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Health Savings Accounts Explained

Margaret Meyer
Margaret M. Whelehan
Vice President, Financial Advisor
(585) 899-4653 x42129

Maybe you’ve seen ads for health savings accounts (HSAs) or you know someone who has one. What exactly is an HSA, and should you consider opening one?


An HSA is a tax-favored account available only to individuals covered by a high deductible health plan (HDHP). Money set aside in an HSA, plus account earnings, may be used tax free to pay qualified medical expenses that aren’t reimbursed by insurance. Although HDHP premiums can’t be paid from an HSA, the account can be used to cover medical expenses incurred each year before the plan’s deductible has been met. HSA withdrawals not used for qualified medical expenses are taxable and generally subject to a 10% penalty.

For 2011, an HDHP’s deductible must be at least $1,200 for self-only coverage or twice that amount ($2,400) for family coverage. However, the plan can have a lower (or no) deductible for preventive care, such as routine physical exams. Out-of-pocket expenses payable under an HDHP can’t be more than $5,950 ($11,900 for family coverage). Coverage can be obtained individually or through an employer that offers it as an employee benefit.

HSA Contributions

HSA contributions are tax deductible. If made by an employer, the employer gets the deduction and the employee excludes the contributions from income. An employer-sponsored plan may allow employees to make HSA contributions on a pretax basis.

In general, the maximum HSA contribution for a person with self-only HDHP coverage is $3,050 for 2011; it’s $6,150 with family coverage. A person age 55 or older may make additional catch-up contributions of up to $1,000.

Common HSA myths

Myth #1 - HSAs are only for the wealthy.

FACT - HSAs are for everyone. HSA Bank’s 2010 Consumer Benchmark Survey found that 44 percent of HSA-compatible plan participants and 45 percent of traditional plan participants have an average household income of between $25,000 and $74,000 (HSA Bank 2010 Consumer Benchmark Survey). 

Myth #2 - HSAs are only for the healthy.

FACT - In a study conducted this year by HSA Bank, individuals were asked to rate their own health. The survey found that there was no significant difference between the self-reported health ratings of those in an HSA-compatible plan as those in a traditional plan. In fact, in most cases traditional plan participants and HSA-compatible plan participants rated themselves within one percent of each other with respect to their health status (HSA Bank 2010 Consumer Benchmark Survey).

Myth #3 - HSAs are not popular among consumers.

FACT - The number of people covered by HSAs and HSA-compatible health plans rose to 10 million in January 2010, up from 8 million in January 2009, and 6.1 million in January 2008 (AHIP Report 2010).  

Why HSA Bank and Canandaigua National Bank & Trust?

CNB  now offers Health Savings Accounts!  We decided to partner with HSA Bank (a Division of Webster Bank, N.A., Member FDIC) because they are recognized as HSA experts nationally.  By drawing upon HSA Bank's servicing expertise and the convenient option to make deposit and withdrawals at our CNB Bank Offices, we offer a valuable solution to our customers. Our new partnership, then, allows us to leverage the experience of HSA Bank and continue to provide you with the exceptional customer experience that you have come to expect from CNB. Simply visit our website at to find out just how easy it is to open an HSA with us!