health savings account (HSA)

FAQs about health savings accounts

• How does a health savings account work?
• Who should consider a high-deductible health plan?
• Can I buy HSA-compatible health insurance through the exchange?
• What’s the difference between an FSA and an HSA?
• Can I use my HSA to pay for COVID testing and treatment?
• Can I use my HSA to purchase over-the-counter medications?

The health plan that pairs with an HSA

Because the HSA is paired with a high-deductible health plan (HDHP), your health insurance premiums will often be lower than they would be on a more traditional plan with a lower deductible. But HSA-qualified plans vary considerably in their out-of-pocket exposure; deductibles on HSA-qualified plans in 2024 can be as low as $1,600 for an individual and $3,200 for a family.¹

For 2025, these lower limits on HDHP deductibles will increase to $1,650 and $3,300, respectively.²

If you’re buying your own health insurance (as opposed to getting it from an employer), you’ll likely find HSA-qualified HDHP options available through the exchange, as well as off the exchange (note that premium subsidies are only available if you get your coverage through the exchange). These plans are available nearly everywhere.

But since the maximum out-of-pocket limits on HSA-qualified plans are lower than the maximum allowable out-of-pocket limits on other plans, there will typically be some non-HSA-qualified plans (with higher out-of-pocket exposure) that have lower premiums than the available HSA-qualified plans. So while an HSA-qualified plan will typically be among the lower-priced plans available, it won’t necessarily be the lowest-cost plan available.

It’s important to note that you can only contribute to an HSA if your current health insurance policy is an HSA-qualified high-deductible health plan (HDHP). Not all plans with high deductibles are HSA-qualified, so check with your employer or your health insurance carrier if you’re unsure.

Contributions to your HSA can be made by you or by your employer, and they’re yours forever – there’s no “use it or lose it” provision with HSAs, and the money rolls over from one year to the next. HSA funds can be stored in a variety of savings vehicles, including bank accounts and brokerage accounts (ie, the funds can be invested in the stock market if you prefer that option and your HSA administrator allows it), and there are numerous HSA custodians/administrators from which to choose.

IRS expands preventive care umbrella to cover some chronic care treatments

The ACA requires all non-grandfathered health plans to pay for certain preventive care before the deductible, and this provision applies to HDHPs as well. But under an HDHP, non-preventive services cannot be paid for by the health plan until the insured has met the deductible.

So HDHPs cannot have copays for office visits or prescriptions before the deductible is met, which is one of the ways they differ from other health plans that have high deductibles but are not HDHPs.

But under guidelines that the IRS issued in mid-2019, the list of preventive services that can be covered pre-deductible on an HDHP has been expanded to include certain treatments for certain specific chronic conditions. It’s optional for insurers to classify these services as preventive, but if they do, the insurer can cover them (partially or in full) before the enrollee meets the deductible, and the health plan will continue to have its HDHP status.

The conditions/treatments include:

• Congestive heart failure or coronary artery disease: ACE inhibitors and/or beta blockers
• Heart disease: Statins and LDL cholesterol testing
• Hypertension: Blood pressure monitor
• Diabetes: ACE inhibitors, insulin or other glucose-lowering agents, retinopathy screening, glucometer, hemoglobin A1c testing, and statins
• Asthma: Inhalers and peak flow meters
• Osteoporosis or osteopenia: Anti-resorptive therapy
• Liver disease or bleeding disorders: International Normalized Ratio (INR) testing
• Depression: Selective Serotonin Reuptake Inhibitors (SSRIs)

Using your HSA funds

You can use the tax-free savings in your HSA to pay for doctor visits, hospital costs, deductibles, co-pays, prescription drugs, or any other qualified medical expenses. Once the out-of-pocket maximum on your health insurance policy is met, your health insurance plan will pay for your remaining covered medical expenses that year, the same as any other health plan.

If you switch to a health insurance policy that’s not HSA-qualified, you’ll no longer be able to contribute to your HSA. But you’ll still be able to take money out of your HSA at any time to pay for qualified medical expenses, with no taxes or penalties assessed. If you don’t use the money for medical expenses and still have funds available after age 65, you can withdraw them for non-medical purposes with no penalties, although income tax would be assessed at that point, with the HSA functioning much like a traditional IRA.³

You can also withdraw tax-free money from your HSA to pay Medicare premiums (for Part A, if you have to pay premiums for it – although most people don’t – and for Part B and Part D, but not for Medigap plans).

Tax-free HSA funds can also be used to pay long-term care premiums. There are limits on how much you can withdraw tax-free from your HSA to pay long-term care insurance premiums. (These limits are for 2024; the IRS indexes them for inflation annually.) If your age is:⁴

• 40 or younger, you can withdraw $470 tax-free to pay long-term care insurance premiums
• Older than 40, but not older than 50, you can withdraw $880
• Older than 50, but not older than 60, you can withdraw $1,760
• Older than 60, but not older than 70 you can withdraw $4,7170
• Older than 70, you can withdraw $5,880

IRS provided transitional relief for HSA-qualified plans that cover vasectomies and condoms before the deductible

While male contraception is not considered preventive care under federal regulations (and thus coverage under a plan that covers male contraception before the deductible would make a person ineligible to contribute money to an HSA), the IRS did not enforce that provision until 2020. So in 2018 and 2019, if you were in a state that required all plans to cover male contraceptives before the deductible, you could still contribute to your HSA if you had a plan that would otherwise have been considered HSA-qualified.

Here’s the backstory on how this all works:

You can only contribute to an HSA while you’re covered by an HSA-qualified HDHP. If you drop your health insurance coverage or switch to a non-HDHP, you have to stop making HSA contributions.

One of the requirements for a plan to be an HSA-qualified HDHP is that the plan cannot pay for any services before the deductible, other than preventive care. Preventive care was initially defined by the IRS in Notice 2004-50. That was revised in 2013 by Notice 2013-57, to clarify that any services deemed preventive care under the ACA (and thus required to be covered on all non-grandfathered plans with no cost-sharing) would be considered preventive care for HSA-qualified plans. That ensured that plans could be both ACA-compliant and HSA-qualified. (As noted above, it was further revised in 2019 to allow HSA-qualified plans to provide pre-deductible coverage for certain care for chronic conditions.)

But some states – including Illinois, Maryland, and Oregon – enacted laws requiring all state-regulated plans to cover FDA-approved contraceptives for men, before the deductible was met. Contraceptive coverage for women is considered preventive care under ACA regulations, so plans that cover female contraceptives before the deductible can still be HSA-qualified. But male contraceptives are not considered preventive care under federal regulations.

So if a state requires all state-regulated plans (ie, all plans that aren’t self-insured) to cover vasectomies and condoms at no cost — or in any form before the deductible is met — HSA-qualified plans in that state would cease to be HSA-qualified.

In Maryland, the law requiring plans to pay for male contraception pre-deductible took effect in January 2018. Concerns arose quickly about the fact that people in Maryland with plans marketed as HSA-qualified would no longer be able to contribute to their HSAs, since their health plans were now providing pre-deductible benefits above what the IRS considers preventive care. Maryland enacted legislation in April 2018 to exempt HSA-qualified plans from the law that requires plans to cover male contraception, but that wouldn’t help people who had already purchased HSA-qualified plans for 2018.

In response to the conundrum faced by people who wanted HSA-qualified coverage in states requiring male contraceptive coverage before the deductible, the IRS published Notice 2018-12. This notice clarified that

• Male contraceptives are not considered preventive care under federal guidelines, so having a plan that covers them before the deductible would make a person ineligible to contribute to an HSA.
• The IRS is seeking comments on the preventive care rules for HDHPs, so it’s possible that IRS guidelines for allowable preventive care under an HSA-qualified plan could change in the future (but this has not happened as of 2023).
• Until the start of 2020, the IRS allowed people to contribute to an HSA even if their plan (which would otherwise be considered an HSA-qualified plan) covered male contraception before the deductible. This transitional relief also applied to plans issued before the IRS published Notice 2018-12, so a person who bought an otherwise-HSA-qualified plan for 2018 could make the full-year HSA contribution for 2018.

The Illinois contraceptive mandate statute now also includes an exception for HDHPs (Sec 356z.4(4)), and several other states have followed suit, issuing requirements that state-regulated health plans cover male contraception, but with an exemption for HDHPs.

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org.

1. ”Revenue Procedure 2023-23” Internal Revenue Service. Accessed May 21, 2024 ⤶ ⤶
2. ”Revenue Procedure 2024-25” Internal Revenue Service. Accessed May 21, 2024 ⤶ ⤶
3. ”About Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans” Internal Revenue Service. Accessed May 21, 2024 ⤶
4. ”Revenue Procedure 2023-34” Internal Revenue Service. Accessed May 21, 2024 ⤶