How a health savings account (HSA) works

An HSA is a savings account that helps you save and pay for health care expenses tax-free.

To see if an HSA is right for you, visit Further.

Learn more about an HSA

What is an HSA?

An HSA works with a health plan that has a high deductible. You can save money in your HSA account before taxes and use the funds to pay for eligible health care expenses. HSAs can also help you save for retirement, when you can use the funds to pay for general living expenses without penalty.

Calculate HSA vs. traditional health plan savings

How does an HSA work?

An HSA is only available with high deductible health plans. These plans usually have lower monthly premiums.

You don’t pay any taxes on the money you put into an HSA. For example, let’s say you put the maximum amount ($3,650 for an individual, $7,300 for a family for 2022) in your HSA each year and you are in the 28% tax bracket. An HSA would save you $1,022 in taxes, or $2,044 for a family. Learn more about contribution limits.

You also won’t pay taxes when you take money out of your HSA to pay for eligible health-related expenses. This includes health care expenses your health plan doesn’t cover. For example, you can use HSA dollars to cover health care costs until you reach your plan’s deductible. You can then use HSA funds to pay coinsurance or copays until you reach your out-of-pocket limit.

Big plus: tax savings

An HSA can help you save on health care and also offers some tax advantages.

  • You pay no taxes on the money you put into your HSA.
  • You pay no taxes on the money you take out of your HSA to pay for eligible health care expenses. You will pay a penalty on HSA funds you use to pay for non-eligible expenses.
  • You earn tax-free interest on the money in your HSA account. You may also have options to invest the money in your account.
  • You don’t lose the money in your account at the end of the year. Your HSA balance rolls over and is always yours to spend, save and invest.
  • At age 65, you can use your HSA funds for any purpose without a penalty. The money you take out to pay for eligible health care expenses continues to be tax-free.

Money in your HSA can earn interest

In many cases, you can invest a portion of your HSA balance if you maintain a $1,000 balance in your account. The money you invest (in mutual funds or stocks, for example) continues to grow tax-free. These are some of the reasons many people use their HSA to save for retirement.

More about health savings accounts

6 benefits of choosing an HSA plan
7 ways to save on health care
Different types of medical spending accounts
Saving for retirement with an HSA

This is general information about how plan benefits work. Review the Summary of Benefits and Coverage and your specific health plan benefit booklet for information about how your plan works.

It’s up to you to always check if your provider is in your health plan network before you receive services. Not all providers are in every network. You may pay more or for all of your healthcare costs if your provider is out of your network or does not have a contract with Blue Cross (this is called a non-participating provider). You can verify if your provider is in your network by calling customer service at the number on the back of your member ID card.

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