Health Savings Accounts (HSA) and Health Care Reform
Although health care reform is bringing many changes for consumers over the next several years, the near-term impact on health savings accounts is limited to two areas:
- Increased penalty for non-medical withdrawals. As of January 1, 2011, if you are under age 65, withdraw dollars from your HSA and do not use them for qualified medical expenses, they will be taxed as ordinary income and you will also incur a 20% penalty. Previously, the penalty was 10%.
- Exclusion of most over-the-counter medications. As of January 1, 2011, most over-the-counter medications will not be considered to be a qualified medical expense unless they are prescribed by a physician. Previously, over-the-counter medications could be included as a qualified medical expense. See www.irs.gov for more information.