A Healthier Way to Save
When medical expenses arrive, a Health Savings Account (HSA) can help relieve financial stress and save money in the long run.
What is an HSA?
HealthCare.gov describes an HSA as a type of savings account that allows individuals to set aside money on a pre-tax basis to pay for qualified medical expenses. To qualify for an HSA, individuals must have a High Deductible Health Plan (HDHP).
Because HSA contributions are not subject to federal income taxes, they can help individuals to reduce their overall taxable income. If contributions are made by paycheck deductions, the savings are also safe from payroll taxes, such as Social Security and Medicare. For individuals in the 22% federal income tax bracket, HSAs could potentially help to save nearly 30% on every dollar contributed.
HSA-Eligible Expenses
HSA savings can be used to pay toward health insurance deductibles, copayments, and coinsurance on emergency, dental, vision, and family medical expenses.
Some examples include:
- Doctor and hospital visits (including surgeries)
- X-rays and lab tests
- Vaccinations and immunizations
- Chiropractor visits
- Prescription drugs
Even over-the-counter purchases can qualify as HSA-eligible expenses, such as:
- Allergy and sinus medications
- Cold and flu remedies
- Insulin
- Walking aids and wheelchairs
HSA vs. FSA
When it comes to saving for healthcare expenses, you may have the choice between an HSA or a Flexible Spending Account (FSA). While both allow individuals to set aside pre-tax savings for medical needs, there are some distinct differences:
HSA
- Higher contribution limits
- Opportunity to invest funds
- Funds rollover at the end of the year
FSA
- Anyone can invest (not just individuals with HDHPs)
- Earlier access to funds
The Right Fit
Research shows that High Deductible Health Plans tend to benefit individuals with fewer medical needs and appointments. Before switching over to qualify for an HSA, it is recommended to consult with an agent or broker to understand the impacts on your coverage.
Meet the Author
Abby Callahan, BA
Abby Callahan is a graduate of the University of Tennessee at Chattanooga, where she earned a Bachelor of Arts in English with a minor in Spanish and the distinction of cum laude. Prior to joining CMC Media & Marketing Group as editor/digital content specialist, Abby successfully fulfilled roles in marketing and event planning, as well as strategic communications and storytelling for a wide variety of initiatives. Today, Abby leads ideation, conceptualization, and development for numerous health & wellness, business, sports, and lifestyle articles published in print and online for HealthScope® and CityScope® magazines as well as Choose Chattanooga® and Choose Huntsville® – premier publications serving Southeast Tennessee, North Georgia, and North Alabama. She also contributes to the development of blogs and other content shared on the publications’ digital platforms. Off the clock, she enjoys thrifting, sewing and designing her own clothes, climbing, and going on adventures with her husky, Hazel.
