Which statement best identifies a Health Savings Account (HSA)?

Which statement best identifies a Health Savings Account (HSA)?

• A. A plan with unlimited coverage for all medical services.
• B. A tax-exempt account used to pay or reimburse eligible medical expenses.
• C. A credit card used for medical bills.
• D. A plan that only covers dental services.

Answer: (B)

An HSA is a tax-advantaged savings account you own that you can use to pay for qualified medical expenses. It’s designed to work with a high-deductible health plan, letting you contribute pre-tax or tax-deductible funds, grow them tax-free, and reimburse yourself for eligible costs now or later. The money stays with you if you change jobs or insurers, and any unused balance carries over year to year. You can use HSA funds for a broad range of eligible medical expenses, not just a single service. That combination of being a separate, tax-advantaged account and being used to cover eligible medical costs is why this description is the best fit. The other ideas aren’t accurate: HSAs aren’t unlimited-coverage plans, they aren’t a credit card for medical bills, and they aren’t limited to dental services.

An HSA is a tax-advantaged savings account you own that you can use to pay for qualified medical expenses. It’s designed to work with a high-deductible health plan, letting you contribute pre-tax or tax-deductible funds, grow them tax-free, and reimburse yourself for eligible costs now or later. The money stays with you if you change jobs or insurers, and any unused balance carries over year to year. You can use HSA funds for a broad range of eligible medical expenses, not just a single service.

That combination of being a separate, tax-advantaged account and being used to cover eligible medical costs is why this description is the best fit. The other ideas aren’t accurate: HSAs aren’t unlimited-coverage plans, they aren’t a credit card for medical bills, and they aren’t limited to dental services.