Medical expenses can quickly add up, but funds from accounts like HSAs, FSAs, and HRAs can help relieve some of this financial pressure.
Each account type has different rules around eligibility, contribution limits, risks, and benefits. Learning the details about each type can help you make the best choices for you, your family, and your wallet.
In this article, we may use some terms to help you when selecting an insurance plan: Deductible: This is an annual amount you must spend out of pocket, within a certain time period, before an insurer starts to cover costs. Coinsurance: This is a percentage of a service cost that you will need to cover yourself. Copayment: This is a fixed dollar amount that you pay when receiving certain services, including filling prescriptions. |
What is an HSA?

HSAs are special accounts that let you set aside money on a pre-tax basis. You can then use the money to pay for eligible medical expenses. The money you save rolls over year after year, allowing you to build up larger savings.
If you have an HSA, you will have a high deductible health plan (HDHP), also known as an HSA-eligible insurance plan. These insurance plans will have lower premium costs and minimum deductible amounts with an out-of-pocket maximum. The out-of-pocket maximum is the total cost you would need to pay each year for healthcare.
Eligibility
According to the Internal Revenue Service (IRS), to be eligible for an HSA, you must not have Medicare or most other types of health insurance coverage. You also must not be registered as a dependent on anyone else’s tax return.
You can have additional insurance for injuries and illnesses that are:
- covered under workers’ compensation laws
- caused by someone else’s wrongdoing
- related to ownership or property use
You can also have additional coverage for specific health conditions or coverage that pays a fixed amount per day (or other period) if you are hospitalized.
Finally, you can have coverage for:
- accidents
- disabilities
- dental and vision care
- long-term care
- telehealth and some other remote services
Contribution limit
For 2023, the maximum contribution that you can make to an HSA is $3,850 for individual coverage and $7,750 for family coverage, according to the IRS.
The IRS notes that, in 2024, this will increase to $4,150 for individual coverage and $8,300 for family coverage.
How you save money
You can use the funds in your HSA to pay for eligible medical expenses that count toward your annual deductible. This may include copayments and coinsurance but must be in line with what your insurer considers eligible healthcare costs.
You cannot usually pay for premiums with the money from your HSA.
Possible risks
Because HSAs work alongside HDHPs, it is important to know whether these plans will suit your needs.
Because insurance premiums are low, you will have to pay more in out-of-pocket expenses, so you may need to carefully consider and anticipate your healthcare needs.
You must also take care to spend money from your HSA only on qualified health expenses. Otherwise, additional taxes may apply.