{"id":10573,"date":"2024-11-12T18:21:43","date_gmt":"2024-11-12T18:21:43","guid":{"rendered":"https:\/\/www.freeway.com\/knowledge-center\/?p=10573"},"modified":"2025-01-15T13:57:10","modified_gmt":"2025-01-15T13:57:10","slug":"health-savings-account-explained","status":"publish","type":"post","link":"https:\/\/www.freeway.com\/knowledge-center\/health-insurance\/health-savings-account-explained\/","title":{"rendered":"Health Savings Accounts (HSAs): How They Work and Their Benefits\u00a0"},"content":{"rendered":"\n

Is a health savings account right for you? When researching health insurance options, you\u2019ve likely heard about how health savings accounts, also known as HSAs, can help you save money on your healthcare expenses. <\/p>\n\n\n\n

HSAs are a helpful complement to your primary health insurance<\/a> policy that makes it easier to plan ahead and decrease your out-of-pocket healthcare costs. However, these special accounts do have a few considerations to keep in mind before you sign up for open enrollment in 2024 and beyond. Exploring the ins and outs of HSAs will ensure you make the right choice for your situation so you can take care of your health without stressing your finances. <\/p>\n\n\n\n

What Is a Health Savings Account (HSA)?<\/strong> <\/h2>\n\n\n\n

So, what is an HSA, and how does an HSA work? A health savings account is a tax-advantaged savings account that you use exclusively for your healthcare needs. You pay into your HSA with pre-tax money directly from your paycheck, so you can avoid paying income tax on those funds. Once the money is in your account, you can use it for a variety of medical expenses, including dental work, copays, and medications. <\/p>\n\n\n\n

Many employers offer HSAs for employees, and you may also be able to set up an HSA on your own or through your insurer. Regardless of where you set up your account, however, you need to make sure your policy is a qualifying high-deductible health plan (HDHP). <\/p>\n\n\n\n

The Role of High-Deductible Insurance Plans in Your HSA<\/strong> <\/h3>\n\n\n\n

HSAs are designed to help people who have limited coverage and can\u2019t afford health insurance<\/a> from traditional policies, so you can only sign up in tandem with an HDHP. As the name implies, high-deductible health plans are healthcare policies that have a deductible that\u2019s higher than average. They often have lower monthly premiums, but you\u2019ll have to pay a higher amount on medical costs before your coverage kicks in. For example, if you have a $2,000 deductible, you\u2019ll need to spend $2,000 out of pocket before your policy will start helping you out with copays and offering other benefits. <\/p>\n\n\n\n

HSAs were created as a complement to HDHPs to ease this financial burden. If you contribute to an HSA, you can use those pre-tax dollars to pay for your healthcare costs. So, instead of having to pay your entire $2,000 deductible with no assistance, you can use the pre-tax money you\u2019ve saved up in your HSA. <\/p>\n\n\n\n

HSA-eligible HDHPs need to meet a few key requirements from the IRS. Namely, the deductible must be more expensive than the typical plan. Currently, the minimum annual deductible<\/a> is $1,600 for individuals and $3,200 for families. Your HDHP also needs to have a maximum out-of-pocket cost of $8,050 for an individual and $16,100 for a family. <\/p>\n\n\n\n

Making the Most of Tax Benefits<\/strong> <\/h2>\n\n\n\n

At first glance, using an HSA may not seem that beneficial. After all, you\u2019re still funding your HSA with your paycheck. However, the tax benefits of your HSA can quickly stack up, making your medical expenses much more manageable. <\/p>\n\n\n\n

The Triple-Tax Advantage of Your Health Savings Account Explained<\/strong> <\/h3>\n\n\n\n

Because you can put pre-tax funds into your account, you can enjoy several tax benefits. These ripple effects can maximize your savings and help you get the most out of each dollar: <\/p>\n\n\n\n