Health Savings Accounts (HSAs) and Health Care Reform
Although the new health care reform law will bring 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 percent penalty. Previously, the penalty was 10 percent.
- 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.