What is an HSA? Health Insurance Explained

You might be wondering what an HSA is and how you can get one - or, more importantly, if opening an HSA will have any benefit for you. We’ve collected all the information you need to know about HSAs so you can get those answers.

What is an HSA?

HSA stands for Health Savings Account. This is a bank account where you can deposit pre-tax dollars (that is, money coming out of your paycheck before it’s subjected to taxes). The money within this bank account and the interest accrued will also not be taxed, even at time of withdrawal. The savings in your HSA will then help you pay for medical expenses such as copays, medications, medical equipment, therapy sessions, and even tampons!

You and/or your employer can contribute to your HSA, which has a yearly contribution limit of $3550 in 2020. There are some other limitations to HSAs, most significantly that in order to have an HSA, you must be enrolled in a High Deductible Health Plan (HDHP), that is an insurance plan that has a deductible of $1400 in 2020. Having an HDHP means that you will have to meet your deductible before the insurance plan begins covering your medical care – which is why HSAs are seen as a tool to make health insurance more affordable.

How do I get an HSA?

If you’re eligible (have a HDHP), you can either start an HSA by yourself or with your employer. Ask your employer if they offer an HSA and if they will match your contributions. If they do not, find an HSA plan for yourself online - there are many to choose from! Remember, this is a savings account, which means that different banks will offer different incentives like interest rates.

What are the benefits of having an HSA?

There are many great reasons to start an HSA. Here are a few:

What are the downsides to having an HSA?

As with any health insurance tool, there are also limits to HSAs. Keep in mind the following when considering opening an HSA:

What should I keep in mind when setting up my HSA?

If you’re ready to open an HSA, here are a few guiding thoughts to help the process:

Having an HSA is a great way to save some money on your taxes while still accessing care (like therapy!). As you search for a vetted therapist in your area, consider your financial needs and whether having an HSA will be beneficial for you.