A Health Savings Account (HSA) has which primary characteristic?

• A. It Requires You to Have Other Health Coverage
• B. It Requires You to Cancel All Other Health Insurance
• C. It Allows and Individual to Deposit Tax-Deductible Funds to Pay for Qualified Medical Expenses
• D. It Cannot Be Used With an HDHP

Answer: (C)

An HSA is a tax-advantaged way to save specifically for medical costs, usually paired with a high-deductible health plan. Its defining feature is that you can contribute funds on a pre-tax basis (or deduct those contributions from your taxable income), and withdrawals used for qualified medical expenses are tax-free. The account can roll over year to year and can even be invested, letting the balance grow tax-free until you need it for medical costs. Because of this setup, the ability to deposit tax-deductible funds to pay for qualified medical expenses is the core characteristic. The other statements don’t fit because an HSA is designed to work with an HDHP, not require canceling other coverage, and you can generally have other coverages as long as you meet the HDHP eligibility rules.