How Does a Health Savings Account Work and What Can I Spend It On?
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If you have the opportunity to enroll in a healthcare plan that includes a Health Savings Account (HSA), it's a good idea to know what expenses it can cover. Just because you have pre-tax dollars accumulating in an HSA, it doesn't mean that you can spend the balance on just anything.
An HSA makes it easy to pay for eligible prescriptions, wellness-related products, and doctor's copays without having to swipe your regular credit card. Plus, if you do happen to pay for something out of pocket, you can reimburse yourself later by submitting your receipt to your HSA provider. There are limitations to what you can do, but once you understand the parameters, an HSA can be a handy perk to your healthcare plan.
So, if you're wondering, "What can I use my HSA on?" Look no further — we're explaining what to know below.
What is an HSA?
A Health Savings Plan, or HSA, is the savings account associated with a high-deductible health plan (HDHP).
If you are enrolled in an HSA-eligible HDHP, this means that you will typically pay less each month for your healthcare premiums but will have a higher deductible to hit for any medical expenses you do owe. Note that you do not need to be on an employer's healthcare plan to have an HSA, but you must be enrolled in an HDHP.
According to the Internal Revenue Service (IRS), HDHPs have a minimum annual deductible of $1,600 for self-only coverage and $3,200 for family coverage (starting in 2024). This means for your insurance to cover allowable expenses for the rest of the calendar year, you will need to hit those minimums first. There are also maximum out-of-pocket amounts to be aware of that apply to deductibles, copayments, and coinsurance but not premiums: $8,050 for self-only coverage and $16,100 for family coverage. This is the most you'd have to pay per year for covered healthcare expenses.
Contrast this with a low-deductible health plan, which lowers the amount you'll need to hit for your eligible expenses to be covered by your insurance. However, the tradeoff is that you'll have to pay a higher monthly premium, and you won't have an HSA with this type of plan.
In short, those who don't have a lot of medical expenses or need to see a doctor beyond standard yearly checkups are better candidates for an HSA-eligible HDHP plan because the low monthly premiums are less of a financial burden.
How does an HSA differ from an FSA?
A Flexible Spending Account (FSA) may seem very similar to an HSA, since they are both accounts for contributing pre-tax dollars from your income to pay for covered healthcare-related expenses.
However, an FSA is only available through employer-sponsored health insurance. With an FSA, you'll get reimbursed for healthcare costs by submitting individual claims. And if you quit or lose your job, you'll lose your FSA unless you can opt for COBRA continuation coverage. Meanwhile, you can sign up for and contribute to an HSA through any HDHP plan and keep the amount you've contributed, even if your employment status changes.
The maximum amount you can contribute to an FSA is $3,200, and it's a use-it-or-lose-it deal (though some employers may offer exceptions to this). On the other hand, HSAs roll over from year to year, and you can contribute more annually without having to worry about spending it all before the end of the year. Per the IRS, the HSA contribution limit in 2024 is $4,150 for individual coverage and $8,300 for family coverage.
Both HSAs and FSAs can be used to pay for copayments, medical supplies, and covered prescription medications, but they can also be used to pay for qualified medical expenses. The IRS defines medical expenses as "the costs of diagnosis, cure, mitigation, treatment, or prevention of disease... They include the costs of equipment, supplies, and diagnostic devices needed for these purposes."
Just note that the specific items that you can pay for with an HSA or FSA may differ slightly — it's a good idea to check your plan to see what limitations may apply. Some expenses, like multivitamins or air purifiers, can only be covered by an HSA or FSA if you've obtained a Letter of Medical Necessity from your physician.
What can I use my HSA on?
As mentioned, you can use your HSA to cover copayments, medical supplies, and covered prescription medications. In addition, you can pay for qualified medical expenses with an HSA.
Below are just a few of the product categories that are HSA-eligible — for a more comprehensive list, check your healthcare plan or the list of includible medical expenses from the IRS.
At-home medical supplies
Acne care
Cold and allergy medicine
Earcare and eyecare products
Diagnostic products
Diabetes care
Digestive health products
First aid
Footcare products
Incontinence products
Mobility aids
Oral care (not including toothbrushes or toothpaste)
Pain relief medications
Prenatal and baby care products
Sleep aids
Sunscreen
What can't I use my HSA on?
There is some gray area between what expenses are and are not eligible to be paid for or reimbursed with an HSA. For example, prenatal vitamins are HSA-eligible, while over-the-counter multivitamins are not.
Below are a few of the broader product categories, per the IRS, that are not eligible for HSA reimbursement (again, check your plan or ask your physician to make sure):
Babysitting services (for a healthy child)
Cosmetic surgeries unrelated to a diagnosed disease or personal injury
Funeral expenses
Gym memberships (unless it is for a weight-loss program to treat a specific disease diagnosed by a physician)
Household help that does not qualify as nursing services or long-term care
Maternity clothes
Veterinary fees (unless it is for a guide dog or service animal)
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