Health Savings Accounts (HSAs) are becoming increasingly popular in the USA for individuals and families to save up for their medical expenses.
The account is a tax-advantaged savings account that is used in conjunction with a high-deductible health plan (HDHP).
They help to offset medical expenses against taxes to reduce costs for US households.
What are the benefits of HSA?
One of the most appealing aspects of an HSA is the flexibility that it provides.
An HSA allows for tax-free contributions, withdrawals, and earnings according to certain expenses which you can use your HSA for.
What expenses can you use your HSA for?
The IRS maintains a list of HSA eligible expenses that can be used to pay for medical costs with HSA funds, from medical services through to long-term care.
For medical services, this category can cover anything from preventive care, doctor visits, physical therapy, chiropractic care, to mental health counselling.
Prescription medications are also covered, including insulin and other medications that are prescribed by a doctor.
Medical supplies and equipment can also be included, typically covering expenses such as crutches, bandages, blood sugar testing kits and other supplies necessary for medical care.
Fees for laboratory tests, such as blood work, X-rays and other diagnostic tests, are also considered HSA eligible expenses.
There are also specific areas covered, such as dental care for routine cleaning, fillings and crowns, vision care for eye exams, glasses or contact lenses and hearing aids.
HSA funds can additionally be used to pay for long-term care expenses, including assisted living and nursing home care.
Some alternative medical treatments, such as acupuncture, chiropractic care and naturopathic medicine, are also eligible expenses under an HSA.
Are there any restrictions to HSA?
Despite the wide-ranging list of expenses covered, there are some limitations and restrictions.
For example, certain medical services, such as cosmetic surgery or elective procedures, are not HSA eligible expenses.
Similarly, over-the-counter medications are only eligible if they are prescribed by a doctor.
Additionally, HSA funds cannot be used to pay for health insurance premiums, except in certain situations, such as for COBRA continuation coverage.
