Question 63

Health savings accounts are designed to pay qualified medical expenses for individuals covered by high-deductible health plans.

Health savings accounts (HSAs) allow individuals with high-deductible health plans to save money tax-free for qualified medical expenses, making them an effective financial tool for managing healthcare costs.

A) Flexible spending account

Flexible spending accounts (FSAs) are employer-established benefit plans that allow employees to use pre-tax dollars for eligible medical expenses. However, FSAs are not specifically tied to high-deductible health plans and do not carry over unused funds to the next year, making them less suited for individuals with high-deductible plans compared to HSAs.

B) Health savings account

Health savings accounts are specifically designed for individuals enrolled in high-deductible health plans. They offer tax advantages for saving money to cover qualified medical expenses, making them the most appropriate choice for this question.

C) Medicare supplement insurance

Medicare supplement insurance, also known as Medigap, is intended to cover costs not paid by Medicare, such as copayments and deductibles. It is not designed for those with high-deductible health plans and does not provide a means to save for medical expenses.

D) Long-term care insurance

Long-term care insurance covers services that assist individuals with chronic illnesses or disabilities over an extended period. This type of insurance is unrelated to high-deductible health plans and does not pay for qualified medical expenses in the same way HSAs do.

Conclusion

Health savings accounts are uniquely tailored for individuals with high-deductible health plans, allowing them to save for medical expenses in a tax-advantaged manner. In contrast, flexible spending accounts, Medicare supplement insurance, and long-term care insurance do not fulfill this specific need, making option B the only correct answer.