Healthcare has long been a hot topic for Americans. At First Alliance, we often get questions about Health Savings Accounts or HSA's. HSA's are a really good way to save for medical expenses, and reduce your taxable income.

What Is a Health Savings Account (HSA)

A Health Savings Account is a type of savings account that lets you save money on a pre-tax basis to help you pay for qualified medical expenses. By using untaxed dollars in an HSA to pay for deductibles, co-payments, co-insurance, and some other expenses, you can lower your overall healthcare costs.

How Do I Know If I Qualify for an HSA?

Health savings accounts can be useful, but they are only available to people with a high-deductible health plan, or HDHP for short. High-deductible health plans, as the name suggests, have high deductibles but also offer lower monthly premiums. According to the Federal government as of 2023, an HDHP is any plan with a deductible of at least $1,500 for an individual or $3,000 for a family. The maximum out-of-pocket expenses are $7,500 for an individual and $15,000 for a family. (This limit doesn't apply to out-of-network services.)

How Does an HSA Work?

When you get a health savings account, you get to decide how much you would like to contribute to your HSA, on an annual basis. although there are maximums outlined by the Government. It's best to check on how much you can contribute, as these maximums do change on a yearly basis. It's worth pointing out that if you have an HSA through a high deductible health plan offered by your employer, you can make automatic contributions right through payroll.

How is an HSA Different from a Flexible Spending Account?

An HSA is different from a Flexible Spending Account, in that unlike a Flexible Spending Account, your HSA balance rolls over from year to year. HSA's are not "Use it or lose it" type accounts. That means you won't have to worry about the funds in your HSA disappearing, and you can even build up your funds in case you have a serious medical emergency.

Additionally, with an HSA, the account belongs to the individual rather than an employer, so the individual gets to decide what happens to the unused funds as well as being able to take it with you if you should change employers. FSA’s can also be limited sometimes- meaning there are only certain things that funds can be used for (i.e- only dental or vision care expenses). Its best to check with your employer on type of FSA they offer.

How Long Can I Keep my HSA?

You can keep your HSA for as long as you want. Once you reach age 65, and have Medicare, you can't contribute to your HSA, but you can continue to use it to cover qualified medical expenses.

Where Can I Find More Information about HSA's?

The best resource for more information about HSA's is to visit healthcare.gov. They have information and resources to help you learn more and help you decide if an HSA is right for you. If your employer offers an HDHP, you can also check with your plan administrator, who will have valuable information about what benefits your insurance offers and if you qualify.