any health insurance premiums paid, other than for a Medicare supplemental policy, by individuals age 65 or older.


Distributions made from an HSA to reimburse the account beneficiary for eligible expenses are excluded from gross income.


The Internal Revenue Service (IRS) defines qualified medical care expenses as amounts paid for the diagnosis, cure or treatment of a disease, and for treatments affecting any part or function of the body. The expenses must be primarily to alleviate a physical or mental defect or illness.

The products and services listed below are examples of medical expenses eligible for payment under your HSA, when such services are not covered by your high-deductible health plan. To be an expense for medical care, the expense has to be primarily for the prevention or alleviation of a physical or mental defect or illness. This list is not all-inclusive; additional expenses may qualify, and the items listed below are subject to change in accordance with IRS regulations.

Under a rule that went into effect Jan. 1, 2011, claims for over-the-counter medicine or drug expenses (other than insulin) cannot be reimbursed without a prescription. This rule does not apply to items for medical care that are not medicines or drugs.

  • Abortion

  • Acupuncture

  • Alcoholism treatment

  • Ambulance

  • Annual physical examination

  • Artificial limb

  • Artificial teeth

  • Bandages

  • Birth control pills

  • Body scan

  • Braille books and magazines

  • Breast pumps and supplies

  • Breast reconstruction surgery

  • Capital expenses (improvements or special equipment installed to a home, if meant to accommodate a disabled condition)

  • Car modifications or special equipment installed for a person with a disability

  • Chiropractor

  • Christian Science practitioner

  • Contact lenses

  • Crutches

  • Dental treatment (not including teeth whitening)

  • Diagnostic devices

  • Disabled dependent care expenses

  • Drug addiction treatment

  • Eye exam

  • Eye glasses

  • Eye surgery

  • Fertility enhancement (in vitro fertilization or surgery)

  • Guide dog or other service animal

  • Health institute fees (if treatment is prescribed by a physician)

  • Certain health insurance premiums (not premiums for an employer-sponsored plan, but certain other medical premiums)

  • Intellectually or developmentally disabled care, treatment or special home

  • Laboratory fees

  • Lactation expenses

  • Lead-based paint removal (if a child in the home has lead poisoning)

  • Learning disability care or treatment

  • Legal fees associated with medical treatment

  • Lifetime care, advance payments or “founder’s fee”

  • Lodging at a hospital or similar institution

  • Long-term care

  • Medical conference expenses, if the conference concerns a chronic illness of yourself, your spouse or your dependent

  • Medical information plan

  • Medications, if prescribed

  • Nursing home fees

  • Nursing services

  • Operations

  • Osteopath

  • Optometrist

  • Oxygen

  • Physical examination

  • Pregnancy test kit

  • Prosthesis

  • Psychiatric care

  • Psychoanalysis

  • Psychologist

  • Special education

  • Sterilization

  • Stop-smoking programs

  • Surgery

  • Special telephone for hearing-impaired individual

  • Television for hearing-impaired individuals

  • Therapy received as medical treatment

  • Transplants

  • Transportation for medical care

  • Tuition for special education

  • Vasectomy

  • Vision correction surgery

  • Weight-loss program if it is a treatment for a specific disease

  • Wheelchair

  • Wig

  • X-ray

Rev. 4/10, 11/10, 1/11, 4/11, 1/12, 4/14


Plans that do not allow reimbursement of all eligible medical expenses as defined by the IRS and Department of Treasury must customize this brochure prior to use.

* For purposes of reimbursement of qualified long-term care premiums from an HSA, reimbursement in excess of the amount which may be deducted on an individual’s personal tax return is not an eligible expense. IRS 213(d)(10) establishes the tax deduction allowed for qualified long-term care premiums on individual tax returns. If the HSA reimburses long-terms care premiums for an amount greater than set forth in IRC 213(d)(10), the amount greater than allowed is included in the account holder’s taxable income and is subject to a 20 percent penalty.

We are happy to answer any of your questions at NY Small Health.

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