Using a health savings account (HSA) to supplement your current health insurance coverage is a great way to save money on your health care costs. Along with saving money on your health care costs, your HSA can get your money working for you by earning interest and providing tax benefits. You can save your HSA money tax-free. Here are some Top 10 HSA Frequently Asked Questions to get a jump-start on understanding your HSA.
Top 10 HSA Frequently Asked Questions:
1. How do I start an HSA? First, you have to have a qualifying health insurance plan. A qualifying health insurance plan is one that carries a high deductible. If you think you have a high-deductible health insurance plan then you can contact your employer, health insurance company, or a number of private insured banks and credit unions locally or online to find out about setting up an HSA. Learn more about HSAs vs. FSAs.
A High-Deductible Health plan may sound scary, but the limits for a health plan to qualify as a "high deductible plan" are not so bad considering the savings on premium payments and the tax advantages.
For example, to qualify as a high deductible health plan in 2020, the minimum deductible is $1,400 for individual coverage or $2,800 for a family plan. Each plan will be different, so ask about your options. Consider that if you build up your savings in your HSA, you may save up enough to cover your deductibles fairly quickly.
2. How much can I contribute to my HSA account? Every year the amount you can contribute to the HSA is revised. For 2020 and 2021 these are the limits:
- a single person can contribute up to $3,550 per year in 2020 and $3,600 in 2021
- a family can contribute up to $7,100 per year in 2020 and $7,200 in 2021
The number changes slightly every year, as a comparison point, in 2018 the number was $3,450 for a single plan and $6,900 for a family plan.
3. Do I pay taxes on the money before it is put into my health savings account? No, the money goes into your HSA account tax-free if your employer will set-up paycheck deductions for you.
If you are not having your employer doing payroll deductions for your contribution, then when you prepare your federal income taxes you will be able to take a deduction for the money you contributed to your HSA that year.
When you withdraw your health savings account money to pay for any qualifying expenses, it is withdrawn tax-free.
4. Can I have some examples of HSA qualifying expenses? Here are some examples of HSA qualifying expenses:
- prescription medicines and eyeglasses
- office visit co-pays
- over-the-counter meds such as aspirin and antacids
- birth-control (over-the-counter or prescription)
- laser eye surgery
There are many more things that you can use your money for so when you get an HSA plan, you will need to ask for a list of covered expenses.
5. What happens if I lose my health insurance? Once you have money in your HSA, you can continue to use it even if you do not have a high-deductible health insurance plan anymore, but you cannot keep contributing money to your health savings account.
6. Can I use my HSA money to pay for my health insurance premiums? You can use your HSA money to pay for your health insurance premiums while you are collecting federal or state unemployment benefits. You can also use your HSA money to pay for COBRA premiums.
7. What if I need medical care in another country... can I use my HSA money there? Yes, your HSA money can be used for the same medical expenses anywhere and in another country.
8. What if I switch jobs, do I lose my money? No. The health savings account is yours. Whatever money you contribute to your HSA you keep, just as you would in a savings account. Even if you don't use all your HSA money in one given year, the money will just roll-over to the next year for use.
9. Can my HSA money be invested? Yes. Your health savings account money can be invested similar to a 401K.
10. When I die, do I lose my HSA money? No. You can name a beneficiary to receive your health savings account money.