Health Savings Account

Enjoy increased adoption and reduced benefit costs

With the rise of consumer-directed healthcare (CDH), consumers are facing more choices and responsibility for managing their medical expenditures. Employers can respond by offering employees a high-deductible health plan (HDHP) combined with a Health Savings Account (HSA), a consumer-controlled and portable savings fund.

The Visa HSA card is a convenient way for employees to access funds in their HSA to pay for qualified medical expenses¹ for themselves, their spouse, and dependents. HSA contributions receive favorable tax benefits, and unused funds roll over year after year—growing tax-free. As HDHPs gain in awareness and usage, HSAs will become an increasingly important way for consumers to manage their healthcare costs.

How it works

An HSA account is coupled with an HDHP to allow consumers to save pre-tax dollars for qualified expenses. The Visa HSA card makes it easy for consumers to access these pre-tax funds in order to pay for such eligible IRS-qualified medical and dental expenses as co-payments, deductibles, and medications.

Upon enrolling in an HSA plan through their employer or another organization authorized to offer HSAs, consumers receive an embossed Visa HSA card. If consumers have authorized regular salary deductions through their employer’s cafeteria plan, a predetermined amount of funds (subject to IRS maximums) is deducted from their pre-tax wages and credited to their HSA. Contributions from employers, if offered, are typically deposited pre-tax directly to employees’ HSAs, based on pay cycles.

When consumers need to draw on their HSAs to pay for eligible expenses, they present their Visa HSA card to the merchant, doctor, pharmacy, or other qualified medical service provider, and the funds are deducted from their HSA. All transactions may be documented on monthly electronic or optional printed account statements.

Card features

• Line of credit. Visa HSA cards may be offered in conjunction with a personal line of credit to cover gaps in HSA funding and help pay for medical expenses prior to coverage under HDHP.
• Multi-purse capability. Visa’s flexible platform supports HSA programs offered individually or “stacked” with HSA-eligible Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements (HRAs), and/or a line of credit, all of which can be accessed with a single, multi-purse Visa card.
• One-card solution. Visa HSA cards may be combined with health insurance identification cards for a “one-card” solution.
• Co-branding capabilities. The front of the Visa HSA card can be co-branded with the name/logo of an affinity/co-branding partner.
• ATM & Merchant Category Code (MCC) Restrictions. Visa’s flexible platform allows for the Visa HSA cards to be issued either with full (both ATM & MCC), part (either ATM or MCC) or no restrictions.

Benefits

For Employers
Benefits of the Visa HSA card:

• Increased employee participation. Adding a Visa HSA card to an HDHP plan provides consumers with convenient access to their HSA funds, helping increase employee participation.

General HSA benefits:

• Tax advantages. Employer contributions to an HSA on an employee’s behalf are not subject to withholding for purposes of Federal income tax, the Federal Insurance Contributions Act (FICA), Federal Unemployment Tax Act, or Railroad Retirement Tax Act. In many cases HSA contributions are exempt from state income taxes as well.
• Cost savings. Employers offer HDHPs to lower their overall health benefit expenditures. By arranging and contributing to an HSA, employers can see increased adoption of the HDHP and may lower overall employee health benefit costs.
• Reduced administrative costs. Unlike FSA or HRA benefit plans, employers are not required by law to ensure employees use HSA funds only for qualified medical expenses. Therefore, the cost of administrating HSAs is significantly lower than for many benefit plans.

For Trustees/Custodians
Benefits of the Visa HSA card:

• Value. Choosing Visa ensures flexibility, enhancements, and greater options.
• Reduced costs. The Visa HSA card is a lower-cost alternative to providing paper checks.
• Increased revenue. The Visa HSA card provides transaction revenue and makes it easy to track HSA expenditures.²

General HSA benefits:

• Deposits. Offering HSAs provides a new source of deposit income for financial institutions.
• Other income. HSAs offer other sources of revenue, such as transaction revenue, fee income, and investment income.²
• Additional products. HSAs provide financial institutions with additional products and services to offer corporate banking clients, while generating new consumer accounts and services.

For Consumers
Benefits of the Visa HSA card:

• Convenient access to HSA funds. Enables consumers to access funds directly from their HSA without worrying about having funds on hand to cover the co-payment for an appointment or a prescription.
• Visa consumer protection. Visa’s Zero Liability Policy protects consumers from unauthorized purchases if their card is lost or stolen; cards can be replaced with the full amount of unauthorized transactions.³ Transaction-dispute rights also apply.

General HSA benefits:

• Tax advantages. Consumers can withdraw funds tax-free from an HSA to pay for qualified medical expenses and deduct the amount of HSA contributions from their federal income taxes, whether or not they file an itemized return. Earnings on unused funds grow tax-free.
• Spouse and dependent coverage. Consumers may use their HSA funds to pay medical expenses for a spouse or tax dependent, even if the spouse/dependent is not covered by an HDHP.
• Portability. If employees leave their employer, they are entitled to keep the funds in their HSA.
• Optional contribution. The employer and/or individual may contribute to the individual’s HSA.
• Control. Consumers own the funds in their HSA account.

About Health Savings Accounts

Consumer-directed healthcare (CDH) is a rapidly growing industry trend that offers consumers more choices and responsibility for managing their medical expenditures. Combining a high-deductible health plan (HDHP) with an HSA is a common, and often effective, approach. HDHPs are health plans with lower premium costs than most traditional health plans because they require the consumer to pay a higher portion out-of-pocket than a traditional HMO or PPO plan.

HSAs are tax-advantaged accounts that allow consumers covered by a qualified HDHP to save pre-tax dollars for qualified medical expenses. HSAs can be used to pay for current qualified medical expenses or save for future expenses. To qualify for an HSA, a consumer must be covered by a high-deductible heath plan (HDHP) that meets federal requirements.⁴ In addition, the consumer may not be:

• Covered by another health insurance policy or plan that is not an HDHP⁵
• Enrolled in Medicare
• Able to be claimed as a dependent on another’s tax return

Consumers may open an HSA with a bank or insurer or another company that has been approved by the IRS to serve as trustee or custodian. Usually, HSAs are offered to consumers in conjunction with an eligible HDHP health plan through their employer. HSA funds may be contributed by employers, consumers, and/or consumers’ family members. The maximum annual HSA contribution is based on the statutory limit for the type of coverage.⁶

Consumers control the funds in their HSA, including how much to contribute (up to the allowable maximum), who will serve as custodian or trustee of the account, and if and how the funds are invested. Once contributed, funds in an HSA are owned by the employee, regardless of employment status.

Issuers of Visa HSA cards have the option to restrict card usage to healthcare-related Merchant Category Codes (MCCs). If card usage is not restricted, the card may be used to pay for purchases wherever Visa debit products are accepted. However, the cardholder will be subject to a penalty tax in addition to paying federal income tax on the amount.⁷ Issuers also have the option to offer or restrict cash access through ATMs.

Get more information

To learn how you can add Visa Healthcare cards to your benefits program, start with our Partner Directory. For more information on HSAs, please visit www.irs.gov.