An HSA health plan is a high-deductible insurance policy paired with a tax-advantaged savings account for medical costs

An HSA-may be able to access health plan is a specific type of health insurance with a higher deductible than traditional plans. The trade-off is that you can open and contribute to a Health Savings Account (HSA) — a separate savings account where money grows tax-free and can be used for medical expenses. You do not have to open an HSA to have an HSA-may be able to access plan, but the plan structure is designed to work with one.

The insurance itself works like any other health plan: you pay premiums, meet a deductible before insurance kicks in, and then pay copays or coinsurance for care. The difference is the deductible is higher — usually $1,400 to $3,000 for individual coverage or $2,800 to $6,000 for family coverage in 2024, though these amounts change yearly. Because the deductible is higher, the monthly premium is usually lower than a standard plan.

The HSA is the second piece. Money you put into it reduces your taxable income, grows without being taxed, and can be withdrawn tax-free for medical expenses. This makes it a way to set aside pre-tax dollars for healthcare costs you know are coming — prescriptions, dental work, therapy, medical equipment — or to save for healthcare expenses in retirement.

Key Takeaways

  • HSA-may be able to access plans have higher deductibles but lower monthly premiums than standard health insurance.
  • You can only open an HSA if you are enrolled in an HSA-may be able to access plan; you cannot have both an HSA and a traditional health plan at the same time.
  • Money in an HSA is yours to keep and carry forward year to year, unlike Flexible Spending Accounts (FSAs) which usually expire at the end of the year.
  • The IRS sets annual contribution limits — for 2024, $4,150 for individual coverage and $8,300 for family coverage — and these limits increase most years.
  • You can use HSA funds for a wide range of medical expenses including insurance premiums, dental and vision care, mental health treatment, and prescription medications.

How the deductible and insurance coverage work together

When you enroll in an HSA-may be able to access plan, you choose a deductible amount. Until you spend that amount out of pocket on covered medical services, the insurance does not pay anything. You pay the full cost of doctor visits, lab work, imaging, and prescriptions yourself. Once you hit the deductible, the plan begins to share costs with you through coinsurance (you pay a percentage, insurance pays a percentage) or copays (you pay a fixed amount per visit).

The deductible resets every January 1st. If you have family coverage, the deductible usually applies to the family as a whole — once any combination of family members reaches the total, coverage begins for everyone. Some plans have individual deductibles within the family deductible, meaning each person has a smaller threshold they must hit first.

HSA-may be able to access plans must also cover certain preventive services — annual physicals, cancer screenings, vaccinations, contraception — without requiring you to meet the deductible first. This means you can get these services for free even if you have not yet paid toward your deductible.

Who can open an HSA and when

You can open an HSA only if you are enrolled in an HSA-may be able to access health plan and have no other health coverage. You cannot have an HSA if you are also covered by a spouse's traditional health plan, Medicare, Medicaid, TRICARE, or a Veterans Affairs plan. You also cannot have an HSA if you are claimed as a dependent on someone else's tax return.

You can open an HSA through your employer if they offer one, or you can open one independently through a bank, credit union, or investment firm. If you open one through your employer, contributions are usually deducted from your paycheck before taxes. If you open one on your own, you claim the deduction on your tax return.

You can open an HSA anytime during the year you enroll in an HSA-may be able to access plan, but you have until April 15th of the following year to make contributions for the previous year. For example, if you enroll in an HSA-may be able to access plan in June 2024, you can contribute to an HSA for 2024 until April 15, 2025.

What you can and cannot use HSA money for

HSA funds can be used for a broad range of medical expenses. These include doctor visits, hospital stays, surgery, prescription and over-the-counter medications, dental work, vision care, mental health counseling, physical therapy, medical equipment (crutches, wheelchairs, hearing aids), and even some alternative treatments like acupuncture if prescribed by a doctor. You can also use HSA funds to pay premiums for long-term care insurance, COBRA continuation coverage, and health insurance while you are unemployed.

You cannot use HSA funds for health insurance premiums while you are employed (except COBRA and unemployment coverage), cosmetic procedures, gym memberships, or over-the-counter items not classified as medical by the IRS — such as toiletries or vitamins unless they treat a specific medical condition and are prescribed by a doctor.

If you withdraw money from your HSA for something that is not a may have access to medical expense, you pay income tax on that amount plus a 20 percent penalty. After age 65, the penalty goes away, but you still owe income tax on non-medical withdrawals.

How HSA contributions and limits work

The IRS sets a maximum amount you can contribute to an HSA each year. For 2024, the limit is $4,150 for individual coverage and $8,300 for family coverage. If you are 55 or older, you can contribute an additional $1,000 per year as a catch-up contribution. These limits increase most years to keep pace with inflation.

If you enroll in an HSA-may be able to access plan partway through the year, you can still contribute the full annual amount, but only if you remain enrolled in an HSA-may be able to access plan through December 31st. If you switch to a different type of insurance mid-year, your contribution limit is reduced based on the number of months you were enrolled.

Contributions can come from you, your employer, or both. If your employer contributes, that amount counts toward your annual limit. Any money you do not spend in a given year rolls over to the next year — there is no "use it or lose it" rule like there is with FSAs. This makes an HSA a true savings account for long-term healthcare costs.

HSA-may be able to access plans versus other health insurance types

The main difference between an HSA-may be able to access plan and a traditional health plan is the deductible and the tax advantage. A traditional plan has a lower deductible but a higher monthly premium. You cannot open an HSA with a traditional plan. A Preferred Provider Organization (PPO) or Health Maintenance Organization (HMO) can be HSA-may be able to access if the deductible meets IRS requirements, but many are not.

An HSA-may be able to access plan is different from a Flexible Spending Account (FSA). An FSA is also a tax-advantaged account for medical expenses, but it has a lower annual limit ($3,300 in 2024), does not roll over unused money to the next year, and you do not have to be enrolled in a specific type of health plan to use one. You can have an FSA with any health plan, but you cannot have both an FSA and an HSA at the same time.

Some employers offer a Health Reimbursement Arrangement (HRA) instead of or alongside an HSA. An HRA is funded entirely by the employer, not by you, and the money belongs to the employer — if you leave the job, you typically cannot take it with you. An HSA is your account; the money is yours to keep.

How to choose whether an HSA plan makes sense for you

An HSA-may be able to access plan works best if you are generally healthy, do not expect major medical expenses in the near term, and want to save money on premiums and taxes. The lower monthly cost can add up to real savings if you do not hit the deductible. The tax advantage of the HSA — being able to set aside pre-tax money for medical costs — is valuable whether you use it immediately or save it for later.

An HSA-may be able to access plan may not be the right choice if you have chronic conditions that require frequent doctor visits and medications, because you will hit the deductible quickly and then pay coinsurance on top of that. In that case, a traditional plan with a lower deductible might cost less overall, even with a higher monthly premium.

When comparing plans, look at the total cost: monthly premium plus the deductible plus the coinsurance percentage. Estimate how much medical care you think you will need in the coming year, and calculate what you would pay under each plan. Also consider whether you have the cash on hand to pay the deductible if you need care early in the year.

Frequently Asked Questions

Can I use my HSA to pay my health insurance premium?

You can use HSA funds to pay premiums for COBRA continuation coverage, health insurance while you are unemployed, and long-term care insurance. You cannot use HSA funds to pay premiums for a health plan while you are employed, with those exceptions. After age 65, you can use HSA funds to pay Medicare premiums.

What happens to my HSA if I change jobs or leave my employer's plan?

Your HSA stays with you. The money in the account is yours, and you can take it to a new employer's HSA or keep it in an individual HSA. You can continue to use the funds for may have access to medical expenses even if you are no longer enrolled in an HSA-may be able to access plan, though you cannot make new contributions once you leave the plan.

Can my spouse and I share one HSA?

No. Each person must have their own HSA. If you are both enrolled in family coverage under an HSA-may be able to access plan, you each open separate accounts. Contributions to each account count toward individual limits, not a combined limit.

Do I have to spend my HSA money every year?

No. Unlike an FSA, HSA money rolls over year to year. You can let it accumulate and use it for future medical expenses or even save it for healthcare costs in retirement. Some people use their HSA as a long-term investment account, paying medical expenses out of pocket and letting the HSA grow.

What records do I need to keep for HSA withdrawals?

Keep receipts and documentation for any medical expense you pay with HSA funds. The IRS can audit your account and ask you to prove that withdrawals were for may have access to medical expenses. You do not have to submit receipts when you withdraw money, but you must have them if asked.