What is a health savings account (HSA)?

A health savings account (HSA) is a tax-advantaged savings account designed specifically for individuals to save money for qualified medical expenses. This type of account allows individuals to contribute pre-tax dollars, effectively lowering their taxable income. The funds in an HSA can be used for various qualified medical costs, including deductibles, copayments, and other out-of-pocket healthcare expenses, which helps in managing healthcare costs more effectively.

The key features of an HSA include tax deductions on deposits, tax-free growth on interest, and tax-free withdrawals when the funds are used for qualified medical expenses. This structure encourages individuals to save for future healthcare costs while also providing significant tax benefits.

In contrast, the other options describe different financial tools or products that do not fit the definition of an HSA. A retirement account for medical expenses does not accurately capture the nature of HSAs, which are primarily intended for current medical expenses rather than as a retirement savings vehicle. A fund managed by insurance companies for health coverage does not reflect the personal ownership and control individuals have over their HSAs. Lastly, a type of insurance coverage for emergencies only does not align with the broad range of expenses an HSA can cover.