Under federal law, which individual is eligible to open a tax-exempt Health Savings Account?

A tax-exempt Health Savings Account (HSA) is specifically designed to help individuals with high healthcare costs manage their medical expenses. The eligibility to open an HSA is contingent upon being covered by a qualified High Deductible Health Plan (HDHP).

An HDHP is defined by having a higher deductible than traditional insurance plans, which means that the insured pays more out-of-pocket before insurance kicks in. The structure of an HDHP complements the use of an HSA by allowing individuals to set aside pre-tax dollars to pay for qualified medical expenses, thereby providing potential tax benefits.

Individuals not covered by an HDHP do not meet the primary criterion for HSA eligibility. Those with any type of health insurance, Medicaid, or no insurance would be ineligible to establish an HSA. Thus, the correct choice reflects the specific requirement tied to high deductible health plans, emphasizing the importance of this connection for individuals seeking to utilize the tax advantages offered by an HSA.