What is the function of a Health Savings Account (HSA)?

A Health Savings Account (HSA) is designed to help individuals save money for qualified medical expenses on a tax-advantaged basis. The primary function of an HSA is to allow contributors, typically those enrolled in a high-deductible health plan, to set aside funds specifically for medical costs, which can include doctor visits, hospital stays, prescriptions, and other healthcare-related expenses.

The correct understanding of this function is tied to the tax benefits offered by HSAs. Contributions to an HSA are tax-deductible, and the funds can grow tax-free. Additionally, withdrawals for qualified medical expenses are also tax-free, making HSAs a powerful tool for managing healthcare costs.

While other options presented might touch on aspects of healthcare financing, they do not accurately represent the core purpose of an HSA. For instance, HSAs are not intended to exclusively cover dental and vision expenses; rather, they cover a broad range of medical expenses. Additionally, HSAs do not eliminate out-of-pocket expenses entirely—rather, they provide a way to manage those expenses more effectively. The claim that HSAs provide funds for non-medical uses once a deductible is met is misleading; while funds can be used for non-medical expenses, doing so incurs taxes and