HSA Reimbursement

A health savings account or “HSA” offers many advantages. If you established your account mainly as a savings vehicle, that is fine. But you never know, you might need it one day for any medical expense. If you pay for a medical expense out-of-pocket, what will happen next? You have an option to make an HSA reimbursement. First, let’s define what is meant by HSA reimbursement. 

What is the meaning of HSA Reimbursement? 

HSA reimbursement stands for health savings account reimbursement.HSA reimbursement, refers to paying for medical expenses on your own or out-of-pocket first and then using the funds in your HSA to “reimburse” yourself or “pay yourself back” for those out-of-pocket medical expenses at a later date. 

Remember that an HSA reimbursement is possible even if you do not have enough money in your HSA account on the day that you incurred the medical expense. 

In processing an HSA reimbursement, there are three things to keep in mind:

• HSA reimbursements can only be used for qualified medical expenses.
• HSA reimbursements are possible for as long as the medical expense was made after your HSA is established. Medical expenses incurred before the date of HSA establishment do not qualify. 
• Keep your records. If you paid for a medical expense out-of-pocket, it is important to keep all your receipts. Having proof of medical expenses can spare you from paying a tax penalty when you make an HSA reimbursement. 

What is the benefit of HSA Reimbursement?

The main benefit of HSA reimbursement is that you can “pay” yourself back with tax-free funds from the money in your HSA.

What is an example of HSA reimbursement? 

To understand HSA reimbursements better, let’s look at an example. 

Anne has recently been hired as a Recruitment Specialist at a well-known recruitment firm downtown. She decided to establish an HSA. A month later, Anne, unfortunately, broke her arm while playing volleyball and needed emergency care, a cast, and prescription medicines. Her total hospital bill amounted to $3,000. Because there were not enough funds in her HSA to cover the medical expenses, Anne had to pay for everything on her own. The good thing is she had some savings set aside.

Being an organized person, Anne made sure to keep records of her hospital bills and receipts from all her medical expenses. She continued to regularly contribute to her HSA.