A health savings account (HSA) is a tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a high-deductible health plan (HDHP). The funds contributed to an account are not subject to federal income tax at the time of deposit. Unlike a flexible spending account (FSA), HSA funds roll over and accumulate year to year if they are not spent. HSAs are owned by the individual, which differentiates them from company-owned Health Reimbursement Arrangements (HRA) that are an alternate tax-deductible source of funds paired with either high-deductible health plans or standard health plans.
HSA funds may currently be used to pay for qualified medical expenses at any time without federal tax liability or penalty. Beginning in early 2011 over-the-counter medications cannot be paid with an HSA without a doctor's prescription. Withdrawals for non-medical expenses are treated very similarly to those in an individual retirement account (IRA) in that they may provide tax advantages if taken after retirement age, and they incur penalties if taken earlier. The accounts are a component of consumer-driven health care.
Proponents of HSAs believe that they are an important reform that will help reduce the growth of health care costs and increase the efficiency of the health care system. According to proponents, HSAs encourage saving for future health care expenses, allow the patient to receive needed care without a gatekeeper to determine what benefits are allowed, and make consumers more responsible for their own health care choices through the required High-Deductible Health Plan.Opponents of HSAs say they may worsen, rather than improve, health care in the United States because people may hold back the healthcare spending that would be covered, or may spend it unnecessarily just because it has accumulated to avoid the penalty taxes for withdrawing it, but people who have health problems that have predictable annual costs will avoid HSAs to have the costs paid by insurance. There is also debate about consumer satisfaction with these plans.