What is the name of the tax-exempt account established to pay or reimburse certain medical expenses?

The correct answer is a Health Savings Account (HSA). This type of account is specifically designed to allow individuals with high-deductible health plans to save money tax-free for qualified medical expenses. Contributions made to an HSA are tax-deductible, and funds can grow tax-free, as well. When the money is withdrawn for qualified medical expenses, it is also tax-free, providing a triple tax advantage.

HSAs can be particularly beneficial because they can roll over unused funds from year to year, unlike some other accounts that may have a “use it or lose it” policy. Additionally, HSAs are owned by the individual, meaning that they are portable and remain with the person even if they change jobs or health plans.

Flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs) are also ways to manage healthcare costs, but they differ in structure and usage limits. FSAs often have a use-it-or-lose-it feature, and HRAs are typically employer-funded without the same tax benefits as HSAs. Archer MSAs, while they do offer some tax benefits for medical expenses, are less commonly used and have strict eligibility criteria compared to HSAs.