What is the primary purpose of a health savings account (HSA)?

The primary purpose of a health savings account (HSA) is to cover high-deductible health expenses. HSAs are designed specifically to allow individuals with high-deductible health plans to save money on a tax-advantaged basis to pay for qualified medical expenses. Contributions made to an HSA are tax-deductible, meaning that individuals can lower their taxable income for the year in which they make the contributions. Additionally, the funds in an HSA can grow tax-free, and withdrawals for qualified medical expenses are also tax-free. This makes HSAs an effective financial tool for managing healthcare costs, particularly for those with high-deductible plans.

Utilizing an HSA can help individuals prepare for out-of-pocket costs associated with their healthcare before they reach the deductible. It's important to note that HSAs can also be used to save for future medical expenses, providing a dual benefit of both immediate cost coverage and long-term savings. The other options, such as providing immediate cash benefits, saving for retirement, or paying life insurance premiums, do not align with the primary and intended use of HSAs in the context of health care financing.