To qualify for a tax-exempt health savings account, which plan must an individual be enrolled in?

To qualify for a tax-exempt health savings account (HSA), an individual must be enrolled in a high deductible health plan (HDHP). This is a specific requirement set by the IRS, designed to ensure that HSAs are paired with health coverage that has higher deductibles and lower premiums.

The purpose of the HDHP is to encourage individuals to pay for their health care expenses out of pocket until they reach the deductible level, promoting a sense of cost-awareness and responsibility regarding health care spending. When individuals are enrolled in an HDHP, they are eligible to contribute to an HSA, which allows them to save money tax-free for medical expenses. It is important that the deductible of the HDHP meets specific minimum limits set by the IRS to maintain eligibility for HSA contributions.

Other types of health plans, such as comprehensive health plans, health maintenance organizations (HMOs), or point of service (POS) plans, typically do not provide the necessary high-deductible structure required for individuals to open and maintain a tax-exempt HSA. This is why enrollment in a high deductible health plan is crucial for accessing the benefits of an HSA.