A Health Savings Account (HSA) is an individually owned, tax-favored account that allows individuals to pay for qualified health care expenses. In order to set up or contribute to an HSA, you must be covered by a Qualified High-Deductible Health Plan (HDHP). Premiums associated with an HSA-qualified plan are usually lower than a traditional plan, allowing employees to capture the savings and fund their account. HSA funds can then be used to pay for any qualified out-of-pocket medical, dental or vision expenses for not only the account holder, but also for their legal spouse and any tax dependents.
The primary purpose of your HSA is to help you pay for any eligible out-of-pocket expenses you may incur such as those related to your health insurance deductible. Though your HSA can be used to pay for several items not connected to your health insurance, these are some of the most common expenses incurred by individuals.
However, under a HDHP, all out-of-pocket expenses (i.e., prescriptions, doctor visits, MRI, etc.) processed through your health insurance will apply to your deductible. Once your deductible is met, depending on your health insurance plan, you may be responsible for a percentage of your out-of-pocket expenses (Co-Insurance) up to a set amount called your Out-Of-Pocket maximum. After which your insurance company pays all eligible expenses for the remainder of the year.
44Cost Savings
Your Estimated HSA Cost Savings Example
| Traditional PPO + FSA | HDHP + HSA | |
|---|---|---|
| Gross Annual Pay | $60,000 | $60,000 |
| Maximum Annual Health Care FSA Contribution | $3,050 | $7,750 |
| Estimated Annual Family Premium | -$13,000 | -$11,000 |
| Adjusted Gross Pay | $43,950 | $41,250 |
| Estimated Tax Rate (15%) | $6,622.50 | $6,255 |
| Estimated Annual Expenses | $3,050 | $3,050 |
| Remaining FSA vs. HSA Balance | + $0 | $4,450 |
| Remaining Take Home Pay with FSA vs. HSA | $34,677.50 | $37,045 |
YOUR TAKE HOME PAY COULD BE $2,367.50 MORE WITH THE HSA
All figures in this table are estimates and based on an annual salary and maximum contribution limits to the benefit account. Your salary, tax rate, health care expenses, and tax savings may be different.
Who Is Eligible?
In order to be eligible to enroll and contribute to a Health Savings Account (HSA), you must first ensure you meet the necessary requirements. If your answers to the below questions match ours then you are likely eligible to open and contribute to an HSA.
| Question | Answer |
|---|---|
| Are you currently enrolled or covered by a HSA-qualified high deductible health plan? | YES |
| Is the annual deductible for your health insurance plan higher than $1,350 for individual coverage or higher than $2,700 for family coverage? | YES |
| Is the annual maximum out-of-pocket for your health insurance plan less than $6,750 for individual coverage or less than $13,500 for family coverage? | YES |
| Are you covered by any other health plan (such as a spouse or parent) that is not considered a HDHP? | NO |
| Are you currently enrolled in Medicare (Part A or Part B) | NO |
| Are you currently enrolled in either a Health Care Flexible Spending Account (FSA) or Health Reimbursement Arrangement (HRA) that reimburses you for medical expenses in addition to dental and vision expenses? | NO |
| Self-Only Coverage | 2023 | 2024 | 2025 |
|---|---|---|---|
| Maximum Annual HSA Contribution | $3,850 | $4,150 | $4,300 |
| HSA Catch-up Contribution (Age 55 or Over) | $1,000 | $1,000 | $1,000 |
| Minimum Annual Deductible for HDHP | $1,500 | $1,600 | $1,650 |
| Maximum Out-of-Pocket Limit for HDHP | $7,500 | $8,050 | $8,300 |
| Family Coverage | 2023 | 2024 | 2025 |
| Maximum Annual HSA Contribution | $7,750 | $8,300 | $8,550 |
| HSA Catch-up Contribution | $1,000 | $1,000 | $1,000 |
| Minimum Annual Deductible for HDHP | $3,000 | $3,200 | $3,300 |
| Maximum Annual Out-of-Pocket Limit for HDHP | $15,000 | $16,100 | $16,600 |
