If you’re enrolled in a High Deductible Health Plan (HDHP), a Health Savings Account (HSA) (HSA) can be a valuable tool for managing healthcare expenses. It allows you to set aside pre-tax dollars to pay for qualified medical expenses, reducing your overall tax burden while giving you greater financial flexibility.
How an HSA Works
✔ Pre-Tax Contributions – Money goes in before taxes, reducing your taxable income.
✔ Tax-Free Growth – Funds grow tax-free through interest or investments.
✔ Tax-Free Withdrawals – When used for qualified medical expenses, withdrawals remain tax-free.
✔ Rollover Benefits – Unlike Flexible Spending Accounts (FSAs), HSA funds roll over each year, meaning they never expire.
2025 HSA Contribution Limits
The IRS sets annual contribution limits, which determine how much you can contribute tax-free each year:
💰 Individual Coverage: Up to $4,300
💰 Family Coverage: Up to $8,550
💰 Catch-Up Contribution (Age 55+): Additional $1,000
If contributions exceed these limits, penalties and taxes may apply.
Choosing an HSA Provider
To open an HSA, you’ll need to select a financial institution that offers HSA accounts. Below are three commonly used HSA providers:
Most providers offer HSA debit cards, online bill pay, and investment options to help you manage your funds efficiently.
How to Use HSA Funds
HSA funds can be used for a variety of IRS-approved medical expenses, including:
✔ Doctor visits and copays
✔ Prescription medications
✔ Dental and vision care (glasses, contacts, braces, etc.)
✔ Over-the-counter medications (with a prescription)
✔ Mental health services
✔ Chiropractic care and physical therapy
Most HSA providers provide a debit card to make payments easier, or you can pay out of pocket and reimburse yourself later.
Maximizing Your HSA
✅ Set Up Payroll Contributions – Many employers allow you to contribute to your HSA directly from your paycheck, ensuring tax savings upfront.
✅ Invest Your Balance – Once you reach the required threshold, many HSA providers allow you to invest your balance in mutual funds or other options.
✅ Save for Retirement – After age 65, HSA funds can be withdrawn for any purpose without penalty (though non-medical withdrawals are subject to income tax).
✅ Keep Track of Expenses – Save receipts for all medical expenses in case of an IRS audit. Some HSA providers offer digital storage for receipts.
Getting Started
1️⃣ Open an HSA with a provider of your choice (Optum Bank, HealthEquity, or Lively).
2️⃣ Submit your account details to HR/payroll (if applicable) to set up pre-tax payroll deductions.
3️⃣ Monitor contributions to stay within annual IRS limits.
4️⃣ Use your HSA funds wisely for short-term medical expenses or long-term healthcare savings.
An HSA is more than just a savings account—it’s a tax-efficient way to manage medical expenses now and in the future. Consider opening an account and making the most of its benefits.
For more details, check with your chosen HSA provider or speak with your HR department.
Maximizing Your Coverage Beyond an HSA
While HSAs are a great way to save for medical expenses, it’s important to remember that most HSA funds won’t cover major healthcare costs until you’ve met your deductible. Unexpected medical events—like accidents, hospital stays, or critical illnesses—can lead to significant out-of-pocket costs before your insurance kicks in.
To help bridge this gap, many people pair their HSA with supplemental insurance plans, such as:
- Accident Insurance – Helps cover expenses from unexpected injuries, like ER visits, broken bones, or ambulance rides.
- Hospital Indemnity Plans – Pays cash benefits if you’re admitted to the hospital, helping with deductibles, copays, and lost wages.
- Critical Illness Coverage – Provides a lump sum payment if you’re diagnosed with a covered serious illness (e.g., cancer, heart attack, stroke).
By bundling these plans with an HSA, you can create a comprehensive safety net to handle both routine and unexpected healthcare costs.
👉 Learn more about how HSAs work best when paired with supplemental insurance plans here.