Understanding Health Savings Accounts

May 30, 2017

Blue Cross and Blue Shield of Kansas City (Blue KC) is committed to keeping you informed when it comes to your health insurance plan. If you’re a member of a Blue KC BlueSaver® PPO health insurance plan, you can enroll in a Health Savings Account (HSA).

What is an HSA?

An HSA allows members enrolled in a qualified high-deductible health plan to use tax-free HSA funds to pay for qualified medical expenses as defined by the IRS.

  • Members can have part of their pre-tax earnings deposited into an HSA.
  • Members can also use savings or individual contributions to fund their HSAs.
  • A member’s employer may also contribute funds to the account but contributions are optional.
  • Members can rollover unused HSA funds at the end of each calendar year

What are the benefits of an HSA?

  • Contributions that you and your employer make to your HSA are tax-deductible.
  • Earnings on your HSA balance are not taxed, and funds withdrawn to pay for qualified medical expenses are not subject to income taxes or penalties.
  • Your HSA will remain in your name and continue to earn interest, even if you leave or change jobs.
  • To continue contributing to an HSA, you must continue to be enrolled in a high-deductible health plan.
  • If your new employer or health insurance company does not offer a high-deductible health plan, or you choose not to enroll in one, you may still use the funds in your HSA for qualified medical expenses and earn interest, however you will be unable to contribute funds to the account.

Establishing an HSA

  • To enroll in an HSA, you must be covered under a high-deductible health plan and cannot be covered by any other health plan that is not a high-deductible health plan with some exceptions.
  • You must not receive any Medicare benefits and cannot be claimed as a dependent on another person’s tax return.

Learn more about HSAs from the IRS.