Glossary

All the terms you’ll need to know in order to best understand the world of HSAs.

Beneficiary
The individual(s) designated to inherit your HSA in the event of your death.
Benefits
The health care items or services covered under a health insurance plan.
Catch-up contribution
Additional allowable contribution amount, currently set at $1,000, above the annual maximum contribution limit for individuals aged 55 years or older by the end of the current tax year.
CDHP (Consumer-Driven Health Plan)
The underlying designation for an HSA-eligible HDHP. It signifies that the HDHP meets the criteria for qualification, including having a high deductible of at least $1,400 for individual coverage and $2,800 for family coverage, and not paying for any services, except a very limited list of exceptions, prior to a person’s need to meet their annual deductible. In addition to a high deductible, the out-of-pocket maximum (see definition) is also regulated and cannot exceed $6,900 and $13,800 for individual and family coverage, respectively.
Claim
The information about a specific medical service submitted by your provider to your insurance company. They are called “claims” because they are a claim of eligible expense toward your HSA’s tax benefits.
Contribution
The technical term used to refer to deposits made to your HSA. They apply to one-time or recurring contributions, as well as your annual contribution limit.
Contribution limits
The maximum amount established by the IRS that you may contribute to your HSA on an annual basis. For 2020, the contribution limit for an individual is $3,550. The contribution limit for family coverage is $7,100.
Copay
The fixed dollar amount you pay for specified services and prescriptions under most traditional health plans. Copays are generally not allowed with HSA-eligible high-deductible health plans (HDHPs).
Custodian
A bank or financial institution that holds and safeguards the HSA provider’s assets (i.e. your contributions) on behalf of account holders.
Deductible
The (usually) annual amount you must pay out of your own pocket before your health plan begins paying toward your costs. HDHPs have a high deductible by definition, which is the tradeoff for the tax benefits of the HSA itself.
Dependent
An individual other than yourself who is covered by your insurance plan; typically a spouse or child. The IRS has specific requirements to determine tax dependents. Your HSA can be used to pay for qualified medical expenses of any tax dependent, regardless of whether or not they are covered by your plan.
Distribution
The technical term used to refer to funds that have been withdrawn from your HSA for any reason. See also: Withdrawal
Electronic funds transfer (EFT)
A quick method of transferring funds directly between your personal financial institution and your HSA.
Eligible individual
Any individual with a qualifying high deductible health plan (HDHP) coverage, as long as the individual does not have any other health coverage, such as non-HDHP traditional plans (PPOs, HMOs,) Medicare, Medicaid, or short-term, limited-duration coverage.
Employee
A person who qualifies for health insurance coverage (and perhaps also an HSA) through their employer and, as a result, has chosen to receive that coverage. Also known as enrollee, subscriber or member.
Enrollment
The act of signing up for health insurance. If you opt to receive and pay for health insurance for a period of time (usually 12 months), whether through your employer or on your own, you are said to have “enrolled” in health coverage.
HDHP (High Deductible Health Plan)
A plan designed to have a higher deductible in order to lower the monthly premium amount you will pay. While there are some HDHPs that do not qualify as HSA-eligible (see also “CDHP”), those that have a minimum deductible of $1,400 for individual coverage and $2,800 for family coverage, as well as meet the other CDHP qualification criteria, also qualify for a tax-preferred HSA, allowing you to pay for certain medical expenses with money free from federal taxes.
Insurance premium
The amount you pay, either monthly if you get insurance on your own, or per pay period if you get insurance through an employer, to have health insurance. HSA-qualified plans typically have lower premiums than traditional health plans.
Marketplace
Shorthand for the “Health Insurance Marketplace,” which are shopping and enrollment services administered either by healthcare.gov or individual states, for finding and enrolling in ACA-subsidized health insurance plans, AKA Obamacare. When shopping on a public marketplace, be mindful of confirming that your HDHP is also HSA-eligible..
Network
The facilities, providers, and suppliers your health insurer or plan has contracted with to provide health care services.
Open Enrollment
The benefits period, also referred to as OE, which typically lasts 1-4 weeks during the last three months of the year, when health plans enable individuals and employees to “enroll” in or set up individuals and groups for health coverage. Employers set the duration of OE, while public sources of coverage, including the ACA and Medicare, have an annual enrollment period lasting anywhere from five weeks to more than two months.
Out-of-network
A provider who does not participate in your health plan network and has no agreement with your health plan. You can still use your HSA to pay for qualified medical expenses from out-of-network providers, but may pay more because your insurer has not negotiated a preferred rate.
Out-of-pocket (OOP) maximum
For HSA-qualified plans: the maximum amount you will pay annually of your own money, i.e. “out-of-pocket,” before your insurance must cover 100% of your approved medical expenses, including prescriptions. Your deductible is included in this calculation and your OOP will be more than your deductible For other plans, the concept is similar, but copays, coinsurance, and other costs may not be included in the calculation of your out-of-pocket maximum. Contact your health plan for more details about your specific coverage.
Over-the-Counter (OTC) Drug
A medicine that does not require a prescription to purchase.
Patient Protection and Affordable Care Act (PPACA)
The comprehensive health care reform law enacted in March 2010, more commonly known as the ACA or “Obamacare.”
Pre-tax
The gross amount paid for goods or services before taxes are taken out. Also, a contribution option for full-time (W2) workers to contribute to their HSA directly from their paycheck, before taxes are deducted (see also, “Tax-Free Contributions”).
Provider
The doctor or another healthcare professional who provides healthcare services.
Provider invoice (provider statement)
A bill you receive from your provider for services. It should reflect the adjustments presented on the EOB (explanation of benefits) from your health plan.
Qualified Medical Expenses
The IRS-designated list of HSA-eligible medical expenses. Individuals or families may use funds from their HSA to cover these specific medical items and/or services. Also known as “eligible medical expenses.”
Reimbursement
The money you withdraw from your HSA to pay yourself back for out-of-pocket medical expenses. There is no deadline to reimburse yourself for qualified medical expenses from your HSA.
Tax-free contributions
When an individual participates in a payroll deduction program through an employer, deductions may be taken from payroll before calculating taxable federal income, Social Security, FICA, and for most states, taxable state income. By taking deductions pre-tax, the individual reduces the dollars on which they are taxed, and, as a result, reduces the total tax bill.
Withdrawal
Money that can be taken out of your HSA tax-free when used on qualified medical expenses.

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