What is a Health Savings Account (HSA)?

A Health Savings Account (HSA) is specifically designed as a tax-advantaged savings account intended for individuals to save money for qualified medical expenses. Contributions made to an HSA are often tax-deductible, and the funds can grow tax-free. Additionally, withdrawals for qualified medical expenses are also tax-free, making HSAs an effective way for individuals to manage their healthcare costs while enjoying tax benefits.

This account can be utilized alongside high-deductible health plans, enabling individuals to cover out-of-pocket medical costs before reaching their deductible. The flexibility of an HSA allows the account holder to decide how and when to use the funds, and unlike some other savings accounts, the money in an HSA rolls over from year to year if not used.

In contrast, the other options describe different concepts that do not align with the purpose or structure of an HSA. For instance, a mandatory insurance plan provided by employers refers to employer-sponsored health insurance but does not embody the savings aspect of HSAs. Similarly, an insurance plan that focuses solely on preventative services does not reflect the comprehensive nature of spending that an HSA provides. Lastly, a fund controlled by insurance companies for premium payments speaks to a completely different financial arrangement that lacks the personal investment