Health Spending Accounts

Health spending accounts can work for almost anyone. The key is knowing how they work. You can use these accounts for qualified medical expenses, such as deductibles and copays.

What are health spending accounts?

Health spending accounts accounts are used to pay for qualified medical, prescription, dental and vision expenses. The three main types of plans are:

  • HSA, or health savings account
  • HRA, or health reimbursement account or arrangement
  • FSA, or flexible spending account 

Types of health spending accounts

What's an HSA?

A health savings account, or HSA, is an account you use to pay for qualified medical, pharmacy, dental and vision expenses and save on taxes.  They are paired with high-deductible health plans.

An HSA is an account to help you save for health care expenses. Instead of spending money on higher premiums, you can keep that money in an HSA to use on those expenses. The account is yours, and you'll never lose what you put in. 

Compared to other health spending accounts, HSAs give you more ways to save on health care expenses, now and in the future.

According to recent estimates, a married couple retiring at age 65 will require approximately $280,000* throughout retirement to cover medical costs such as out-of-pocket prescription drug expenses and Medicare premiums. By saving money in an HSA you can prepare for your family's future health care costs and also use your HSA as a buffer to protect your other retirement accounts from out of pocket medical expenses.

* Source: Fidelity Investments, 2018

Who can open an HSA?

You must be covered by a high-deductible health plan to open an HSA. You can’t open an HSA if you’re:

  • Covered by Medicare or Medicaid
  • Claimed as a dependent on someone else's tax return

Is an HSA right for you?

Individuals who may benefit most from an HSA

If you're generally healthy and you want to save for future health care expenses, an HSA may be an attractive choice. Or if you're near retirement, an HSA may make sense because the money can be used to offset the costs of medical care after retirement.

More: Ways to make an HSA work for you (PDF)

Individuals who may not benefit from an HSA

If you think you might need expensive medical care in the next year and would find it hard to afford a high deductible, an HSA and high-deductible health plan might not be your best option.

Advantages of an HSA

  • An HSA offers a triple-tax advantage. Your payroll contributions, interest earned (on investments) and withdrawals for qualified expenses are all tax-free.
  • Once your HSA balance reaches a certain amount, you can choose to invest in a selection of investments to boost your savings. Any gains are earned tax-free.
  • You own it. The money goes with you if you retire, select a new health plan or change jobs.
  • Anyone can deposit money in your HSA, including you, your employer, your spouse and dependents, up to an annual limit set by the IRS. If you’re 55 or older, you can make a catch-up contribution above the annual maximum each year until you enroll in Medicare.

More: A smart way to save for health care expenses (PDF)

Using an HSA

Putting money in an HSA

You can contribute to your HSA any time of the year, up to the annual limit

Ways to contribute include:

  • Have a set amount taken out of each paycheck before taxes
  • Deposit money that’s already been taxed—you can deduct it from your income on your tax return, no matter who it came from
  • Your employer can put money into your HSA and save on taxes, too
  • You can move money from an IRA to your HSA once—called a one-time rollover

Publication 969 from the IRS will give you more information about making contributions.

Using the money in your HSA

Depending on how your account is set up, you pay for qualified expenses:

  • Using a debit card
  • Paying from your HSA account
  • By using your own money and submitting receipts for reimbursement

The IRS defines qualified expenses. Publication 502 has the complete list.

Members with an HSA can access it through their online member account or with our mobile app.

More about Health Savings Accounts

Resources to help HSA members get the most from their accounts

Couple at computer
Video

Getting to know your plan

Watch video
Person at computer
Video

You have an HSA, now what?

Watch video
Person on phone
Video

Six tips to get the most out of your HSA

Watch video
Ways to make an HSA work for you
A smart way to save for health care expenses
Qualified medical expenses

What's an HSA?

A health savings account, or HSA, is an account you use to pay for qualified medical, pharmacy, dental and vision expenses and save on taxes.  They are paired with high-deductible health plans.

An HSA is an account to help you save for health care expenses. Instead of spending money on higher premiums, you can keep that money in an HSA to use on those expenses. The account is yours, and you'll never lose what you put in. 

Compared to other health spending accounts, HSAs give you more ways to save on health care expenses, now and in the future.

According to recent estimates, a married couple retiring at age 65 will require approximately $280,000* throughout retirement to cover medical costs such as out-of-pocket prescription drug expenses and Medicare premiums. By saving money in an HSA you can prepare for your family's future health care costs and also use your HSA as a buffer to protect your other retirement accounts from out of pocket medical expenses.

* Source: Fidelity Investments, 2018

Who can open an HSA?

You must be covered by a high-deductible health plan to open an HSA. You can’t open an HSA if you’re:

  • Covered by Medicare or Medicaid
  • Claimed as a dependent on someone else's tax return

Is an HSA right for you?

Individuals who may benefit most from an HSA

If you're generally healthy and you want to save for future health care expenses, an HSA may be an attractive choice. Or if you're near retirement, an HSA may make sense because the money can be used to offset the costs of medical care after retirement.

More: Ways to make an HSA work for you (PDF)

Individuals who may not benefit from an HSA

If you think you might need expensive medical care in the next year and would find it hard to afford a high deductible, an HSA and high-deductible health plan might not be your best option.

Advantages of an HSA

  • An HSA offers a triple-tax advantage. Your payroll contributions, interest earned (on investments) and withdrawals for qualified expenses are all tax-free.
  • Once your HSA balance reaches a certain amount, you can choose to invest in a selection of investments to boost your savings. Any gains are earned tax-free.
  • You own it. The money goes with you if you retire, select a new health plan or change jobs.
  • Anyone can deposit money in your HSA, including you, your employer, your spouse and dependents, up to an annual limit set by the IRS. If you’re 55 or older, you can make a catch-up contribution above the annual maximum each year until you enroll in Medicare.

More: A smart way to save for health care expenses (PDF)

Using an HSA

Putting money in an HSA

You can contribute to your HSA any time of the year, up to the annual limit

Ways to contribute include:

  • Have a set amount taken out of each paycheck before taxes
  • Deposit money that’s already been taxed—you can deduct it from your income on your tax return, no matter who it came from
  • Your employer can put money into your HSA and save on taxes, too
  • You can move money from an IRA to your HSA once—called a one-time rollover

Publication 969 from the IRS will give you more information about making contributions.

Using the money in your HSA

Depending on how your account is set up, you pay for qualified expenses:

  • Using a debit card
  • Paying from your HSA account
  • By using your own money and submitting receipts for reimbursement

The IRS defines qualified expenses. Publication 502 has the complete list.

Members with an HSA can access it through their online member account or with our mobile app.

More about Health Savings Accounts

Resources to help HSA members get the most from their accounts

Couple at computer
Video

Getting to know your plan

Watch video
Person at computer
Video

You have an HSA, now what?

Watch video
Person on phone
Video

Six tips to get the most out of your HSA

Watch video
Ways to make an HSA work for you
A smart way to save for health care expenses
Qualified medical expenses

Plans for employers

If you're an employer looking for information on consumer-directed health plans for your employees, visit our Employer CDH page.