what is hsa-eligible


HSA-Eligible: Understanding the Basics of Health Savings Accounts

Health Savings Accounts (HSAs) have gained popularity in recent years as a way for individuals and families to save for medical expenses while receiving tax benefits. However, not all health insurance plans qualify for these accounts. To be eligible for an HSA, a person must have a high-deductible health plan (HDHP). In this article, we will discuss the key points of an HSA-eligible plan, its benefits, and how it works.

What is an HSA?

A Health Savings Account (HSA) is a personal savings account that allows individuals to set aside funds for qualified medical expenses. These accounts are available to individuals with an HDHP, which is a health insurance plan with high deductibles and lower premiums. The funds deposited into an HSA can be used to pay for a wide range of medical expenses, including doctor visits, prescription medications, and some preventive care services.

HSA-Eligible, HDHP Plans

To be considered HSA-eligible, a health insurance plan must meet certain criteria set by the Internal Revenue Service (IRS). The main requirement is that the plan must have a high deductible. For 2021, the minimum deductible for an HSA-eligible plan is $1,400 for individuals and $2,800 for families. Additionally, the plan's maximum out-of-pocket expenses are capped at $7,000 for individuals and $14,000 for families.

Benefits of HSA-Eligible Plans

Choosing an HSA-eligible plan offers several advantages over traditional health insurance options. First and foremost, contributions to an HSA are tax-deductible. This means that individuals can reduce their taxable income by the amount contributed to their HSA, resulting in potentially lower tax liabilities.

Moreover, earnings on HSA funds grow tax-free, and withdrawals are also tax-free when used for qualified medical expenses. This triple tax advantage makes HSAs a powerful tool for saving and paying for medical expenses.

In addition, unlike flexible spending accounts (FSAs), funds in HSAs can be rolled over from year to year. This means that any unspent funds at the end of the year will remain in the account and continue to grow, providing a long-term savings option for future medical expenses.

How HSA Works

Contributions to an HSA can be made by the account holder, their employer, or both. For 2021, the maximum annual contribution limits are $3,600 for individuals and $7,200 for families. Account holders who are 55 or older are eligible for an additional catch-up contribution of $1,000 per year.

Once funds are deposited into the HSA, they can be invested in various options, such as stocks, bonds, or mutual funds, depending on the HSA provider. These investment options allow the account to grow at a potentially higher rate than a regular savings account.

When medical expenses arise, account holders can use their HSA funds to pay for them. This can be done through a debit card, checks, or by reimbursing themselves for expenses already paid out of pocket. It is important to keep detailed records and receipts to ensure accurate record-keeping and to satisfy IRS requirements.


An HSA-eligible plan offers individuals and families the opportunity to save for future medical expenses while enjoying tax advantages. By coupling an HDHP with an HSA, individuals can lower their insurance premiums while still having financial protection in the event of medical emergencies. Understanding the basics of HSAs, including eligibility requirements and contribution limits, is important for making informed healthcare and financial decisions.

However, before selecting an HSA-eligible plan, it is always recommended to consult with a healthcare or financial professional who can provide guidance based on your specific needs and circumstances.