who-can-i-use-hsa-for

cost-plantar-fasciitis

using-benefits-wisely

Vicky Warren - Headshot

no-longer-eligible-for-hsa

HSA Account Rules

Lively can simplify your understanding of HSA account rules. Here is what you need to know about HSA account rules, healthcare, benefits, and retirement.

HSA account rules

Learn how you can use your HSA to pay for qualified medical expenses for your spouse, child, dependents, and yourself. Sign up with Lively to open your account today!

Who Can I Use My HSA Funds For? | Lively

Lively can simplify your understanding of HDHP. Here is what you need to know about HDHP, healthcare, benefits, retirement, and of course HSAs.

HDHP

Lively can simplify your understanding of healthcare benefits. Here is what you need to know about healthcare benefits and of course HSAs.

Healthcare Benefits

Personal Finance

Lively can simplify your understanding of personal finance. Here is what you need to know about personal finance, healthcare, benefits, retirement, and of course HSAs.

Plantar fasciitis is a condition that causes inflamation on your heel from repeated stretching and tearing. Learn more about common expenses related to plantar fasciitis in this article. 

Common Health Care Expenses: The Cost of Plantar Fasciitis

What can you do with an old HSA when you become ineligible? You can still use your balance to pay for qualified medical expenses and save for retirement.

I’m No Longer Eligible for an HSA… Now What? | Lively

Financial Health

Lively can simplify your understanding of financial health. Here is what you need to know about financial health, healthcare, benefits, retirement, and of course HSAs.

Financial Health Articles

Lively can simplify your understanding of benefits. Here is what you need to know about healthcare, benefits, retirement, and of course HSAs.

Benefits articles

Benefits

Lively can simplify your understanding of HSAs. Here is what you need to know about healthcare, benefits, retirement, and of course HSAs.

Vicky Warren, once a nurse, now a freelance healthcare writer and social media coach.

Vicky Warren

HDHP (High Deductible Health Plan)

HSA (Health Savings Account)

When we hear the words: not eligible, no longer eligible, ineligible, we start to panic. We think we’ll be in trouble if we make the wrong move. But fear not. If you’re no longer eligible for a Health Savings Account (HSA), it just means you’re no longer eligible to contribute to an HSA. 

You can keep the money that’s already in your HSA as long as you like as they roll over from year to year.

Now, what to do next?

## Why are you ineligible for an HSA?

There are several reasons you could be ineligible:

1. You changed your health plan from a [High Deductible Health Plan (HDHP)](https://livelyme.com/guides/hdhp/).

2. You have supplemental health insurance coverage either from a spouse or other source.

3. You’re aged 65.

4. You’re on Medicare.

## What can I do with my remaining balance?

Regardless of the reason you’re ineligible, you can still use your HSA to pay for [qualified medical expenses](https://livelyme.com/whats-eligible/). And if you do so, those distributions will remain tax-free. However, once the money is gone, you’ll no longer be able to make contributions to the account. You can also still [invest](https://livelyme.com/features/invest-your-lively-hsa/) the money in your HSA.

If you’re ineligible because of reason 1 or 2, you can think of your contributions as “on pause”. Since, you’re free to begin contributing to your account once you purchase an HDHP (and only an HDHP). You can continue to use your HSA for qualified medical expenses tax-free and invest your contributions as you wish.

If you’re ineligible because you’re age 65 - congratulations! Your HSA now functions like a retirement account. That means you can use your HSA to pay for any expenses you like. Although, keep in mind that the tax-free nature of the distributions only applies to qualified medical expenses. If you use your HSA for other expenses, you will pay income tax on those distributions.

If you’re on Medicare and younger than age 65, you can use your HSA to pay for qualified medical expenses tax free and invest your contributions as you wish.

The best thing might be to save your HSA money for an unexpected medical expense you might otherwise go into debt for.

## Can I cash out my balance?

Yes. But it’s probably not advantageous to do so. If you’re under 65 and you close your HSA to withdraw the money, you will owe income taxes and an additional 20% penalty on any of the funds used for non-qualified medical expenses. If you’re over 65 and choose to withdraw the funds, you will just owe regular income taxes. However, all distributions on qualified medical expenses will always be tax-free.

If you do cash out your HSA, make sure to fill out the proper forms when you file your income tax return.  

Can I move to another provider or transfer my funds?

Yes, you can. If you want to move your HSA, you have several options.

__1. A rollover or transfer to another HSA provider.__ 

If you choose a [rollover](https://livelyme.com/blog/how-to-rollover-your-hsa-funds/), the original HSA provider physically sends you a check or electronically transfers the funds to you. You then have to send the money to a new HSA provider within 60 days of receipt. You’re able to roll over your funds at least once in a 12-month period. 

If you choose a transfer, you simply open a new HSA and request the original HSA to send the money directly to the new HSA. You don’t have to worry about physically getting the funds to the new HSA, the HSA administrators will handle it for you. There are no limits on how often you can transfer money from one HSA to another.

[Rolling over or transferring your HSA](https://livelyme.com/blog/hsa-transfer-vs-rollover/) to another provider could be a good idea if your current account doesn’t allow you to invest your contributions. By investing your contributions in the market, you can grow your HSA balance even if you’re not eligible to deposit money. And you don’t have to worry about paying taxes or penalties.

__2. Withdraw your HSA balance and put it into a Roth IRA.__ 

While this is something you can do, it doesn’t make a lot of sense. Here’s why:

HSAs and Roth IRAs function similarly upon retirement in the sense that you can use your distributions on anything you’d like. As mentioned above, if you use your HSA distribution on qualified medical expenses, you won’t pay income taxes on the amount. If you use it for other expenses, you will.

While you don’t pay income taxes on your Roth IRA distributions, that’s because your contributions aren’t tax deductible. So if you withdraw your pre-tax HSA contributions to deposit into a Roth IRA, you will pay income taxes on the amount drawn. In addition, you’ll pay a 20% penalty. 

## What can’t I do with my HSA when I become ineligible?

You cannot use your HSA balance to:
- Pay health insurance premiums.
- Roll it into your 401k or IRA.

No matter the reason you’re ineligible to contribute to your HSA, there are still lots of uses for your account. Not least of which is paying for [out-of-pocket qualified medical expenses](https://livelyme.com/whats-eligible/) that your new health plan doesn’t cover like copays, coinsurance, etc. You can also continue to invest your contributions and grow your balance! So don’t cash it out. Don’t forget about it. Use your HSA in the way that makes the most sense for your life.

I’m No Longer Eligible for an HSA… Now What? 

A Health Savings Account (HSA) is an amazing way to help you pay for qualified medical expenses. If you’re looking specifically for what is considered a qualified medical expense, Lively maintains a searchable database of [qualified health expenses](https://livelyme.com/whats-eligible/). The next question is who exactly can you use your HSA funds for?   

## What’s the eifference between an individual HSA and family HSA?

Health Savings Accounts are owned by one person. An HSA is an individual account and are established using the name and tax ID number of one specific individual.

An individual's coverage under a [High Deductible Health Plan](https://livelyme.com/blog/what-is-a-high-deductible-health-plan-hdhp/) determines the amount they can contribute - the “family” amount or the “individual” amount - to an HSA. These [HSA contribution limits](https://livelyme.com/blog/hsa-contribution-limits/) are set each year by the IRS. Those over 55 can make an additional [catch-up contribution](https://livelyme.com/blog/what-is-an-hsa-catch-up-contribution) of $1,000. 

You must be covered under an HDHP to make HSA contributions. If you change health insurance coverage, you can still use the existing HSA funds for qualified medical expenses, but cannot make additional contributions when not covered under an HDHP.

## Who is covered by my HSA?

Once you’ve obtained qualified HDHP coverage, established the HSA, and made contributions - you need to know what you can use the money for. 

As for the “what,” you can spend your HSA funds on qualified medical expenses. Many healthcare services and products are included, IRS Publication 529[ lists HSA eligible items.   
](https://www.irs.gov/pub/irs-pdf/p529.pdf) 
When it comes to the “who” part, there are three groups of people you can use your HSA funds for.    

[IRS Publication 969](https://www.irs.gov/forms-pubs/about-publication-969) states: 

__Qualified medical expenses are incurred by the following:__

- You 
- Your spouse
- Any dependents you claim on your tax return
- Anyone you could claim as a dependent on your tax return, but don’t for varying reasons

Even if you have “self-only” HDHP coverage, you can use your HSA funds on these individuals.

### You and your spouse 

It goes without saying that you can spend your HSA funds on yourself. You can also use the funds for qualified medical expenses for your spouse - even if you have “self-only” HDHP coverage.

The plan owner does not have to be present when their spouse uses HSA funds. Your spouse can also use their own cash, debit, or credit card to pay and then reimburse themselves with the HSA funds. Be sure to keep every receipt to justify the reimbursements. Your spouse can obtain healthcare using pre-tax dollars using the HSA money. 

### Your children and other dependents 

You can use HSA money on your children and other dependents. The IRS’ definition of a dependent is a qualifying child or relative, which could include a related member of your family you care for. Dependent expenditures are qualified medical expenses, so make the most of your HSA funds! 

### Those you could claim as dependents 

There is a third group of people you can use your HSA funds for. The IRS words it as people who could have been your dependent but were not for varying reasons. 

This group is defined as: 
Any person you could have claimed as a dependent on your tax return except that: 

- The person filed a joint tax return
- The person had a gross income of $4,050 or more
- You, or your spouse, if filing jointly, could be claimed as a dependent on someone else's tax return

A couple of examples include a child whose income is above the limit, so they may not qualify as an IRS dependent, or a married child who files a joint tax return but is still eligible for coverage under your plan. You can use your HSA funds for their qualified medical expenses in these cases.

To wrap it up, you can use HSA funds for you, your spouse, your children, and other dependents, and even those you could claim as dependents but don’t for some reason or another. HSAs become even more appealing, knowing you can use pre-tax dollars to pay for your entire family’s healthcare expenses! 

Who Can I Use My Health Savings Account For?

Your *plantar fascia* is a ligament on the bottom of your foot that connects the heel bone to the toes. It supports your arches and absorbs shock when you walk. Small tears can happen if too much stress and tension are placed on the ligament. Repeated stretching and tearing can irritate, and lead to inflammation of the fascia which leads to the common issue known as plantar fasciitis.

## Diagnosing Plantar Fasciitis

To diagnose plantar fasciitis, your provider will take a detailed medical history and do a physical examination. They will check for areas of tenderness in your foot. Typically, a diagnosis can be made without further testing. However, they may want to do an X-ray or MRI to ensure there isn’t another problem causing your pain.

## Treating Plantar Fasciitis 
Most people with plantar fasciitis can use conservative treatments such as rest, ice, and stretching, and recover in a few months. Many people can use over-the-counter medications like naproxen sodium (Aleve) and ibuprofen (Advil, Motrin) for pain relief.  

Sometimes, stretching and strengthening therapies such as physical therapy, night splints, and orthotics can help remedy the situation. 

If conservative remedies don’t help, your provider may recommend more intense treatments like steroid injections, extracorporeal shock wave therapy, ultrasonic tissue repair, or surgery if needed. 

Plantar fasciitis surgery involves releasing the plantar fascia from the heel bone. The procedure is typically only done when pain is severe, and all other treatment options have failed to provide adequate pain relief.

## Cost of Treating Plantar Fasciitis

Many health insurance plans cover at least part of the cost of plantar fasciitis treatments, with a copay or coinsurance of about 10% - 50% of the treatment price.  

If you don’t have health insurance, you could spend up to $500 for OTC medication, comfortable shoes, and a night splint. Another common treatment is custom orthotics, which can range from $200 - $800. Physical therapy can cost several thousand dollars uninsured, and if surgery is required, it can cost up to $10,000 or more. 

## How an HSA Can Help

A Health Savings Account (HSA) is a tax-exempt account that allows you to save for and pay for certain qualified medical expenses. 

You can use HSA funds to pay for a wide range of plantar fasciitis treatments. Items such as [night splints](https://livelyme.com/whats-eligible/#Splints), [orthotic inserts](https://livelyme.com/whats-eligible/#Orthotics) (custom or off the shelf), [physical therapy](https://livelyme.com/whats-eligible/#Physical-Therapy) and even surgery can be paid for by using HSA funds. 

HSAs take time to set up and build savings. They are a great way to save for the medical expenses you have now or will need down the road. Funds in your HSA rollover year to year, so you don’t have to worry about the “use it or lose it” that comes with other types of accounts. Also, you can take your HSA with you wherever you go without losing funds. 

If you’ve been diagnosed with plantar fasciitis, rest assured that you can use HSA funds for many of the associated expenses. 

Plantar fasciitis is a common issue. By knowing what to expect to pay for treatment, you can move forward and get back to walking pain-free. 



To lower your healthcare costs you enroll in a high-deductible health plan (HDHP). That's because HDHPs have lower insurance premiums (but higher deductibles).

Since HDHPs have higher deductibles, you can help keep your healthcare costs low by using preventive care and a medical savings account (known as an HSA).

1. Most HDHPs cover preventive care (like a physical exam) with zero out-of-pocket. So keeping up with preventive care is a smart way to avoid costly illnesses (and to feel good!).

2. You can continue to lower your healthcare costs by using a health savings account. In fact, a high-deductible health plan works best in combination with a health savings account.

Read this guide if you want to learn how to use a tax-advantaged health savings account (HSA) to pay for qualified medical expenses, save money, and lower your taxes.

<h2>Who should read this</h2>

This material applies to individuals & families that want to lower their healthcare costs and be financially effective with their high-deductible health plan (HDHP).

It’s important that you learn about HSAs if you have (or plan to enroll in) an HDHP. It will help you save big.

If you’re in the process of enrolling in an HDHP then choose a plan that is compatible with an HSA. The IRS defines an HDHP as having:

- $1,350 minimum annual deductible for self-only health care coverage and $2,700 for family coverage (both unchanged from 2018)

- $6,750 maximum for self-only health care coverage (a $100 increase from 2018), and $13,500 for family coverage (a $200 increase from 2018)

Jump to:

- [Health Plan Terms](#health-plan-terms)
- [Definition of an HSA](#definition)
- [HSA vs FSA](#hsa-vs-fsa)
- [HSA vs PPO](#hsa-vs-ppo)
- [Benefits of an HSA account](#benefits)
- [How to qualify for an HSA account](#how-to-qualify)
- [How to maximize your savings](#how-to-maximize)
- [How to use your HSA funds](#how-to-use)
- [How to open an account account](#how-to-open)
- [Frequently asked questions](#faq)

<h2 id="health-plan-terms">Some Health Plan Terms</h2>

Before we move forward, let’s define a few terms you’ll come across when shopping for health plans. If you know these feel free to skip to the next section.

- Deductible: This is what you pay upfront for your medical care before your insurer’s coverage kicks in. Once you meet your deductible your insurer covers a large part of the bill. It resets every year.

- Premium: This is what you pay every month to the insurance company to have health insurance whether you use it or not.

- Copay: Predetermined rate you pay to access healthcare services. With your plan, you could have to pay $20 every time you go to the doctor’s office or a $10 copay for your monthly medication.

- Coinsurance: Once you meet your deductible, your health insurer takes up the bulk of your medical bills. But not all of it. Your co-insurance is the percentage of a medical bill you pay for after you meet your deductible. For instance, with a 25% coinsurance, you would pay 25% of each medical bill, and your health insurance provider will cover the remaining 75%.

- Out-of-pocket limit: But you can’t just keep paying for your healthcare, otherwise in a bad health year even with the best plan you would become bankrupt. Your out of pocket limit is the absolute maximum you would need to pay for your healthcare in a year before your health provider covers 100% of the bill.

<h2 id="definition">What is an HSA?</h2>
Health care costs for Americans have been skyrocketing. And an HSA can help you (and your family) plan for and beat the rising costs.

So what exactly is an HSA?

A Health Savings Account (HSA) is an easy and smart way to pay for qualified medical expenses for you and your dependents. With its tax-advantages, easy access to savings, and future growth potential it’s an effective savings vehicle that provides benefits today and in the future.

You can [open an HSA easily and in only a few minutes with Lively](https://livelyme.com/). Then you can contribute to your account (which is FDIC insured) with pre-tax dollars. As a result, you’ll lower your income tax (which is a significant tax benefit).

Using your HSA funds is also easy. We cover it below in the ‘[How to use your HSA funds](https://paper.dropbox.com/doc/2019-Guide-to-HSA--AR5sdUz22mf7__AoRI1xvIORAg-EtPIRt4gBzgxqKMnnuDyY#:uid=463786104738843322001399&h2=How-to-use-your-HSA-funds)’ section.

<h2 id="hsa-vs-fsa">HSA vs FSA</h2>

Health savings account versus a flexible spending account

FSA stands for flexible spending account. It’s an account your employer makes available to you so you can pay for medical expenses with pre-tax dollars.

With both an HSA and an FSA, you can pay for out-of-pocket medical expenses—like copays, medical bills, and vision expenses—while __lowering your taxable income.__

But an FSA is different than an HSA. Read our HSA vs FSA blog post to find out which account is better for you.

<h2 id="hsa-vs-ppo">HSA vs PPO</h2>

It's not a choice between an HSA plan and a PPO plan.

__An HSA account helps you save for medical expenses. It’s not a form of health insurance.__

__A PPO, on the other hand, is a form of health insurance.__ PPO stands for Preferred Provider Organization and refers to the type of network you can access for healthcare.

PPO plans are traditional plans that tend to have lower deductibles and higher premiums. Other healthcare plans like a health maintenance organization (HMO) have lower premiums and low or almost no deductibles, but you have a smaller choice of providers.

The question isn’t whether an HSA is better than a PPO. The question is do you want a high-deductible plan, or do you want a low deductible plan? And if you opt for a high-deductible plan then you’ll be financially efficient if you also enroll in a health savings account.

Our [HSA vs PPO blog post](https://livelyme.com/hsa-vs-ppo/) helps you decide if a PPO or an HDHP + an HSA is right for you.

<h2 id="benefits">Benefits of an HSA account</h2>

An HSA is like a supercharged IRA. It’s approved by the Internal Revenue Service (IRS). And it’s great for your federal tax and state tax returns.

That’s because your HSA contributions are tax-deductible from your income tax, __meaning you can lower your tax burden.__

An HSA offers triple tax savings:

- Pre-tax or tax-deductible contributions
- Tax-free interest and investment earnings
- Tax-free distributions, when used for qualified medical expenses

HSAs are also portable. This means that you always keep your HSA. This is true even if you change employers or stop working. Unlike a [Flexible Spending Account (FSA)](https://livelyme.com/hsas-vs-fsas/), there is no “use-it-or-lose-it” rule with HSAs. If you don’t use funds, they remain in your HSA each year. They also continue to earn tax-free interest.

So take control of your healthcare costs and plan for your future by [opening an HSA](https://livelyme.com/).

__1. Save more for your health__

Contributions to an HSA are tax deductible. Paying with these funds means you’ll pay less for health expenses.

__2. Health safety net__

Rollover your HSA funds from year to year. Unlike a flexible spending account, your contributions don’t have to be used within the year.

__3. Put your money to work__

From day 1, you can establish an investment account using your HSA contributions, with a variety of mutual funds to choose from.

__4. The 401(k) of healthcare__

After age 65 you can use your HSA money for non-health related expenses and just pay income taxes on your withdrawals. No penalty!

<h2 id="how-to-qualify">Qualifying for an HSA account</h2>

To qualify for an HSA you need to a health insurance plan known as an HDHP.

High-deductible health plans have lower premiums and higher deductibles. And to qualify for an HSA,the HDHP must satisfy certain IRS requirements with respect to deductibles and out-of-pocket expenses.

Based on 2019 IRS specifications, qualifying HSA health plans must have minimum deductibles of $1,350 for individuals and $2,700 for families. In addition, qualifying plans must have maximum out-of-pocket amounts of less than $6,750 for individuals and $13,500 for families.

With an HDHP, you generally pay more up front for medical expenses before the plan begins to pay for covered services. In return, you will generally pay less in premiums than in other medical plan options. Otherwise, an HSA-eligible health plan is much like a traditional health care plan.

For more information on if you qualify for an HSA check out [IRS publication 969](https://www.irs.gov/forms-pubs/about-publication-969%5d).

__Not sure if you qualify? Use our free calculator__

Lively created the industry’s first [HSA eligibility calculator](https://livelyme.com/signup-eligibility/). It algorithmically calculates hundreds of HSA contributions scenarios to show you exactly how much you can contribute. You can see it live here.

<h2 id="how-to-maximize">Maximizing your savings (2019 contribution limits)</h2>

To take full advantage of tax savings and to build a reserve for the future, it is suggested that you make the maximum contribution as set by the IRS. So there are HSA contribution limits? Yes.

For those of you who want the quick answer: the HSA contribution limits for 2019 are __$3500 for an individual__ and __$7000 for a family__. If you are 55 or older your catch-up contributions are limited to an __extra $1000 a year__.

Read our [2019 HSA Contribution Limits](https://livelyme.com/2019-and-2018-hsa-contribution-limits/) blog post for a complete look at contribution limits and to learn how to maximize your savings.

<h2 id="how-to-use">How to use your HSA funds</h2>

You can use your HSA funds as you would the funds in your bank account: with your debit card.

After you enroll in an HSA, Lively sends you a branded debit card.

The catch is you can only use HSA money for qualified medical expenses. These costs generally include payment to doctors or dentists, over-the-counter [prescription](https://www.nerdwallet.com/blog/health/2014/03/24/cheap-prescriptions/) drugs, imaging such as MRIs, medical services (such as home care) and medical equipment or supplies.

With a Lively HSA, you can also reimburse yourself for any qualified medical expenses that your insurance didn’t cover and you had to pay out-of-pocket.

Lively created a [free-to-use search engine](https://livelyme.com/whats-eligible/) to find out if what you want to buy is a qualified medical expense. You can also visit [HSA Store](https://hsastore.com/?a_aid=59ee38ee1506b&a_bid=87383ed8&utm_source=Lively&utm_medium=TPA+Portal+EL+List&utm_campaign=TPA+Partner) to find and purchase thousands of eligible expenses.

Q) Can an HSA be used for glasses?

A) Yes, as long as the sunglasses have prescription lenses and were not bought over-the-counter.

Q) Can an HSA be used for dental?

A) You can include in medical expenses the amounts you pay for the prevention and alleviation of dental disease. Preventive treatment includes the services of a dental hygienist or dentist for such procedures as teeth cleaning, the application of sealants, and fluoride treatments to prevent tooth decay. Treatment to alleviate dental disease include services of a dentist for procedures such as X-rays, fillings, braces, extractions, dentures, and other dental ailments.

<h2 id="how-to-open">How to open an account</h2>

Open and FDIC-insured health savings account in minutes with Lively.

Lively brings HSA into the modern era so it’s easier for you to keep healthcare costs low today and plan for the costs of tomorrow.

__1. Why Lively HSA__
<iframe title="Why Lively HSA?" width="640" height="360" src="https://www.youtube.com/embed/6Yx8YS3wQ2o?feature=oembed" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>

__2. How to easily open an HSA__
<iframe title="Setup HSA Account Tutorial 💵 How to set up a Health Savings Account with Lively" width="640" height="360" src="https://www.youtube.com/embed/jysGYakLFQ8?feature=oembed" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>

<h2 id="faq">Frequently asked questions</h2>

Q) Is an HSA also health insurance?

A) No, it isn’t. Health insurance is provided by an insurance company. An HSA is not insurance coverage. For our full answer, read our [Is HSA health insurance?](https://livelyme.com/is-hsa-health-insurance) blog post.

Q) Is an HSA tax-deductible?

A)Yes. But you need to fill out the right forms. Read our blog post on [HSA Tax Forms](https://livelyme.com/what-hsa-tax-forms-do-you-need-to-fill-we-know/).

Q) Are HSA contributions pre-tax?

A) Your HSA contributions are pre-tax if made by payroll deduction.

Q) What happens if I use my money to pay for a non-qualified expense?

A) If you are under 65 years old, you will have to pay ordinary income taxes as well as pay a 20% penalty for the amount you’re disbursed out of your HSA account. If you are 65 or older, disabled or die, then you will just pay ordinary incomes taxes (no penalty). If you find yourself in this situation, you can attempt to put money back into your HSA funds before tax time each year.

Q) Does an HSA roll over?

A) Once funds are deposited into the HSA, the account can be used to pay for qualified medical expenses tax-free, even if you no longer have HDHP coverage. The funds in your account roll over automatically each year and remain indefinitely until used. There is no time limit on using the funds.

<h2>Get a free HSA</h2>

Things like your flexibility in contributing, the ability to keep your unused balance and additional tax benefits make HSAs the wisest choice. So [sign up for an HSA – it's free →](https://livelyme.com/)

HSA Guide 

Learn how to use a Health Savings Account to pay for qualified medical expenses for you and your dependents.

Health Savings Account Guide - IRS-Qualified Medical Expenses & More

2019 HSA Guidebook

It’s that time of year again, when 80% of Americans spend less than an hour researching one of the most important decisions they’ll make this year: their health coverage.  Unfortunately, this often leaves many people under-insured or without the right coverage for their needs.  To prevent this from happening to you, we have a few tips that’ll help you make the right decisions for you and your family this open enrollment season.

## What is open enrollment?

[Open enrollment](https://www.healthcare.gov/glossary/open-enrollment-period/), simply put, is a period of time, usually two-to-six weeks, when people can enroll in health insurance and other benefits for the next year. It most often occurs in the fall, but some employers have specific open enrollment periods, so if you are not sure when your company's open enrollment takes place, it's always a good idea to ask. Outside of open enrollment, you often are not able to change your health insurance coverage without a "qualifying life event," such as having a baby, getting married, or losing other health coverage.

## Common mistakes

Because researching healthcare options can feel like a chore, during open enrollment, roughly 90% of Americans choose the health plan they had the previous year, despite any changes in health. This can leave them under-insured. In addition, individuals often don't look into how their plans may have changed, even if it has the same name, and often neglect the full range of benefits their insurance plan and employer offers. 

## Six tips to help you determine your benefits package

These simple, actionable tips will help you select the best benefits for you and your family.

## Review your family’s recent health history

To make sure you’re buying the right coverage for your family’s needs, you need to know what those needs are. Take a look at what your family’s medical needs have been over the last two years. Assess:
- How did your current plan support you?  
- Where did it fall short?  
Then ask yourself if you or a family member has been recently diagnosed with a condition that will require ongoing treatment.  If so, you’ll want to take that treatment into account when choosing a plan.

## Assess recent or near-future life changes

Are you [getting married](https://livelyme.com/blog/tag/are-married-getting-married/)? [Pregnant, wanting to get pregnant, or adtopting a child](https://livelyme.com/blog/life-events-that-can-change-your-healthcare-costs/)? Are you planning to move away from your preferred doctor and want to make sure you have access to another health provider you like? To make the right decision for your health coverage, you’ll want to anticipate how these future changes will affect your healthcare needs.

## Check your current plan

Plan names can stay the same but the benefits included within them could change. So even if you keep the same plan as you had last year, it could end up costing you more or less depending on what changes your employer or the plan provider made. Possible changes to look for are:

- Coverage levels
- Pricing
- Types of products offered
- New providers for existing products
- New products from existing providers

## See if premiums and deductibles have changed

Sometimes companies change the amount to which they’ll contribute to their employees’ health plans. If your company has changed its contribution levels, this will likely affect the amount you pay in premiums and deductibles. It might also affect the attractiveness of HSAs and FSAs in order to help with those deductibles.

## Do your own research

Your company will likely put out official communication regarding your benefits options and reviewing its resources is a good place to start.  But it’s not a place to end.  Many companies like <a href="https://www.alegeus.com/insights/1232-choosing-a-health-insurance-plan">Alegeus</a>, which is an administrator of health benefits for organizations, provide resources to help consumers make the right choices when it comes to their benefits.  By doing your own research, you’re more likely to get a neutral third party assessment of your plan options, and you might even find better benefits in the marketplace than your company is offering.

If you do find better plans that you think your company should consider, try sending them to your Human Resources (HR) Department. When HR knows what employees need, they can make better choices in terms of what benefits they offer in the future.

## Check your company’s wellness initiatives

Companies have realized that a healthier workforce is a more productive workforce. To incentivize healthy behavior, many have started programs that reward such behavior with increased benefits like a greater HSA or 401(k) contribution, lower premiums, or other perks like reimbursement for gym memberships. Check with your HR Department to see if you might qualify for any increased benefits.

Navigating the healthcare labyrinth can feel like a job in and of itself.  But if you follow our six tips, you’re more likely to make the right decisions for your family and could end up saving money over the course of the year.

## Learn more with Lively

Lively is a modern, health savings account (HSA) that helps you save for routine and unexpected healthcare expenses and plan for retirement. To learn more, check out our [resources on healthcare and financial wellness](https://livelyme.com/resources/), or see if an HSA is a [fit for you](https://livelyme.com/features/).

Select the right healthcare insurance benefits for your family.

child and mother at a family doctor visit 

80% of Americans spend less than an hour researching their health coverage. Follow these tips so you can make the right decisions for you and your family.

Open Enrollment Tips for Employees | Lively

Open Enrollment Tips for Employees

Familiar with the tax-saving benefits of a health savings account (HSA), and wondering how you can extend those benefits to your family? While an HSA is owned by one person, there is a way to tap into those HSA funds for the rest of your family. Discover how, and the differences between a family HSA and individual HSA.

## Your HSA is dependent on your health care coverage

To be [eligible to contribute to an HSA](https://livelyme.com/hsa-guide#qualifying-for-an-hsa-account), you must enroll in an eligible [High-Deductible Health Plan](https://livelyme.com/blog/what-is-a-high-deductible-health-plan-hdhp/) (HDHP). The IRS sets annual minium deductibles for individual and family health care coverage, as well as annual out-of-pocket maximums, and usually update those annually based on inflation.

## What is a Family HSA?

![what-is-family-hsa](//images.ctfassets.net/6j8y907dne6i/2AyTsX5zWqJw75Sf8dPxjn/27b942e17c0757642c853d85db8abfe4/what-is-family-hsa.jpg)

While often referred to as a “Family HSA” account, there is actually no such thing. 

Each HSA is owned by one person. But family coverage under a qualifying HDHP allows you to use your HSA to pay for [qualifying medical expenses](https://livelyme.com/whats-eligible/) for yourself and your family. The type of health plan (individual or family) you’re enrolled in decides how much you can contribute to your HSA account in one calendar year. 

If you are enrolled in an individual qualifying high-deductible health plan, you will only be able to [contribute the individual maximum contribution](https://livelyme.com/blog/hsa-contribution-limits/) amount set annually by the IRS. If you and your family are covered by the same qualifying health plan, then your contribution limit is increased to the annual contribution limit set for families. One rule: To contribute the maximum family contribution limit, none of the family members can be claimed on another person’s [tax return](https://www.irs.gov/irb/2004-02_IRB). 

## Annual HSA Contribution Limits

![hsa annual contribution limit](//images.ctfassets.net/6j8y907dne6i/3mripn4V4Q51N7FfM26AEf/283c4bf5ded5d8aefbf448ea77e7b317/hsa_annual_contribution_limit.jpg)

If you are enrolled in an individual qualifying high-deductible health plan, you will only be able to [contribute the individual maximum contribution](https://livelyme.com/blog/hsa-contribution-limits/) amount set annually by the IRS. If you and your family are covered by the same qualifying health plan, then your contribution limit is increased to the [annual contribution limit set for families](https://livelyme.com/blog/hsa-contribution-limits/). 

One rule: To contribute the maximum family contribution limit, none of the family members can be claimed on another person’s [tax return](https://www.irs.gov/irb/2004-02_IRB). 

If enrolled in an HSA-eligible HDHP, and at least 55 years old—or will be 55 any time in the calendar year—you can make an extra $1,000 contribution. This is a [“Catch-Up” Contribution](https://livelyme.com/blog/what-is-an-hsa-catch-up-contribution/). 

## Real-life examples
### Individual health plan with HSA

During open enrollment, James chooses an HDHP because he wants to take advantage of his employer’s contributions to an HSA. James is not currently married and doesn’t have any dependents, so his health plan will cover only him.

As an individual, James can contribute up to the individual annual [HSA contribution limit](https://livelyme.com/blog/hsa-contribution-limits/) without a penalty.

### Family Health Plan with HSA
Fast forward a few years, and James is now married with two children. James is at a different company, but still has his HSA and an HDHP that covers him and his family.

James is now eligible to contribute the family limit to his HSA, and while the contribution limits often change annually, he knows he'll be able to contribute up the the annual family [HSA contribution limit](https://livelyme.com/blog/hsa-contribution-limits/) within one calendar year.

## Can I Have a Joint HSA With My Spouse?
![no-joint-hsa-with-spouse](//images.ctfassets.net/6j8y907dne6i/4JyBNCLJUiCy6ietwyTrGn/588c28e6b0352282f87b6d0c6643cfe9/no-joint-hsa-with-spouse.jpg)

*Short answer:* No. An HSA is owned by one person. 

Yet, there is a way for you and your spouse to have HSAs of your own. If you and your spouse are covered under the same HDHP, you can each open your own HSA and contribute separately. But, the amount you and your spouse contribute, combined, cannot exceed the contribution limit for a family plan. 

### Real-life examples:

#### Family HSA contribution limit with two accounts

Jack and Diane are married and covered under Jack’s high-deductible health plan. Diane wants to take advantage of her employer’s HSA contributions, so she decides to open up an HSA of her own. 

However, Jack and Diane’s total, combined contributions cannot exceed the family contribution limit set for the IRS that year. That means that whatever Jack contributes to his HSA and whatever Diane contributes to her HSA added together needs less or equal to the annual contribution limit. 

Jack and Diane can use these funds to pay for the [qualified medical expenses](https://livelyme.com/whats-eligible/) of those covered under their health plan, including each other.

#### Family HSA contribution limit with one account

The other option is to have the entire amount of the HSA in one account holder’s name. In this case, Jack opts not to contribute anything into his HSA for the year, and Diane and her employer will be able to contribute the entire amount into her account.

## The benefits of an HSA

![hsa-retirement-benefits](//images.ctfassets.net/6j8y907dne6i/1okT5ICuYiKx6c18Oof9dK/0e331b4135f6588ed8df49e0f2a24bdd/hsa-retirement-benefits.jpg)

There are four primary [benefits of having an HSA](https://livelyme.com/blog/what-are-the-benefits-of-an-health-savings-account/).

1. __Three levels of tax savings__. Pre-tax or tax-deductible contributions. Tax-free interest, and investment earnings. And tax-free withdrawals when used for qualifying medical expenses.
2. __Portability__. HSAs aren’t tied to your employer. If you decide to move to a different company or retire, your HSA stays yours. The funds added to your account stay there until you choose to withdraw or roll it over; like a 401(k).
3. __ A safety net in the event of a health-related emergency__. An HSA helps you save for the unknown. It can be used for unexpected health care expenses or health insurance if you’re between jobs. An HSA covers all qualified medical expenses, even after a change of plans or providers.
4. __ Flexibility in retirement__. When you turn 65, your HSA can be used for non-health-related expenses without penalties; like a 401(k), or IRA.

An HSA is a great safety net in the event of a health-related emergency. And with [options to invest](https://livelyme.com/blog/can-i-invest-my-hsa-money/), choosing to open an HSA is one of the best financial choices you can make for you and your family. 

To learn more, or to open an HSA, [get in touch](https://livelyme.com/features/) with us at Lively.


family hsa and individual hsa contributions are dependent on health care coverage

family-hsa-vs-individual-hsa

Learn the differences between a Family HSA vs Individual HSA. And how to extend HSA benefits to your entire family. 

Family HSA vs Individual: What’s the Difference?

Dividing your assets, such as 401(k)s and Health Savings Accounts (HSAs) is a central piece of negotiating a divorce settlement. If you receive health insurance through your spouse’s employer, you want to carefully consider whether it makes sense to stay on your partner’s health insurance after you divorce.

## Tips for navigating health insurance when divorcing

### You can pay for health insurance through an ex’s health insurance.

If your health insurance was through your partner’s workplace plan, you may be able to stay on the plan for up to 36 months. The federal COBRA legislation requires any firm or organization with at least 20 employees to offer health insurance to the divorced partner. If your soon-to-be-ex works for a smaller employer, you may be eligible for extended COBRA coverage through a state-run plan.

But there’s a big expensive catch to COBRA health insurance coverage: Once you are divorced, the employer no longer will subsidize the premium cost for the non-employee. 

You will be required to pay the full cost. According to the Kaiser Family Foundation, the average monthly premium for single coverage through a group plan was nearly $7,200 in 2019.  And the employer is also allowed to tack on an additional 2% annual fee to cover administrative charges.

### Check out your employer’s health insurance. 

If you were on your partner’s plan because it was more robust or cost-effective than the plan offered by your employer, time to circle back to your workplace plan. It may now be more cost-effective than staying on your ex’s plan through COBRA. 

Getting divorced is considered a [qualifying life event](https://livelyme.com/life-events-that-can-change-your-healthcare-costs), so you’ll be able to enroll for health insurance outside of open enrollment. 

### Compare COBRA coverage to an ACA-marketplace plan.

Before you finalize your divorce, spend some time pricing out purchasing your own health insurance through the ACA marketplace. Depending on your income you may be eligible for subsidies. You can start your search at the [healthcare.gov](https://www.healthcare.gov/) website.

### Include the cost of paying for health insurance in your divorce negotiations. 

It’s likely that whatever health insurance solution you land on, the premium is going to be a sizable line-item cost in your monthly budget. You should factor that into negotiations for assets. And keep in mind that if there is a family HSA account that has a sizable balance, that is a valuable asset to also bring into your discussions. 

### Consider a legal separation as a temporary step. 

If you are legally separated, but not divorced, you may be able to stay on a spouse’s plan, but it varies by employer and insurer.

### Sort out who pays for insurance coverage of the kids.

This is obviously a key part of your divorce negotiation. If you opt for joint custody and you both assume responsibility for health insurance, the spouse whose birthday falls earlier in the calendar year will have the “primary” insurance for the children. If there isn’t joint custody, the custodial parent typically assumes responsibility for health insurance for children. If the custodial parent remarries, and doesn’t have health insurance, the responsibility can fall to the custodial parent’s new spouse. If that isn’t an option the non-custodial parent will be required to step in and provide health insurance coverage.

Given the complexity of divorce, including health insurance coverage. consulting with a lawyer experienced in divorce law is a smart move to ensure that everyone in the family is covered. 



stay-on-insurance-divorce

Divorce is a complicated process - and it doesn't help that your health insurance gets tied up into the process as well. We detail some information that you will need to know regarding your healthcare if you are getting divorced from your partner.

How Long Can I Stay on My Partner's Insurance After a Divorce? 

<p>Helping employees understand the benefits of an HSA (like any new HSA user), takes time and resources. In order to make the HSA education and engagement process easier for employers and employees, we have outlined our best practices.</p>
<p></p>
<p>Our employee HSA education guide will help you get HSA strategies&nbsp;in place from day 1 so employees can take advantage of the&nbsp;<a href="https://livelyme.com/what-are-the-benefits-of-an-health-savings-account/">triple-tax benefits</a>&nbsp;immediately.</p>
<h2>HSA Employee Education Tips</h2>
<p>Opening, establishing and contributing to an HSA should be easy.&nbsp;It shouldn&#8217;t be rocket science, that&#8217;s at least what we think at Lively! Here is what every employee needs to know to get started with their new HSA:</p>
<ol>
<li>Confirm&nbsp;<a href="https://livelyme.com/hsa-eligibility-details/">HSA-Eligibility</a></li>
<li>Understand&nbsp;<a href="https://livelyme.com/2018-hsa-contributions/">Contributions&nbsp;Limits</a></li>
<li><a href="https://livelyme.com/add-1-hsa-day-1/">Open and Establish their HSA</a></li>
<li>How to&nbsp;<a href="https://livelyme.com/hsa-rollovers-and-transfers/">Rollover or&nbsp;Transfer</a>&nbsp;an Existing HSA</li>
<li><a href="https://livelyme.com/set-forget-hsa/">Automating HSA Contributions</a></li>
<li>Use an HSA&nbsp;<a href="https://livelyme.com/hsa-debit-card/">Debit Card</a>&nbsp;for Eligible&nbsp;Purchases</li>
<li>Review&nbsp;<a href="https://livelyme.com/can-i-invest-my-hsa-money/">HSA Investment</a>&nbsp;Options</li>
</ol>
<p>No employer health or financial situation is the same. Once employees have opened&nbsp;an HSA, customizing&nbsp;HSA strategies can help each and every eligible employee take advantage of their HSA benefits. This will better ensure success (and renewal). Let&#8217;s look at two likely employee HSA scenarios:</p>
<ul>
<li><b>HSA Saver</b>&nbsp;&#8211; HSA savers are more focused on the long-term savings value of an HSA. They can invest their funds or simply take advantage of FDIC-Insured interest bearing&nbsp;HSA accounts. Thereby taking advantage of compound interest and save HSA funds for future health costs.</li>
<li><b>HSA Spender</b>&nbsp;&#8211; These employees are using pre-tax HSA funds to pay for expected and unexpected health costs. They can use their dedicated HSA funds to reduce their out-of-pocket health expense liability.</li>
</ul>
<p>Many HSA account holders are a mix of both. Helping employees save for health costs today and plan for anticipated health costs well into retirement will only increase HSA adoption.</p>
<h4>Employee Engagement and Support</h4>
<p>Things come up. Employees get stuck. We get it. We have&nbsp;been through it ourselves. Making sure on-demand support options are available for employees is crucial in this process. It saves everyone time. Employee HSA education is an ongoing process. So we created an on-demand resource center to help &#8211; from an&nbsp;<a href="http://support.livelyme.com/">HSA FAQs</a>&nbsp;to&nbsp;<a href="https://livelyme.com/calculator/">HSA saving calculators</a>. We backed it all up with a dedicated&nbsp;customer&nbsp;service team to answer employee&nbsp;questions via&nbsp;<a href="mailto:support@livelyme.com">email,</a>&nbsp;<a href="tel:1-888-576-4837">phone</a>&nbsp;or chat (via our website).</p>
<h4>Don&#8217;t&nbsp;Forget! Talk About Retirement &amp; Health Costs</h4>
<p>Many employees are stuck on a year-to-year&nbsp;ferris&nbsp;wheel when it comes to health insurance and cost planning. Employees are forced into rising yearly health insurance premiums and out-of-pocket costs. Not planning for health costs in retirement &#8211; which are&nbsp;<a href="https://www.cnbc.com/2017/11/24/health-care-costs-in-retirement-can-top-275000.html">expected to exceed&nbsp;$275,000 per couple</a>&nbsp;&#8211; can be a financial mistake. Employees can use their HSA to plan and save for retirement. In fact, an HSA might be the&nbsp;<a href="https://livelyme.com/stealth-ira/">new stealth IRA</a>.</p>
<p>Opening an HSA is easy (at least at Lively). Helping employees understand the value of an HSA should be too. Use this employee HSA guide&nbsp;to fast-track benefits education to save employees time.</p>

Employee-HSA-Guide.jpg

Helping employees understand the benefits of an HSA (like any new HSA users), takes time and resources. In order to make the HSA education and engagement process easier for employers and employees, we have outlined our best practices.

Employee HSA Guide

Lively Blog

It’s a fact. The cost to be - and stay - healthy rises each year. And even the comprehensive  (expensive) health insurance plans are covering less for the cost of care. So what’s a person to do? Open an HSA.

A Health Savings Account (HSA) allows you to set aside money on a pre-tax basis to pay for qualified medical expenses. You, your employer, and even friends and family can contribute money to your HSA. The contributions are tax-deductible and never expire. So you can save them for a rainy day, retirement, or to help pay for an expensive procedure you have coming up.

## How do I qualify for an HSA?

To qualify for opening and contributing to an HSA, you must meet these criteria:

1. You must enroll in a [High-Deductible Health Plan](https://livelyme.com/guides/hdhp/) (HDHP). 
2. You can’t have any other supplemental health insurance coverage. Meaning, you can’t be covered under your spouse’s health insurance plan too.
3. You must not be eligible for or enrolled in Medicare.
4. You must be under the age of 65.
5. You can’t contribute to a [Health Flexible Spending Account](https://livelyme.com/blog/what-is-a-healthcare-fsa/) (HFSA). But you can contribute to a [Dependent Care](https://livelyme.com/blog/dependent-care-fsa-dcfsa-work/) (DCFSA) or [Limited-Purpose FSA](https://livelyme.com/blog/what-is-a-limited-purpose-fsa/) (LPFSA) and contribute to a health savings account in the same year.

## How to enroll and use an HSA

![how-does-health-savings-account-work](//images.ctfassets.net/6j8y907dne6i/3zynuAFE9SoOfJRy8MT7lO/d0078bf16189f8141aeeaa5b7ae1da54/how-does-health-savings-account-work.jpg)

### Step 1: Elect a high-deductible health plan during open enrollment.

![Infographic High Deductible Health Plan plus HSA how you save](//images.contentful.com/6j8y907dne6i/5lcCeg9CA7pfdV9jfLrUVG/86661d1a0187b5c1f8408c52a5247e9f/Infographic_HealthPlan_plus_HSA_HORIZ.png)

### Step 2: Open a health savings account and decide how much you want to contribute. 

To enroll in an employer-sponsored health savings account, you'll likely open your HSA during open enrollment. Let your employer know how much you want to contribute for the year up to the [IRS contribution limit](https://livelyme.com/blog/hsa-contribution-limits/), which are different whether you are an individual, family, and/or over 55. Your employer may begin making payroll deductions each month.

Your employer may choose to contribute to your HSA. But they’re not required to. If they do, those contributions will count toward your annual limit. But will remain tax-free to you.

![Infographic how money goes into your HSA](//images.contentful.com/6j8y907dne6i/5qd6V0TtmmbBHgwTvMuTHh/f26f8ca95dd89fa960804adbe80616d6/Infographic_Money_In_HORIZ.png)

Maybe your employer doesn’t offer a health savings account. Or it’s outside of open enrollment and you want to get started on saving for your health care costs today. You can open an HSA with a financial institution in the private market.

With this route, you will make arrangements to fund your HSA with the account administrator. And your contributions will be deducted from your gross taxable income when you pay taxes for that year.

### Step 3: Use your funds for qualified medical expenses.

To use your funds, your account administrator may provide a debit card so you can pay for your health care costs at the point of sale. Or you will pay for costs upfront and submit documentation for [reimbursement](https://livelyme.com/blog/hsa-reimbursement-rules/). Your withdrawals are tax-free as long as you use the money to pay for qualified medical expenses. If you use your money for something else, the money you withdrew will be subject to income tax plus a 20% penalty.

![HSA infographic how money comes out of HSA](//images.ctfassets.net/6j8y907dne6i/4ASMR4GJB8EGJoXPtGWqLj/d6a2d0cf2f363b57abaa037e62026a55/Infographic_Money_Out_HORIZ.png)

__Additional health savings account details:__

- You own your account so you can take it with you from employer-to-employer (or employer to unemployed). 
- Even if you choose a health insurance plan that isn’t an HDHP, you can still use past contributions for out-of-pocket, qualified medical expenses. But you won’t be able to contribute to your account.
- Employer contributions are tax-free.
- If you’re under the age of 65, you must use your contributions for qualified medical expenses.
- Once you reach 65, you can no longer contribute to your account. But you can use your savings to pay for whatever you’d like.  
- An HSA offers triple tax savings: pre-tax or tax-deductible contributions, tax-free interest and investment earnings, and tax-free distributions when used for qualified medical expenses.

## What can I use my funds for?

![hsa-eligible-expenses](//images.ctfassets.net/6j8y907dne6i/42Oe00AuAcE2fs9KFkcmHS/b30013424117eb2a8c42b7c42b094e5c/hsa-eligible-expenses.jpg)

HSA-eligible expenses include (but are not limited to):

- Deductibles
- Copays
- Coinsurance
- Out-of-pocket costs related to diagnostic services like x-rays and blood tests
- Prescriptions
- Quality of life enhancers like air purifiers (with a letter of medical need)
- Medical supplies like band-aids and crutches
- Alternative medicine treatments like acupuncture

This list is not exhaustive. For a comprehensive list of IRS-qualified medical expenses check [“What’s Eligible."](https://livelyme.com/whats-eligible/)

## What happens if I switch employers?

You get to keep your account and every dollar you’ve saved. Although you may not be able to continue contributing to that same account. 

If your new employer uses a different health savings account administrator, you will have two options. [Roll the HSA](https://livelyme.com/blog/rolling-over-your-hsa/) from your previous employer into the new account or maintain two different HSAs. One account from your previous employer - from which you can withdraw but not contribute. And one from your current employer into which you can start contributing.

For more details about your specific situation, contact your HR department.

## Where can I sign up for a Health Savings Account?

![sign-up-lively-hsa](//images.ctfassets.net/6j8y907dne6i/4sUTWDriKFMgGBrIHxeyH9/a36ee79d497005f21445666727ab98e6/sign-up-lively-hsa.jpg)

You can [sign up for an HSA](https://secure.livelyme.com/signup/start) in two places. Through your employer, if it offers this benefit. Or through a financial institution in the private market.

Here, at [Lively](https://livelyme.com/), we offer a private-market HSA that allows you to put your contributions into mutual funds or other investments. That way you can access an even greater benefit: growing your money with the market.

As you can see, there are many ways an HSA can help you save money for health care expenses and retirement. A health savings account can also offer security should you lose your health insurance coverage for a period of time. For more information about HSAs, check out our [HSA Guide](https://livelyme.com/guides/hsa-guide/).


what-is-hsa

Learn the basics of an HSA, including the qualifications for opening and contributing to an account, how much you can contribute, how to use your account, and more!

HSA Basics: Qualifications, Contributions, and More | Lively

The Basics of HSAs: Qualifications, Uses, and More

In a world of text, chat and email it can feel like everything is (or has) an acronym. Health insurance plans are no exception. You may have come across the acronym HDHP and are wondering "What is a High Deductible Health Plan (HDHP)?" Continue reading to learn how choosing an HDHP could benefit you. Provided it gives you the coverage you need.

To start, an HDHP is a health insurance plan defined by lower premiums and a higher deductible. But don't let "higher deductible" scare you off. Here are two reasons why an HDHP could make sense for you:

1. All preventative care is covered before the deductible, and
2. HDHPs are an affordable way to get the coverage you need without paying more for extras you may not need.

HDHPs are also the only health insurance option that can be paired with a Health Savings Account (HSA). An HSA can help pay for the high-deductible or to save money for future medical costs.

<iframe src="https://player.vimeo.com/video/377355900" width="640" height="360" frameborder="0" allow="autoplay; fullscreen" allowfullscreen></iframe>

## What is considered eligible?

Annually, the IRS redefines what it considers an HDHP (adjusting for inflation). In 2022, their parameters were a [health plan](https://livelyme.com/guides/hsa-guide) with a deductible of at least $1,400 for an individual and $2,800 for a family. As well as out-of-pocket expenses that didn’t exceed $7,050 for an individual and $14,100 for a family.

In 2023, the minimum deductibles and out-of-pocket maximums will rise. For individuals the minimum deductible will be $1,500 for indiviudals and $3,000 for families. The maximum out-of-pocket limits will rise to $7,500 for an individual and $15,000 for a family.

There's one other qualifying characteristic of HDHPs. The individual pays for the cost of healthcare, up to the deductible, before insurance pays for services. The one caveat here is preventative care. All preventative care is covered before the deductible.

## How do they work?

![preventative-care-included-hdhp](//images.ctfassets.net/6j8y907dne6i/5j1glZm5E5y47Fi5eW2T2K/1ebc0d46beb92be8021d514656948957/preventative-care-included-hdhp.jpg)

HDHPs charge participants lower monthly premiums. This is in exchange for requiring higher deductibles and out-of-pocket maximums.

Choosing an HDHP could make sense if you don't need many health care items or services. Or if you only visit the doctor for preventative care. This is because you'll be spending less on your monthly [health insurance plan](https://livelyme.com/compare-health-insurance-plans) premium. An HDHP could also make sense if you need more care. Here's why.

Because HDHPs have a higher deductible, the IRS allows you to [deposit pre-tax money into a savings account](https://livelyme.com/blog/what-is-an-hsa/) called an HSA or Health Savings Account. HSAs are tax-advantaged accounts because contributions are pre-tax.

![Infographic High Deductible Health Plan plus HSA how you save](//images.ctfassets.net/6j8y907dne6i/5lcCeg9CA7pfdV9jfLrUVG/86661d1a0187b5c1f8408c52a5247e9f/Infographic_HealthPlan_plus_HSA_HORIZ.png)

The distributions and any gains those contributions make can also be tax-free. That's as long as the contributions are used to pay down your deductible or to pay for other qualified medical expenses. Depending on your tax bracket, this could help you save up to 30% on medical expenses.

Where an HDHP could get you into trouble is if you suffer a catastrophic event that requires an expensive procedure or treatment. And you can’t afford the out-of-pocket maximum. Or if you have or develop a chronic condition that needs management.

__Decide which plan is right for you with our [Health Plan Comparison Calculator](https://livelyme.com/compare-health-insurance-plans).__

To choose an HDHP, you would make the election during the open enrollment period for either your place of employment or in the private market. The other time is after a [Qualifying Life Event](https://livelyme.com/blog/when-should-i-consider-changing-my-health-plan/). If you’ve experienced a life event like the loss of health insurance, marriage, the birth of a child, or death of a dependent, you can sign up for an HDHP at any time during the year with a special enrollment period.

## What are the benefits?

![high-deductible-health-plans-lower-premium](//images.ctfassets.net/6j8y907dne6i/45YNFcVTSqOIH1GiPuzUVQ/150ddbbe5981bcf60c7150e50f13f6d1/high-deductible-health-plans-lower-premium.jpg)

Whether you’re considering an HDHP or have been using one for years, there’s no question that higher deductibles are a tough pill to swallow. The good news is, this type of health plan does offer some unique flexibility and opportunities that other health insurance plans lack.

1. __Flexibility__ – HMO health insurance plans require referrals from a primary care physician. This can be extremely frustrating for individuals who need to have some kind of care outside of a general practitioner. While HDHPs still have in and out of network designations, the list of in-network providers is extensive. And you can see a dermatologist, cardiologist, or other specialists even if you haven’t yet designated a primary care physician.
2. __Lower cost__ – The problem with large, overarching health plans is they try to cover everyone. This might sound good on paper, but not in practice. This often leads to people with low health care needs paying more to cover people with high health care needs. HDHPs reward limited use of the medical system by charging participants low monthly premiums. While also covering preventative care before the deductible is met.
3. __Health savings for the long term__ – HDHPs are the only health insurance plan that you can pair with an HSA. You own the contributions both you and your employer make to your HSA. And they never expire. The funds can be saved or invested in stocks and mutual funds, making these accounts function as a medical safety net. This is beneficial if you lose your employment or your employer changes your health insurance options. Or if your health insurance company decides to discontinue the plan you’re on, or you experience a catastrophic event. Any of which could leave you scrambling to cover unexpected medical expenses. And in the event you don’t spend your contributions before the age of 65, you can use that money, tax-free, for any expenses. Just like another retirement account. 

## Is this plan right for me?

![is-hdhp-right-for-me](//images.ctfassets.net/6j8y907dne6i/1lGHA7VDq1QmkbEHtrozbq/8ce9096c3149cd21eca124e9fb2a5cf3/is-hdhp-right-for-me.jpg)

*The right health insurance plan for you lies at the nexus of affordability and appropriate coverage.* You must be able to afford the monthly premium but also the annual out-of-pocket maximum in case you experience a catastrophic event.

The plan must also provide adequate coverage for your current medical needs. As well as those in the foreseeable future (e.g. having a baby, knee surgery, etc.). Inadequate coverage could cause your out-of-pocket expenses to get out of hand quickly.

So take a look at the specifics for the HDHP you’re being offered. Can you afford that monthly premium? If yes, then take a look at what procedures, treatments, and prescriptions are covered and at what levels. When taking coverage levels into account, can you afford the copays, co-insurance, and other out-of-pocket costs?

Do you have the ability to contribute even a small amount to an HSA? Something to remember about HSAs is the money is contributed pre-tax. That means you could end up saving up to 30% on medical expenses depending on your income taxes bracket.

If, after answering these questions, an HDHP looks like it makes financial sense, then it could be the right plan for you. If you have questions about your specific situation, you should always reach out to your HR department.

HDHPs are often thought of as an [affordable health insurance option](https://livelyme.com/guides/hdhp/), especially for the healthy or if you know you’ll exceed your out-of-pocket maximum. Combine an HDHP's monthly affordability with the option to pair the plan with an HSA, and you have an attractive setup. Not only for those who have limited medical care needs but those who can afford to contribute a little extra each month toward future costs and savings. 

discover "what is a high deductible health plan?"

what-is-a-high-deductible-health-plan

Discover how an HDHP works, its benefits, and if one is right for you. Pair your Lively HSA with a qualified high deductible health plan to start saving today.

Your Crash Course in High-Deductible Health Plans

Understanding High Deductible Health Plans

You’ve heard about HSAs and FSAs. And you think they are a good way to save money for and on medical expenses. And your employer offers both as part of its benefits plan. 

You’re in luck. You get to choose the option best suited to your needs. And yes, you do have to choose. Because you can’t contribute to an HSA and a Healthcare FSA at the same time. Let’s discover which account type will win in HSA versus FSA.

So how do you choose? To make the best decision for you and your family, consider the details of each account. And compare those to the realities of your family’s medical and financial needs.

## HSA vs. FSA Basics

There are some basic facts you need to know to understand the differences between FSAs and HSAs. 

To start, let's look at what these accounts have in common.

Health Savings Accounts (HSA) and Healthcare Flexible Spending Accounts (FSA) are pre-tax accounts. And are both used to pay for qualified, out-of-pocket medical expenses. These include, but aren’t limited to, copays, deductibles, coinsurance, and prescriptions. Because contributions are pre-tax, you can save up to 30% on those out-of-pocket expenses. Depending on your tax bracket.

How are HSAs and FSAs different? The [major difference](https://livelyme.com/blog/differences-between-hsa-vs-healthcare-fsa-infographic/) they have is that an FSA is an employer owned account that pays for short-term expenses. You must use up the FSA funds you contributed by the end of the year.

HSAs are individually owned, and you can use them for short-term expenses, or long-term savings, like retirement. In addition, account functionality and account holder requirements are different for the two account types. 

Let’s learn a little more about each account type.

## What is a Health Savings Account?

![how-to-choose-between-hsa-fsa](//images.ctfassets.net/6j8y907dne6i/1JfvzE56bAaAExlGqDmfjd/eafd5bc19e833ef342e4349e4eb6f630/how-to-choose-between-hsa-fsa.jpg)

A Health Savings Account is a kind of savings account that allows you to [save for health care costs](https://livelyme.com/blog/what-is-an-hsa/). And reduce your taxable income. In other words, HSAs are individually owned, tax-advantaged medical savings accounts. You can open one as an individual or as part of a family plan. As long as you and your family are enrolled in an HSA-eligible [High Deductible Health Plan](https://livelyme.com/blog/what-is-a-high-deductible-health-plan-hdhp/) (HDHP).

### What’s considered an HSA-eligible health plan?

HDHPs are [health plans](https://livelyme.com/guides/hsa-guide#qualifying-for-an-hsa-account) with a minimum deductible and maximum out-of-pocket expenses set by the IRS that differs for individuals and families.

The IRS adjusts its allowed annual [HSA contribution limits annually](https://livelyme.com/blog/hsa-contribution-limits/) for inflation, and has different limits for individual and family accounts. If you have a [mid-year change](https://livelyme.com/blog/hsa-contribution-limits-mid-year-changes) – like moving from self-only coverage to family coverage, or vice versa, then your annual contribution limit becomes prorated.

### How does an HSA work?

When you open your HSA, you choose how much you’d like to contribute annually. Then, your employer will deduct the appropriate amount from each paycheck. Your employer may choose to also contribute to your account. But they’re not required to.

If they do contribute, those contributions will count toward your [maximum annual limit](https://livelyme.com/guides/hsa-guide#maximizing-your-savings). Choose your individual contribution amount carefully. And keep in mind that contributions are cumulative. Otherwise, you could end up going over the annual contribution limit.

If you’re under the age of 65, you must use your contributions to pay for qualified medical expenses. These include, but are not limited to:

- Copays
- Coinsurance
- Deductibles
- Acupuncture
- Mental health treatment
- Prescriptions
- Medical supplies like [bandages](https://hsastore.com/SearchProducts.aspx?q=band+aid&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), [crutches](https://hsastore.com/SearchProducts.aspx?q=crutches&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), [joint braces](https://hsastore.com/SearchProducts.aspx?q=braces&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), and more
- Hearing aids
- Dental health
- Vision tests

Want to see the full list of HSA-eligible expenses? Visit [What’s Eligible?](https://livelyme.com/whats-eligible/)

### How age affects HSA use and taxes

![age-affects-hsa-taxes](//images.ctfassets.net/6j8y907dne6i/1mxiaR9se6IhBYokKGgsdd/86de5569ecab00a84ae82f763e30789e/age-affects-hsa-taxes.jpg)

If you’re under the age of 65 and use your contributions for qualified medical expenses, those funds are not subject to federal income tax. But, your state tax liability for contributions depends on your state.

If you choose to use the money for something other than qualified medical expenses, you will incur a 20% tax penalty. And have to pay income taxes on the misused money. After age 65, you can use your health savings on anything you want provided income tax is paid on the amount of the non-qualified disbursement.

## What is a Flexible Spending Account (FSA)?

There is only one type of HSA, and its main use is to pay for qualified medical costs at any age. 

There are three types of FSAs: 

- [Healthcare FSA](https://livelyme.com/blog/what-is-a-healthcare-fsa/)
- [Dependent Care FSA](https://livelyme.com/blog/what-is-a-dependent-care-fsa/)
- [Limited Purpose FSA](https://livelyme.com/blog/what-is-a-limited-purpose-fsa/)

When people use the term “FSA,” they are most often talking about a [Healthcare FSA](https://livelyme.com/blog/what-is-a-healthcare-fsa/), which is a spending account your employer makes available to pay for qualified medical expenses with pre-tax dollars. HDependent Care FSAs are for qualified care expenses, like child or adult daycare. Limited Purpose FSAs are only used for qualified dental and vision expenses. 

The most important thing to remember is that you cannot contribute to a Healthcare FSA or Dependent Care FSA and an HSA at the same time. But you can have a Limited Purpose FSA and an HSA at the same time. 

### How does a Healthcare FSA work?

If you decide you would like to open an FSA, the good news is that you don’t have to purchase a specific health plan. In fact, you don’t have to purchase any health plan.

But you must elect to participate during your employer’s open enrollment period. Or within 30 days of starting employment if you begin your job mid-year. Then, you select the amount you would like to contribute to your account at that time. Your employer will then deduct the appropriate amount from each paycheck.

Your employer can choose to contribute to your FSA but is not required to do so. And their contributions don’t count toward your annual max. Unfortunately, you can’t change this election at any point outside of open enrollment. Unless you’ve experienced a [qualifying life event](https://www.healthcare.gov/glossary/qualifying-life-event/) like the birth of a child, death of a dependent, marriage, or divorce. 

![qualifying-life-event-fsa-contribution-amount](//images.ctfassets.net/6j8y907dne6i/td25GiIFP70vewqfrlrSD/751854829eee489fc8a0c81fddb11efb/qualifying-life-event-fsa-contribution-amount.jpg)

You also lose any unused money at the end of the year. Unless your employer offers either the option to [rollover a small amount of funds](https://livelyme.com/blog/fsa-contribution-limits/) to next year’s account or a 2.5 month grace period during which you can use leftover funds. So choose your contribution amount carefully.

Like with HSAs, the IRS imposes [an annual limit on FSA contributions](https://livelyme.com/blog/fsa-contribution-limits/) that adjusts annually for inflation. Unlike HSAs, FSAs are only opened on an individual basis, so there are no “family plan” increases for annual contribution limits. But if both you and your spouse are offered the opportunity to take part in an FSA at work, you can do so and each can contribute up to the maximum allowed amount.

FSA funds can be used to pay for out-of-pocket medical, vision, and dental expenses not covered by your health insurance plan. Including, but not limited to:

- Copays
- Coinsurance
- Deductibles
- Acupuncture
- Mental health treatment
- Prescriptions
- Medical supplies like [bandages](https://fsastore.com/SearchProducts.aspx?q=bandages&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), [crutches](https://fsastore.com/SearchProducts.aspx?q=crutches&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), [joint braces](https://fsastore.com/SearchProducts.aspx?q=joint%20braces&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), and more
- Hearing aids
- Dental health
- Vision tests

For a full list of medical expenses that you can use your FSA (or HSA funds) on, check out [Publication 502](https://www.irs.gov/forms-pubs/about-publication-502) from the IRS. You can also visit the [FSA Store](https://fsastore.com/?utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner).

## The differences between HSAs and FSAs

![choose-between-hsa-fsa](//images.ctfassets.net/6j8y907dne6i/EqKcpDQS9JGMip8psYcVj/994cea7acae40c6fc14eecff7688fdfc/choose-between-hsa-fsa.jpg)

### Eligibilty requirements

- __FSA:__ Only employers can establish an FSA plan for employees to contribute. Employees can open an FSA regardless of if they have a HDHP or not. Self-employed individuals cannot open an account.
- __HSA:__ Employees are eligible only if they have an [HSA-eligible HDHP](https://livelyme.com/guides/hsa-guide#qualifying-for-an-hsa-account). Individuals are not dependent upon their employer to offer an HSA. And an HSA can be opened from the private market. Self-employed individuals can open an account.

### Contribution sources and changes

- __FSA:__ The contribution amount is chosen during open enrollment or at the time of a qualifying life event. And the contribution amount can not be changed outside of these two time periods.
- __HSA:__ You can change your contribution amount at any time, no major life event required. This gives you the flexibility to increase or decrease your contribution at any time. *__Multiple contribution sources:__* You can grow your HSA in multiple ways. Not only can you add money to your HSA, but your employer, relatives, or anyone who would like to contribute can help your HSA grow.

### Rollover rules

- __FSA:__ Employers choose whether an employee can keep their unused funds or not. There are three options: *__Forfeit__*: Employee forfeits money, and employers get to keep it. *__Grace period__*: Employee has a 2.5 month grace period after the plan year ends to use on expenses. Any remaining money after the grace period is employer’s. *__Carryover__*: Employees can add up to $550 of unused funds to next year’s plan in 2021 and $570 in 2022 (in addition to contribution limit). Employers decide the carryover limit, and any funds over the limit are the employer’s.
- __HSA:__ Funds do not expire from year-to-year. Rollover money is in addition to the contribution limits. Money in your HSA can be carried with you and is available even if you change health insurance plans, get a new job, or retire. And funds left in your account grow tax-free through interest or any investment gains.

### Account ownership

- __FSA__: An FSA is owned by the employer. Unused funds belong to employers, not the employee.
- __HSA__: Funds stay with you. One of the best perks of an HSA is that the money you save always stays with you because you own the account. If money is left in your HSA at the end of the year, it stays put. No scrambling around trying to find ways to spend the money before the timer runs out.

### Access to money

![accessing-hsa-fsa-contributions](//images.ctfassets.net/6j8y907dne6i/4lJ6EN6128M5SHmAuh8hzk/60301225072d2cec1be8a6e2fda926ca/accessing-hsa-fsa-contributions.jpg)

- __FSA:__ Money available from day one. Every penny you contribute to your FSA is available at the beginning of the benefit year. Or shortly after the first contribution is made. Say you add $2,000 to your FSA for the year, you’ll likely contribute about $80 per paycheck. Yet, the entire $2,000 is available to use at any time even though you only make small contributions during the year. Another perk? If you leave a position before the year is over, the money spent from your FSA doesn’t have to be paid back.
- __HSA:__ As the employee contributes to their plan. An employee only has access to what has actually been deposited into their HSA account.

### HSA: A savings asset

- *__After the age of 65, your HSA functions like any other retirement account.__* And you can use your HSA money on anything you wish. How does it differ from other retirement accounts? You don’t pay income taxes on money used for medical expenses. You do, however pay income taxes on money used for anything else.
- *__HSAs are assets you can pass on to your kin:__* If your spouse inherits the HSA, it retains its status as a retirement-like account. With the same rules and allowances as it had when you were the account holder. If you pass it on to someone other than your spouse, it stops being an HSA, and inheritance laws apply.

## Understand the pros and cons to find what’s best for you

![is-hsa-fsa-better](//images.ctfassets.net/6j8y907dne6i/7dkm3u9Ez0B7z6r7ZndKdK/d746299a286d54387aae669880b9cbb2/is-hsa-fsa-better.jpg)

While it’s likely you’ll only be eligible for either a Healthcare FSA or an HSA, it is still a good idea to take a look at the pros and cons of both types of accounts. This can help you understand how they align with your greater financial goals and help you decide what healthplan to choose.

### HSA Advantages

- __Portable account__: means you own the account and don’t lose it if you change jobs
- __Triple-tax advantage__: Contribute funds pre-tax, funds grow pre-tax, withdraw funds pre-tax for qualified expenses
- __No use-it-or-lose-it rules__: Spend now or save for retirement.
- __Anybody can contribute to your HSA__: This includes your employer, spouse, family, or friends, as long as you don’t go over the annual contribution limit.

### HSA Disadvantages

- Must enroll in a HDHP and meet other qualifications to have one
- May be subject to fees from the provider
- If you use your HSA for non-qualified expenses over age 65 you'll owe an additional 20% tax penalty on top of any taxes due

### Healthcare FSA Advantages

- __Double tax savings__: Contribute funds pre-tax, withdraw funds pre-tax for qualified expenses
- __Health plan agnostic__: Can enroll in one if your employer offers it, do not need to have a specific type of health insurance plan

### Healthcare FSA Disadvantages

- Only available from an employer, can’t have one if you are self-employed
- Employer owned, means you lose the account if you change jobs
- Subject to use-it-or-lose-it rules, meaning you lose funds if you they are not used during the plan year

## Align Your Goals with Your Savings

Deciding between an HSA and FSA depends on your medical and financial needs. The principal requirement for an HSA is enrollment in an HDHP. And while preventative care is covered before the deductible under HDHPs, most other care is not. That means you will have to pay for your medical expenses for you and your family out-of-pocket until you reach your deductible.

An HSA-eligible HDHP makes the most sense in two cases. First, [if you or one of your family members](https://livelyme.com/features/) has a condition that needs managing by either a specialist or with speciality prescriptions or treatments. In this case, you’ll likely exceed the deductible and be able to use HSA funds to save up 30% on out-of-pocket medical costs.

Secondly, if you rarely use the medical system except for routine preventative care (that includes vaccines and well visits for children) and really want the ability to use your pre-tax account as an investment vehicle to save for retirement. Then, an HSA/HDHP arrangement may be the best choice for you.

To make the best decision for you and your family, start by assessing your past medical needs and those you can project. Then take a look at your finances. Choose the account and health insurance plan arrangement that sits at the nexus of best health coverage and account flexibility.

comparing hsa versus fsa

An HSA and FSA provide up to 30% savings on out-of-pocket healthcare expenses, but you can’t contribute to both. Let’s explore the pros and cons of each account.

HSA vs FSA: How to Choose Between an HSA and Healthcare FSA

HSA vs. FSA: How to Choose Between the Two

Finding the right health insurance plan for you can feel daunting. One of the questions you may be considering is whether you should get an HSA or PPO. The good news is that you might not have to choose at all. Here’s what you need to know about both and how you can utilize them to maximize your health savings.

## HSA or PPO: Why not both?

Before we get into the details of each option, let’s clear something up. A Health Savings Account (HSA) is a [tax-advantaged account](https://livelyme.com/guides/hsa-guide/) that allows you to save for qualified medical expenses — it’s not a health insurance plan. 

On the other hand, a preferred provider organization (PPO) is a type of health insurance plan that provides access to health care in a certain way. 

In fact, you [can have a PPO plan and an HSA](https://livelyme.com/blog/can-an-hdhp-be-a-ppo/) at the same time. Here’s how they both work.

### Preferred Provider Organizations

A PPO refers to the network coverage your health plan gives you access to. If you get your healthcare with providers who are in the network of your healthcare plan, you pay less for healthcare than with providers outside the network. However, you may still get some coverage with out-of-network providers. 

One major benefit of a PPO is that you don’t have to get a referral from your primary care physician to visit with a specialist. Simply check if they’re in your plan’s network and book an appointment with them directly. 

The biggest competitor to PPOs are [HMOs (health maintenance organizations)](https://livelyme.com/blog/hmo-vs-hdhp/), which allow you to coordinate your healthcare with your primary care physician, but at the cost of having access to a smaller network of providers.

### Health Savings Accounts

An HSA is a type of health savings plan that allows you to set aside money to pay for medical costs, up to a [maximum each year](https://livelyme.com/blog/hsa-contribution-limits/) which is set by the IRS.

Contributions to an HSA are tax-deductible, and your earnings in the account grow tax-free. As long as you use the funds for eligible medical expenses, those distributions are tax-free, too — that’s what the experts call a triple tax advantage.

To be eligible to contribute to an HSA, you have to have a [high-deductible health plan (HDHP)](https://livelyme.com/guides/hdhp/), which has a deductible and out-of-pocket maximum that are higher than traditional health plans. In exchange, they charge lower monthly premiums. 

### Can you get an HSA on a PPO plan?

In a lot of the information you may find online, it can sound like HDHPs, PPOs and HMOs are all separate types of health plans. But HDHPs are defined only by their deductibles and out-of-pocket maximums and have nothing to do with your network of providers.

In fact, the beauty of all of it is that it’s possible for an HDHP to be on a PPO network. That’s not to say the two are synonymous, though. Many PPO plans have low deductibles and out-of-pocket maximums, which are usually paired with higher premiums. 

Because this can get confusing, we’ll use the term “typical plan” or “traditional plan” to refer to the low- deductible, high-premium plans you can get on a PPO or HMO network, and we’ll use HDHPs for HSA-eligible plans that you can also get on both networks.

Now, with that out of the way, let’s get to the heart of the matter. The question isn’t whether an HSA is better than a PPO. The question is really whether you want an HDHP that qualifies for an HSA or a low-deductible plan?

## What is an HDHP?

As previously discussed, a high-deductible health plan is one where you have higher deductibles and out-of-pocket maximums than traditional plans, but also lower premiums. 

The limits are [determined each year by the IRS](https://livelyme.com/guides/hdhp/). These figures are sometimes much higher than what you’ll find with a traditional health plan. But the option to contribute to an HSA helps soften the blow a bit, especially if you have a high income and can benefit greatly from the tax breaks HSAs provide.

An HDHP can also be a good choice if you don’t have a history of needing medical care often. While there is a risk of ending up with a higher payment in some circumstances, you’ll have the certainty of lower monthly payments.

## What do traditional PPO and HMO plans offer?

These traditional plans charge higher premiums than HSA-eligible plans, but they also have lower deductibles and out-of-pocket maximums. In fact, some PPO and HMO plans have no deductible at all. They’re great if regular office visits are part of your health regimen.

The difference between a PPO and an HMO is how the provider network works. With an HMO, you’ll deal with your primary doctor most of the time and need to get a referral if you want to see a specialist. A PPO, on the other hand, gives you options to see other doctors and specialists without needing to go through your primary care physician.

## Why should you get an HDHP?

The biggest benefit of an HDHP is that it gives you the option to contribute to an HSA. To give you an idea of the potential savings, let’s say you have a family plan and can contribute $7,200 in 2021, the maximum contribution limit set by the URS. 

If your effective tax rate for the year is 15%, that contribution cut $1,080 off your tax bill for the year — of course, as long as you don’t use your HSA funds for ineligible expenses.

In addition to saving for upcoming health care costs, you can also use an HSA to save for retirement. Health care is one of the [most expensive aspects of retirement](https://livelyme.com/blog/retiring-how-much-you-will-actually-need-healthcare/), and is estimated to cost an average couple $300,000 to $400,000 to pay for it.

Even if you don’t want to use your HSA for medical expenses in retirement, you can take withdrawals without the typical 20% tax penalty once you reach age 65. That said, the distributions will be subject to income taxes.

HDHPs can also be good if you’re young or generally healthy and don’t expect to spend a lot on medical care throughout the year. Of course, there’s no guarantee you won’t need an expensive procedure or visit to the emergency room. 

Even with most doctor visits, you have to pay the full bill before your insurance coverage kicks in. As a result, HDHP plans are best if your risk tolerance is high. 

## Why should you get a traditional PPO or HMO plan?

A traditional health plan won’t give you access to an HSA. But it can be great if you expect to make regular doctor visits or to get medication frequently throughout the year.

Their lower deductibles mean you’ll hit your limit sooner, and your insurance coverage will kick in earlier. For instance, they’re great if you’re pregnant as you’ll be doing regular check-ups with your doctor while you’re expecting.

Also, it’s possible to get access to a Flexible Spending Account (FSA) with a traditional health plan. FSAs are [another type of health savings plan](https://livelyme.com/blog/hsas-vs-fsas/), but you can only contribute to one if your employer offers it as a benefit. 

FSAs have some of the same benefits as HSAs, including pre-tax contributions (not the same as deductible contributions, but it’s the same concept). Also, when you designate how much you want to contribute over the next plan year, you’ll receive that amount at the beginning of the year instead of waiting to build up the balance through your payroll deductions. 

The biggest drawback of an FSA is its use-it-or-lose-it provision. This means that if you don’t use all of the money you contributed during the plan year, you could lose the remaining balance. 

Employers are allowed to make some exceptions, such as giving you more time to incur qualified expenses or allowing you to carry over some of the balance into the new year. But that’s not guaranteed.

Also, your FSA stays with your employer, so if you get laid off or move to another employer, you lose the money you’ve saved.

## Pros and cons of HDHP plans

Before you pull the trigger on a new health insurance plan, it’s important to understand both the benefits and drawbacks. Here’s a summary of what you need to know about HDHPs. 

### Pros of HDHP plans
- You’ll pay lower premiums than with traditional plans.
- You can contribute to an HSA and enjoy the tax benefits.
- HSAs don’t have a use-it-or-lose-it provision like FSAs.
- HDHPs can also be PPOs and HMOs, giving you more flexibility with your options.

### Cons of HDHP plans
- Deductibles can be high, which can be a colossal financial setback if you’re unprepared.
- Even simple doctor visits can be a major expense, especially if they include tests and screenings.
- You may find it difficult to contribute to an HSA if your out-of-pocket expenses are high every month.

## Frequently asked questions

### Can I have an HSA and a PPO?

Yes! In fact, many HSA-eligible health care plans are part of PPO networks. However, not all PPO plans are HSA eligible. Check if your plan allows you to have an HSA when shopping around.

### Is it better to have an HSA or a PPO?

If you’ve come across this question online, it’s important to note that it’s misleading. HSAs are a form of savings account that you can get with some healthcare plans. PPOs refer to the network your health insurance gives you access to.

But people tend to associate HSAs with HDHPs. And they associate PPOs with low deductible plans. The truth is that you can get a PPO plan that’s also an HDHP and, therefore, eligible for an HSA.

Hence the correct question is: Is it better to have a high-deductible or low-deductible health plan? The answer: it depends. It depends on your risk tolerance, how often you expect to visit the doctor, and how much you can afford to save up.

For instance, if you’re young and healthy and don’t expect a lot of doctor visits, an HDHP is an excellent way to save on monthly premiums. It’s also important to consider how much you can actually contribute to an HSA, which determines your tax benefits.

On the flip side, if you’re older, pregnant or have pre-existing medical conditions that require you to need regular check-ups, a traditional health plan may be a better fit, even with higher premiums. 

Finally, just because you’re young and healthy, it doesn’t mean you won’t max out your deductible or out-of-pocket maximum. You’re essentially betting that you won’t have to spend more on out-of-pocket costs than what you’re saving by not choosing a traditional plan. As such, HDHPs are better for folks with high risk tolerance. 

### What’s the difference between HRA and HSA health insurance?

An [HRA (Health Reimbursement Arrangement)](https://livelyme.com/blog/what-is-an-hra/) has a similar premise to an HSA. It’s a savings account that you can use to reimburse medical expenses. The big difference is that HRAs are only available through an employer, and only your employer can make contributions. 

In contrast, an HSA belongs to you, and you, your employer or anyone else can make a contribution. Also, HSAs are portable, so you don’t have to worry about losing anything if you leave your company.

With an HRA, if you leave your employer, you lose access to that money because it never really belonged to you.

### What’s better, an HSA or an HRA?

Like most things in life, it depends. It depends on you and your needs. HRAs and HSAs also have different benefits for employers and employees.

If you’re an employer, advantages of an HRA include:
- Tax advantages.
- You can integrate them with FSAs.
- Better employee retention.

However, if you want to offer an HSA to your employees instead, your benefits include: 
- Tax advantages.
- Flexibility with how much you contribute.
- Less record keeping.
- Your workforce becomes more engaged with their health care and medical expenses.
- Lower expenses.

On the other side of the coin, if you’re an employee, the benefits of an HRA include:
- No need for an HDHP.
- It’s completely funded by your employer. 
- You have access to the funds from the first day of coverage.

However, if you choose an HSA instead, here are the advantages:
- Portability.
- Can invest the funds for retirement in mutual funds.
- You get all the tax benefits.
- 
### Are all high-deductible plans HSA eligible?

Not necessarily. They need to meet the requirements set by the IRS to qualify as a true HDHP, which is HSA-eligible. Also, true HDHPs will cover preventive care without requiring you to hit your deductible but offers no other benefits until you reach that point.

Also, it’s important to note that in order for you to be able to contribute to an HSA, you must also meet other requirements, including;
- You have coverage under the IRS’s definition of an HDHP on the first day of the last month of the year.
- You have no other health coverage, and you’re not enrolled in Medicare.
- Someone else isn’t claiming you as a dependent on their tax return.

### Can I have an HSA if my employer offers an HRA?

Yes, but only under very limited circumstances. Most general HRAs will make you ineligible for an HSA. But if your company offers a “limited purpose” HRA or a “post-deductible” HRA, then you may still be eligible for an HSA. Also, if your employer contributes to an HRA that you can only use when you retire, you may be eligible for an HSA.

A “limited purpose” HRA is one where you can only use it for dental, vision or preventative care. A “post-deductible” HRA is one where you can use it to pay for medical expenses after the IRS deductible is met.

### Can I contribute to an HSA without an HDHP?

No. But you can still spend the funds in your HSA or reimburse your medical expenses until the account is empty. 

### Can I have an HSA if my spouse has an HSA?

If your spouse has an individual health policy and no other form of health insurance, then you can get an HSA for yourself, as long as you meet all the other requirements. 

However, if your spouse uses a [health care FSA](https://livelyme.com/blog/what-is-a-healthcare-fsa/), then you wouldn’t be eligible. This is because your partner can also use their FSA funds to pay for your medical expenses. The devil’s in the details, though. If your spouse’s FSA is a limited purpose FSA (one that covers vision and dental only), then you can get an HSA.

### Can an HSA plan have copays?

Yes. The IRS defines copays as an out-of-pocket expense in an HSA-eligible HDHP. HDHPs have to have a [max out-of-pocket limit](https://www.healthcare.gov/glossary/high-deductible-health-plan/).

### Can HRA be used for premiums?

For most employers, the simple answer is no. HRAs were often used by employers to reimburse workers insurance premiums. But, that changed with the Affordable Care Act (ACA). Under the ACA, an HRA can no longer pay for health premiums. There are some exceptions, though.

For example, ACA market reforms do not apply to retirement HRAs and stand-alone. The first option is offered only to retirees, while the second is an HRA with only one plan member. Under these two specific HRAs, you can use them to reimburse health care premiums.

### Can HRA funds be rolled over to an HSA?

As of 2012, you can’t roll funds over from an HRA into an HSA.

### Can you contribute to an HSA without health insurance?

No. To contribute to an HSA, you must be on a qualified HDHP and not otherwise insured. A family member can contribute on behalf of other family members as long as they are eligible. But to be able to contribute to an HSA, you need to have an HDHP.

## How to work out what plan is best for you

When deciding which health plan to choose, you’ll want to take a thorough look at the following factors:
- Do you expect to visit the doctor often? 
- What is your risk tolerance? 
- Will you be able to afford an expensive medical bill if an unexpected event happens?
- How big of a network do you need?
- Can you max out an HSA every year?

Take a clear look at the math of the plans you’re weighing up. Sometimes even though the deductible for a traditional plan is lower, it doesn’t make financial sense if the employer contribution to the HSA in the HDHP plan is high. 

At the end of the day, no-one can tell you what plan is best for you. Only you know your unique situation and your risk tolerance. Consider speaking with a tax advisor to get personalized advice to help you make the choice that’s best for you.

Choosing the right health care plan for you hsa vs ppo

HSA or PPO? The good news is that you don’t have to pick, as long as you have a high-deductible plan in a PPO network.

HDHP HSA vs PPO Plans: Which is better for healthcare?

HDHP HSA vs PPO: Is HSA or PPO Better?

When you have a medical expense there are two ways of paying. You can either 1) swipe your [Lively Visa debit card](https://www.benefitnews.com/news/lively-visa-partner-on-debit-processing-hsa) at the time of purchase, or 2) reimburse yourself later. 

What does it mean to “reimburse” yourself with your Health Savings Account (HSA)? It means paying out-of-pocket for an HSA-qualified medical expense and then using money from your HSA to pay yourself back. This can be done even if you don’t have money in the account the day the expense incurred, and at any time in the future. Whether you reimburse yourself now⁠—or later⁠—has some interesting benefits.

## Paid for a medical expense out-of-pocket? What’s next?

As long as the qualifying medical expense was made after the establishment of your HSA, you can [use your HSA to pay yourself back](https://livelyme.com/guides/hsa-guide/) for your out-of-pocket expense. And while it isn’t required that you submit receipts to be reimbursed from your HSA, we recommend it in case of an IRS audit. 

### Know what qualifies as an HSA-eligible medical expense

There are thousands of HSA qualified medical expenses. Expenses are likely pretty obvious if you’re at the doctor’s, having an eye exam, or at a dentist appointment. But what about over-the-counter products like sunscreen, prenatal vitamins, or contact lens cleaning solution? 

Use “[What’s Eligible](https://livelyme.com/whats-eligible/)” to find qualifying medical expenses without the requirement of a doctor’s note, with a prescription, or with a doctor’s letter. Better yet; let Lively’s Expense Scout do the searching for you.

### Expense Scout

Don’t spend your time scanning receipts trying to find your HSA-eligible medical expenses. 

Instead, use Lively’s [Expense Scout](https://livelyme.com/expense-scout/) to scan and alert you of potential HSA-eligible expenses from linked external accounts. Like your personal debit card or credit cards. Expense Scout prompts you to a list of expenses for review. Then you have the option to reject or submit them⁠—with receipt—for reimbursement, now or later.

## Document all medical expenses

![document-all-expenses](//images.ctfassets.net/6j8y907dne6i/4FopIwi9mrF1zEqiMZQpxi/aadc96e2bbe2ec9a3e7426a5a4f48b6d/document-all-expenses.jpg)

To justify spending money on a qualified medical expense, you should keep or track your expense receipts. Receipts should be kept for as long as your tax return is open and subject to an audit; usually three years. Or as long as your HSA is open. Whichever is longer.

Some HSA companies (like Lively) offer digital receipt filing so you can document your receipts without having to save piles of receipts. This is helpful if you plan on paying for out-of-pocket expenses and reimbursing yourself “20 years” from now. But, more on that hack in a bit. 

### Records to keep in case of an IRS audit 

It’s best to save a copy of your health insurance carrier’s Explanation of Benefits (EOB) in case the IRS audits you. This documents the expenses for services covered under your High-Deductible Health Plan (HDHP). You should also keep receipts for all products or services you paid for.

In case of an [IRS audit](https://www.irs.gov/forms-pubs/about-publication-969), you need to have records that prove:

- Distributions were to pay or reimburse qualified medical expenses,
- Qualified medical expenses had not been paid or reimbursed from another source, and
- The medical expenses had not been taken as an itemized deduction in any year. 

When you choose to be reimbursed for an eligible medical expense that’s called a __distribution__.

If you take a distribution your HSA provider will send you [Form 1099-SA](https://livelyme.com/what-is-irs-tax-form-1099-sa). You should be prepared to file [Form 8889](https://livelyme.com/irs-tax-form-8889) with your annual taxes. If there’s something that doesn’t match between forms 1099-SA and 8889, resolve it before filing your taxes. Keep reading to learn how HSA distributions are taxed and reported.

## When can I reimburse myself for an out-of-pocket expense?

![when-hsa-reimbursement](//images.ctfassets.net/6j8y907dne6i/2DcikyDJz1nLL4z6MHOCy1/36828f85b62ccab059de8b6a9336d31b/when-hsa-reimbursement.jpg)

You can reimburse yourself __anytime__. 

Today, tomorrow, or 20 years from now. The only rule is that your HSA was established at the time that the expense was incurred (date of service). And that the expense was not reimbursed in any other way. 

This is one of the reasons why knowing the exact date of the establishment of your HSA is important. You cannot be reimbursed for expenses that were incurred prior to that date.

Did you know that you can also reimburse yourself for expenses even if you are no longer eligible to contribute to an HSA? That’s because the use of your funds is not tied to HSA eligibility. Once you add money to your HSA, it’s yours. And it can be used at any time in the future.

## Want more money in retirement? Reimburse yourself later

One of the major financial benefits of an HSA is that you can choose to reimburse yourself anytime. This gives you the opportunity to save the funds in your account. It also provides the opportunity to increase interest earned or provide more time for invested funds to grow.

Many people choose to pay for medical expenses out-of-pocket and reimburse themselves later. Since there’s no reimbursement deadline, you can choose to reimburse yourself years later. Even during retirement.

This requires you to save your receipts and invoices for reimbursement. In the event that you ever get audited by the IRS, they will ask for proof. If you’re unable to provide those records, you would have to pay regular income tax plus a 20% penalty on your reimbursements.

## How HSA distributions are taxed and reported

![hsa-distribution-tax](//images.ctfassets.net/6j8y907dne6i/1Qp2iGiBLoBkr48xsxV81z/ad237aa0e2034eae881b12050d5fa8c8/hsa-distribution-tax.jpg)

If you use your HSA to buy a qualified medical expense, you will not have to pay income taxes on those funds. If you use your HSA for something other than a qualified medical expense, that distribution is taxable income. And you can be subject to a 20 percent penalty for early withdrawal. When an HSA account holder reaches the age of 65 or becomes disabled, they are no longer subjected to that 20 percent penalty.

In terms of reporting HSA tax information, the HSA trustee or custodian keeps all reports of distributions. The trustee then shares that information to the account owner through IRS Form 1099-SA. HSA account holders are responsible for reporting their own distributions to the IRS through Tax Form 8889. It’s recommended that HSA owners keep records of all their distributions, in the event, they ever become audited by the IRS.

## HSA reimbursement in action

### Real-life example: When your HSA is low in funds 

James recently got a new job and has a variety of health plans to choose from. He decides on a high-deductible health plan so that he can take advantage of his employer’s HSA contributions. Upon opening his account, he deposits a dollar to establish his account. 

A few weeks after opening his account, James gets into an accident and sprains his ankle. Since he doesn’t have those funds in his HSA yet, he pays for his treatment out-of-pocket. He saves his receipts with a digital receipt organizer, so he can reimburse himself later.

Fast forward to a year from then. James now has enough money in his HSA to pay himself back for those out-of-pocket expenses. Because he kept such diligent records, he was able to reimburse himself with his HSA.

He reports this information to the IRS using IRS Tax Form 8889. If James did not report his distribution to the IRS correctly, the money he withdrew could receive a 20% tax penalty. Since James saved his receipts, he won’t have to pay this penalty. And he receives the tax-free benefits from using his HSA for qualified medical expenses.

### Real-life example: Your savings strategy

![hsa-reimbursement-wealth-building](//images.ctfassets.net/6j8y907dne6i/6R7cjd9se6Xrgawi2jo8UB/6d65ef236dfdd131080e9af01ae762b8/hsa-reimbursement-wealth-building.jpg)

Juliet is a smart, money-savvy individual and she wants to get the most out of her HSA when she retires. She enrolls in an HDHP for several years and also maxes out her HSA every year. When she needs to pay for a health-related expense, she pays out-of-pocket. She tracks her health expenses by taking pictures of her receipts and logging them into Lively App to reimburse herself later.

Fast-forward to years from now when Juliet is in retirement. Since she hasn’t withdrawn any of the money in her HSA, she was able to earn more interest with her higher account balance. And even earned more through investing some of her funds. 

Juliet has diligently logged years’ worth of glasses, contacts, prescriptions, and other qualified health-related expenses into her account. Which, when added together totals thousands of dollars. She chooses this opportunity to finally reimburse herself for those expenses with her HSA. And uses those funds to help her travel during retirement.

## Reimbursing yourself for out-of-pocket medical expenses with Lively

Have a couple of out-of-pocket expenses that you can use your HSA for? Here’s how you can reimburse yourself through the [Lively app](https://livelyme.com/app/):

1. Access your Lively account through our online portal, iOS, or Android App.
2. Navigate to “Transactions” in the menu or click on “+ Expense.”
3. Choose “Add Expense: For purchases made using your personal fund.”
4. Enter the amount of the medical expense, who the merchant/provider was, and the date you made the purchase or started receiving service.
5. Choose “Get Reimbursed Later” or “Process Immediately.” 
6. Add a receipt by taking a photo or uploading an image.
7. Click the “Submit” button.

This process is quick and easy, and you’ll have those funds in your account within 2-3 business days. 

We suggest taking a picture of all of the receipts you have for your healthcare expenses so you can keep them attached to your transactions within your Lively account. Having your information ready to go makes using your HSA simple.


hsa-reimbursement-rules

Learn about HSA reimbursement rules: how to track expenses in case of an IRS audit, how distributions are taxed, and what is reimbursable under the rules.

HSA Reimbursement Rules: How to Get Reimbursed, and When  

What Are Reimbursable Purchases Under HSA Rules?

Are you looking for HSA related articles regarding children? Take a look at what we have.

What if I have children?

Here you will find HSA related articles regarding marriage and tax savings.

What if I am married or planning on getting married?

If you are under 30 and have a high deductible health care plan find out how an HSA can save you money.

What if I am under 30?

Offered job-based insurance? Read our articles.

What if I have or was offered job-based insurance?

Currently unemployed? Find out how you can save on your taxes with these USA articles.

What if I am unemployed?

Whether you had a baby or adopted one our articles on HSA tax savings can help.

What if I had a baby or just adopted?

If you qualify for Medicare and have HSA questions our articles can help.

What if I qualify for Medicare?

If you are self-employed in a high deductible health care plan (HDHP) read our articles on how HSA's can help save money on taxes.

Vicky Warren

Freelance Healthcare Writer

Sign up for our newsletter

You're subscribed!

Latest Posts

I’m No Longer Eligible for an HSA… Now What?

Who Can I Use My Health Savings Account For?

Common Health Care Expenses: The Cost of Plantar Fasciitis

You might like these

2022 and 2023 HSA Contribution Limits

#1 HSA Provider

5 Reasons to Take a Closer Look at Flexible Spending Accounts

Vicky Warren

Freelance Healthcare Writer

Sign up for our newsletter

You're subscribed!

Latest Posts

I’m No Longer Eligible for an HSA… Now What?

Who Can I Use My Health Savings Account For?

Common Health Care Expenses: The Cost of Plantar Fasciitis

Must Reads

2022 and 2023 HSA Contribution Limits

#1 HSA Provider

5 Reasons to Take a Closer Look at Flexible Spending Accounts