A Health Savings Account (HSA) is a smart way to save money on healthcare if you’re enrolled in an HSA-qualified high-deductible health plan (HDHP). These plans follow specific IRS rules, not every plan with a high deductible qualifies.
With an HSA-compatible plan, you pay the full cost of non-preventive care (like doctor visits and prescriptions) until you hit your deductible. After that, your insurance starts to share the cost of covered services. The good news? Preventive care, like annual checkups and screenings, is always covered at 100%, even before your deductible is met. And if your plan hasn’t hit the deductible yet, you still benefit from discounted, in-network rates for covered services.
The second part of an HSA is the savings account itself. This is where the real power of tax savings comes in. You can put money into your HSA tax-free, grow that money with tax-free investments, and spend it on qualified medical expenses, again, tax-free. It’s your money, and it rolls over from year to year with no “use it or lose it” rule.
You can use your HSA to pay for a wide range of out-of-pocket costs, including things your insurance might not cover, like acupuncture, dental work, vision care, or even over-the-counter medications. You can open an HSA through many banks or investment firms. Fidelity and UMB are two popular options that offer a wide range of investment choices.
The Two Parts of an HSA Plan
1. The HSA-Qualified Health Plan
To open and contribute to an HSA, you need to be enrolled in a health plan that meets the IRS requirements for a High Deductible Health Plan (HDHP). These plans do not allow copays for non-preventive care before the deductible. Here are the minimum deductible and maximum out-of-pocket limits:
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Minimum deductible: $1,650 (individual) / $3,300 (family)
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Maximum out-of-pocket: $8,300 (individual) / $16,600 (family)
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Minimum deductible: $1,700 (individual) / $3,400 (family)
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Maximum out-of-pocket: $8,650 (individual) / $17,300 (family)
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Note: “Family” means at least two people are covered—your spouse, child, etc. It doesn’t require the entire household to be on the plan.
You can enroll in an HSA-qualified plan without opening an HSA, but you must have a qualifying plan in place to make new contributions to the savings account. Some Expanded Bronze plans also qualify.
2. The Health Savings Account (HSA)
The savings account part is optional but highly recommended. You can open an HSA on your own or through your employer. If you open one yourself, contributions are tax-deductible. If it’s through your job, they’re usually deducted pre-tax from your paycheck, so you still get the tax benefit.
Contribution Limits:
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$4,300 for self-only coverage
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$8,550 for family coverage
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$4,500 for self-only coverage
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$9,100 for family coverage
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Catch-Up Contributions:
If you’re 55 or older, you can contribute an extra $1,000 per year. If both spouses are over 55, you’ll need to have two separate HSAs to make two catch-up contributions.
HSA contributions lower your Modified Adjusted Gross Income (MAGI), which can help you qualify for more generous subsidies on ACA marketplace plans.
And even if you switch to a non-HSA-qualified plan later, you get to keep your HSA. You just can’t make new contributions unless you re-enroll in an HSA-qualified plan. The money can still be used, tax-free, for qualified medical expenses at any time.
HSA Limits by Year
Don’t Wait to Start Saving
Opening a Health Savings Account (HSA) now can make a big difference, not just for your medical expenses today, but for your long-term financial health. Think of your HSA as a way to turn your health insurance strategy into a savings strategy.
Here’s how: HSA-qualified high-deductible health plans typically cost less than traditional plans with low deductibles and copays. That premium savings can go straight into your HSA instead of to the insurance company. Over time, your HSA grows, especially if you invest the balance, and it’s all yours to use for future healthcare needs or even retirement expenses.
It’s Not Too Late to Start
If you’ve been holding off, now is a great time to jump in. You don’t need to spend your HSA funds right away. You can let the balance grow year after year, and it will never expire or get forfeited. Even if you don’t reimburse yourself immediately for medical expenses, you can do so later, as long as you keep your receipts.
And remember, once you meet your annual deductible, your insurance plan starts covering the rest of your eligible care. So even though you’re on a high-deductible plan, you’re still protected from big medical bills.
What Can You Use an HSA For?
You can use HSA funds for a wide range of qualified medical expenses, far beyond just doctor visits. These include things like:
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Dental and vision care
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Acupuncture and chiropractic services
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Prescriptions and many over-the-counter medications
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Mental health services
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Medical equipment and supplies
For the full list of eligible expenses, check out IRS Publication 502.
Please note: The information here is not legal or tax advice. Rules around HSAs can change, so it’s always a good idea to speak with a licensed tax or financial professional if you have questions about your situation.
