It’s no secret that healthcare costs can be expensive. The older we get, the more likely we are to spend more on our health, whether it’s increased office visits to manage chronic conditions like hypertension or diabetes or spending more at the pharmacy to manage conditions with prescription drugs. Many Americans have trouble affording healthcare which may lead some to skip or delay seeking healthcare services. 

In an effort to help employees with healthcare expenses, companies may offer a Health Savings Account (otherwise known as HSA). Put simply, an HSA is an account that helps you pay for eligible medical expenses that aren’t covered by your insurance plan, such as prescription drug costs. And as a bonus, HSAs are tax exempt, meaning, you can make contributions tax-free!

Due to their tax advantages, there are a few requirements on who is eligible for an HSA.

Those eligible:

• Have coverage under a high deductible health plan (HDHP),
• Do not have coverage under another a medical plan that is not an HDHP,
• Are not enrolled in Medicare, and
• Cannot be claimed as a dependent on someone else’s tax return

Contributions to your HSA can be made by you, your employer or both! Keep in mind, the total contribution amount is limited by the IRS every year, but there’s good news—you can roll over unused funds from your HSA year after year AND interest earnings are tax-deferred. This can help you save money for future medical expenses! Another benefit of having an HSA is that it is completely portable, so you can take it with you from job to job or if you change your medical coverage or become unemployed.

So, what can you buy using your HSA?

Funds from your health savings account can pay for any “qualified medical expense.” Generally, these include most medical care and services, as well as dental and vision care. For example, you can use your HSA to pay for crutches after breaking your leg or for prescription eyeglasses. Other common items that qualify as HSA-eligible expenses include:

• First-aid kits
• Bandages
• Hot & cold packs
• Nasal spray
• Contact lens solution
• Breast pumps
• Pregnancy tests
• Chiropractor
• Hearing aids and batteries
• Over-the-counter drugs like Aspirin
• Menstrual care products
• Weight-loss program (must treat a specific disease diagnosed by a physician)

For more information, see IRS Publication 502, Medical and Dental Expenses.

If you currently have an HSA, take a moment to ensure you are getting the most out of your account! If you do not currently have an HSA, speak with your HR team or insurance broker on what options may be best for you. 

Sources: Lopes, L. et al., 2024. Americans’ Challenges with Health Care Costs. Kaiser Family Foundation. https://www.kff.org/health-costs/issue-brief/americans-challenges-with-health-care-costs/