Documenting HSA Activity
There
are
two
primary reasons for keeping good records of your Health Savings Account (HSA) activity:
-
Measuring
and
evaluating
your
medical
expenses
helps
you
in
identifying
ways
to
reduce
these
expenditures.
-
You're
accountable
to
the
IRS.
If
you're
audited,
you
may need to provide a reconciliation between your HSA withdraws and your qualified expenses.
Measuring Your
Health
Care
Costs
Knowledge
is
power.
When
you
measure your health care costs,
you're
better
able
to
identify less costly alternatives,
or
recognize unnecessary expenses. Good data will help you ask the right questions that make you a wiser consumer, leading to
more
effective health care spending.
Some examples:
- Are you purchasing the same retail prescription each month? If so, you'll probably save some money by using your plan's mail order prescription benefit.
Or
you
may
be
able
to save by changing to another
drug
store. Prescription drug costs can vary significantly by
retailer,
and
pharmacies
are
typically
cooperative
in
providing
cost
data
to
comparison
shoppers.
- Is there a generic equivalent for your brand name prescription? Discuss it with your doctor.
- Are you incurring
excessive emergency room charges?
Urgent
care
centers
are
often
a
more
economical
alternative.
Look
for
urgent
care
centers
in
the
area
where
you
live.
- Health care cost transparency is becoming a reality. You may be able to compare area physician and hospital charges via your insurance company's website.
- Your insurance company wants to do all it can to help you minimize your out-of-pocket costs. Check the insurer's website for other potentially helpful online tools.
Reconciling Expenses and Withdraws
Withdraws from your HSA are not taxed so long as they're used for qualified expenses, which are defined by the IRS (http://www.irs.gov/pub/irs-pdf/p502.pdf).
If you're ever audited, you may need to demonstrate that all your HSA withdraws have been used for qualifying expenses. So we recommend you save the following documentation:
- Regular Statements from your HSA Administrator
Your HSA Administrator will provide you regular statements detailing and summarizing your deposits and withdraws.
- Your Insurer's Explanation of Benefits (EOB) Statements
Each time your insurance company processes a claim, they generate an
Explanation
of
Benefits
(EOB)
form. The document may be mailed to you or it may be accessible via the insurer's website. EOBs provide a definitive record of your qualified expenses for services covered by your health insurance plan.
- Documentation of Non-Covered Expenses
You
can
use
your
tax-advantaged
HSA
funds
for
many
services
not
covered
by
your
health
insurance
plan.
Dental
and
vision
care
expenditures are examples. You should keep receipts for
these
services
and
organize
them
by
calendar
year,
maintaining
a
running
total.
You
don't
need
sophisticated
software
tools
to
do
this.
You
can
organize
the
receipts
in
a
single
folder
and
track
running totals on a sheet of paper.