HSAs or Health Savings Accounts can be a great thing. They work well for millions of Americans and can be a great way to pre-fund possible insurance claims, as well as pay for other medically related expenses. Many people understand that HSA contribution limits increase each year. For 2015, those limits are $3,350 for an individual and $6,650 for a family (Source: SHRM.org). Many people also understand that an HSA can be used for things other than paying health insurance claims. What many people don’t understand, however, is that you can also invest HSA money, much like an IRA.
HSAs can be confusing. Below are 5 aspects of an HSA that can help you better understand what it is and how you can best use it.
1. You must have a high-deductible health plan (HDHP) to qualify
HSAs must accompany a high-deductible health plan. On a basic level, the IRS defines a HDHP as an individual health plan that has a deductible of no less than $1,300, and a family health plan with a deductible of no less than $2,600. If you are not on a qualified HDHP, you may continue to use funds deposited into an HSA, but you may not continue to make contributions. If your plan does not qualify, you may consider signing up for a flexible spending account as an alternative.
2. Your HSA funds must be used only for qualified expenses
HSA funds can only be used for qualified medical expenses as determined by the IRS. Some of those expenses include payments for doctors, prescription medications, dentists, eye glasses, health insurance claims and other medical supplies. HSA funds may not be used for paying insurance premiums, elective cosmetic surgeries, OTC drugs, vitamins or other