Introduction

Health savings accounts (HSAs) are an excellent way to save money on healthcare costs.

They’re like a high-yield savings account, but instead of putting your money into an investment or CD, you’re investing in yourself by saving for medical expenses.

If you have health insurance through your employer, you’ve heard about HSAs. If not, here’s everything you need to know about how they work and how much more useful they could be for your health and finances.

What is an HSA?

An HSA is health savings account that you can use to pay for eligible medical expenses. It’s similar to an IRA or 401(k), but it’s specifically designed to help you pay for health care costs.

An health savings account is a type of health insurance plan. That means it functions similarly to traditional insurance policies: It will cover certain kinds of healthcare services up to a certain amount, then stop covering those costs once they exceed that limit.

However, unlike traditional insurance policies, HSAs have no monthly premiums or deductibles, so they’re more flexible and less expensive than most other types of coverage plans available today (though there are still limits on what kinds of procedures are covered by an HSA).

As long as your employer offers an HSA-eligible high-deductible plan that has been paired with an health savings account option for employees and their families who want one, typically through a broker, then you can enroll in the program yourself via payroll deductions from each paycheck until 2022, when the government will phase out its support for these accounts altogether (unless Congress acts otherwise).

Who’s eligible for a health savings account?

You must be enrolled in a high-deductible health plan and have no other health insurance coverage. You must also be a U.S. citizen or legal U.S. resident to have an HSA account, though not all states allow HSAs to be offered through their exchanges as of 2019.

To open an health savings account, you’ll need to choose a bank or credit union that offers these accounts (you can find one here).

How much can I save in an HSA?

The maximum amount you can save in an HSA in 2019 is $6,750 for an individual and $13,500 for a family. That’s a lot of money.

If you are not contributing enough to meet the minimum contribution requirement, you may consider increasing your contribution amount.

The minimum requirement for an health savings account is $1 per month (or $12 per year), but many people choose to contribute more than this to take full advantage of all the benefits offered by health savings account.

How much can I contribute to an HSA?

The maximum contribution limit is $3,400 for 2019. You can contribute to an HSA yearly, even if you use the money for non-qualified medical expenses.

You can also contribute to an health savings account if you are on Medicare or have other coverage through your employer. This is because health savings account are designed to be used in addition to other health insurance plans rather than as a replacement for them.

If you do not have any group health plan coverage and don’t meet the eligibility requirements for Medicare (age 65 or older), then you may still qualify as long as one of these conditions apply:

• You earned less than $35,000 in the previous tax year ($40,000 if married and filing jointly)
• Your spouse was covered by minimum essential coverage at all times during 2018 except for one month when she had minimum essential coverage (for example, due to COBRA continuation coverage).

Are there limits on how much I can save in an HSA?

The IRS sets a maximum amount of money that can be saved in an HSA, and the maximum is $6,750 for 2019 and $7,000 for 2020.

There is no limit on how much you can contribute to your health savings account if you don’t exceed the IRS limits.

Can I get an HSA even if my employer doesn’t offer one?

If you’re like most people, your employer does not offer an HSA. Don’t worry. You can still use an health savings account even if your employer doesn’t offer one.

You should have a high deductible health plan (HDHP) and health savings account-eligible insurance policy to do so. If that sounds complicated, don’t worry, it’s not. If you have these two things (an HDHP and health savings account eligible insurance policy), then congratulations:

You’re ready to start using an HSA! It’s as easy as opening up an account at any bank or credit union that offers health savings account.

When can I spend my money in the HSA?

You can spend the money in your HSA whenever you want, for whatever reason. It’s yours to use as you see fit, whether paying for copays and deductibles or buying that new iPhone case that catches your eye.

The only things you can’t spend from the account are medical expenses. The IRS defines them as “costs paid for the diagnosis, cure or prevention of disease or health conditions,” including copays and prescription drugs.

You also cannot use your health savings account to pay for over-the-counter medicines (OTC), considered an expense by most insurance companies and would therefore be considered a medical expense by the IRS.

What does the average person spend their money on from the HSA?

Most people spend their health savings account funds on dental, vision and prescription drugs. These three expenses are typically the most expensive of all health-related costs.

Some also use their HSAs to pay for over-the-counter medications, co-payments and deductibles.

Is there a deadline for spending money (unused funds) in my HSA?

It’s important to know that there are time limits for spending your HSA funds.

You must use them or lose them by the end of the year unless you have a balance of $1,000-plus left over (in which case you can carry it over into next year).

Conclusion

We hope this article has been helpful in your understanding of HSAs and how they can be used to save money on taxes while also saving for healthcare expenses.

The average person spends around $300 annually, but many people leave thousands of dollars to expire yearly.

If you’re looking for ways to save more money on taxes or if you want to contribute towards medical bills with no out-of-pocket costs, then an HSA might be a good option for you.