WHAT ARE HSAs?

1. The HSA is a tax-exempt account established exclusively for the purpose of paying qualified medical expenses. It is almost best described as a 'medical IRA'.
Rules that apply to HSAs are similar to rules that apply to an IRA.

The individual owns the account.  For example, if an employee who later changes employers or leaves the work force, the HSA stays with the individual.

Also, contributions are tax deductible and grow tax deferred. However, taxpayers cannot use an IRA as a HSA, and cannot combine an IRA and a HSA in a single account. They are separate account types.

2. Who can have them?
Most US taxpayers can establish a HSA. First step is by establishing a High Deductible Health Plan (HDHP). You are then eligible to begin contributions.

The full definition is: An "eligible individual" means, with respect to any month, any individual who:
(1) is covered under a high-deductible health plan (HDHP) on the first day of such month;
(2) is not also covered by any other health plan that is not a HDHP (with certain exceptions for plans providing certain limited types of coverage);
(3) is not entitled to benefits under Medicare (generally, has not yet reached age 65); and
(4) may not be claimed as a dependent on another person's tax return.