If you have a health savings account (HSA), you can use it to buy prescription medications.

Also, with the new Coronavirus Aid, Relief, and Economic Security (CARES) Act, you can use your HSA funds to buy nonprescription over-the-counter (OTC) medications, including:

  • Pain relievers, like aspirin, Tylenol, and Motrin
  • Heartburn medications, like Tums, Maalox, and Mylanta
  • Allergy medications, like Claritin, Zyrtec, and Xyzal

The CARES Act also approved the use of HSA funds for menstrual care products.

Many health insurance plans don’t typically cover OTC medications or menstrual care products.

What exactly is an HSA? 

An HSA is a financial account that you can set up and use to pay qualified medical expenses. They’re offered through banks and insurance companies.

Important characteristics of an HSA include:

  • You can contribute pre-tax money into your HSA. For example, if you make $28,500 per year and put $2,500 in your HSA, you will be taxed as though you make $26,000 instead.
  • Your HSA deposits can earn tax-free interest.
  • Your HSA contributions can carry over from year to year, even if you retire or change jobs.

You can make deposits to an HSA only if you have a high deductible health plan (HDHP). According to the U.S. Centers for Medicare & Medicaid Services (CMS), for 2020 an HDHP is defined as a plan with:

  • A deductible of at least $1,400 for an individual or $2,800 for a family
  • Total yearly out-of-pocket expenses (including coinsurance, copayments, and deductibles) of $6,900 or less for an individual or $13,800 for a family

For 2021, according to the U.S. Internal Revenue Service (IRS), the parameters are slightly adjusted to:

  • A deductible of at least $1,400 for an individual or $2,800 for a family
  • Total yearly out-of-pocket expenses (including coinsurance, copayments, and deductibles) of $7,000 or less for an individual or $14,000 for a family

Using your HSA for prescription drugs 

When your doctor prescribes a medication for you, they’ll either call the prescription into your preferred pharmacy or give you the prescription in writing to take to a pharmacist. 

The pharmacy will fill your prescription and you’ll pay for it. Many HSAs come with a debit card, so you can use that to pay for your prescription. 

If you don’t have an HSA debit card or choose not to use it, you can pay as you usually would — just remember to save the receipt as a record for your self-reimbursement from your HSA.

If you pay with a discount or coupon program like Optum Perks, you’ll pay the discounted rate established by that program. Depending on your health insurance plan, you may be able to get paid back for this type of expense, and your carrier might count this expenditure against your deductible.

What does an HSA cover?

Along with prescription drugs, your HSA covers qualified medical expenses as defined by the IRS, including:

  • Medical care
  • Vision and dental care expenses, plus hearing aids
  • Qualified capital expenses, such as special medical equipment installed in your home
  • Mental healthcare
  • Qualified diagnostic devices, such as a blood sugar test kit to monitor your blood sugar level
  • Laboratory fees
  • Qualified long-term care services

For a detailed list, the IRS publishes a directory of medical expenses.

Takeaway

If you have an HSA, you can use it to pay for your prescriptions.

You can also use it for other qualified medical expenses, including:

  • Medical care
  • Mental healthcare
  • Dental and vision care
  • OTC medications