HSA-compatible health plans
What if you had a savings account to help cover health care costs — and the dollars rolled over from year to year? What if the money you spent on health care could help you save on taxes? That’s the power of a health savings account (HSA) paired with an HSA-compatible health plan.
How does it work?
Health savings accounts
You can open an HSA to help pay for medical expenses. You may be able to get an HSA through your preferred bank or credit union. If you want to take advantage of an HSA, you need to be enrolled in an HSA-compatible health plan. If you already have an HSA, you can pair it with a UCare HSA-compatible plan.
HSA-compatible health plans
An HSA-compatible plan, sometimes called a high-deductible health plan, has a lower monthly premium and higher deductible than a copay plan. Because you will pay more out of pocket before you reach your deductible with this kind of plan, you can use an HSA to save money for medical expenses.
An HSA-compatible plan is available through UCare. You choose your network (broad or focused) and the level of coverage (silver or bronze) that works best for you. Just like the other UCare Individual & Family Plans, HSA-compatible health plans cover preventive care and cap your out-of-pocket expenses.
You aren’t required to open an HSA in order to enroll in an HSA-compatible plan, but it is a great option for saving money and paying for eligible medical expenses.
Save on taxes
- You can deposit up to $3,850 each year tax free for an individual (Individuals 55 and over can contribute an extra $1,000 annually) or up to $7,750 for families
- Withdrawals are tax free when funds are used for eligible medical expenses
- Any interest you earn on your account is tax free
Is an HSA-compatible plan right for you?
This kind of health plan might be a good fit if you are generally healthy and don’t expect large health care expenses this year. It’s also a great option if you’re interested in actively managing your expenses and using your HSA as an investment tool.
If you think you and your family might need expensive health care in the next year, a copay plan may be a better option.
Never lose your HSA funds
Unlike a flexible spending account (FSA), you can keep funds you don’t use year after year. You can also invest the funds in your account and keep your earnings tax free. Talk to your financial planner or credit union rep about investing your HSA funds.
Once you enroll in Medicare, you can no longer contribute to an HSA. But you can continue to use the funds in your account to pay for qualified medical expenses. You can also use your HSA funds for other purposes after age 65, but you’ll pay income taxes for anything other than qualified medical expenses.
- HSA stands for Health Savings Account
- HSA + HSA-compatible health plan = a flexible, tax-advantaged way to cover medical expenses
This is a health plan that allows you to spend funds from a bank account called a health savings account (HSA) to cover IRS-qualified medical expenses. Funds in your HSA account can be used to pay for medical expenses before and after you have met your health plan deductible—and even for procedures that aren’t covered under your health plan, like LASIK.
After your deductible is met, there is a percentage you will pay for covered services, called coinsurance. You can use HSA funds for these expenses as well. Some plans, like UCare’s Bronze HSA, have 0% coinsurance so once you meet the deductible, you also meet the maximum out-of-pocket limit and UCare fully covers in-network, covered services for the remainder of the plan year.
Typical HSA-compatible plans have these features:
- Lower monthly premiums than other health plans.
- Higher deductibles. A deductible is what you must pay before coverage begins.
- Fully covered preventive care that is available before you meet your deductible.
To be eligible for an HSA, you must:
- Be enrolled in an HSA-compatible health plan also known as a high-deductible health plan or HDHP.
- Not be enrolled in a non-HDHP, Medicare, a general-purpose flexible spending account (FSA), or covered by another health plan.
- Not be claimed as a dependent on someone else’s tax return.
Yes. An HSA-compatible plan covers in-network preventive services at 100% even if your deductible hasn’t been met.
Contributions to the HSA are deductible up to the annual limit—just like an IRA. As a result, they lower your taxable income.
Tax-free for medical care
Withdrawals to pay qualified medical expenses are never taxed.
Interest earnings grow tax-deferred.
HSA funds may be used to pay for IRS-qualified medical expenses. Common medical expenses include doctor, telehealth and online/virtual visits, lab fees, dental and vision care, prescriptions, over-the-counter medications and feminine care products. For a full list of IRS-qualified medical expenses see irs.gov and search for “Publication 502, Medical and Dental Expenses.”
The IRS provides a list of what health-savings account funds may be spent on. For a full list of IRS-qualified medical expenses see irs.gov and search for “Publication 502, Medical and Dental Expenses.”
Over-the-counter medications and feminine care products can now be purchased without a prescription using HSA funds.
Yes, and interest on your account is tax-free.
Once you open an HSA and make a deposit, you can use your funds. You are immediately fully vested and have full control over your HSA money.
If you are seen for services, your doctor will submit your claim to your health plan. If you haven’t met your deductible, you will be billed for those services, except preventive care which is fully covered. You could then pay that bill using HSA funds. Keep your bills and payment receipts for tax purposes, and talk to a tax professional for help with any tax-related questions.
Yes. The limits are set by the IRS and updated each year to account for cost of living increases. For 2023, those limits are:
- Single coverage: $3,850
- Family coverage: $7750
If you’re over 55, you can make “catch up” contributions of $1,000 annually. You are responsible for making sure you don’t contribute more than the allowed amount. You can find up-to-date information at hsacenter.com.
You have up until the tax filing deadline of the following year, to make contributions for the tax filing year.
No. You can deposit one lump sum, or make smaller deposits throughout the year. However, your bank may require a minimum deposit or balance.
You’re in charge, but you can keep track by downloading “Publication 502, Medical and Dental Expenses,” a list of IRS qualified medical expenses, from irs.gov. It’s also a good idea to consult with your tax or financial advisor.
Yes, complete Form 8889 each year with your taxes to report total deposits and withdrawals from your account.
Yes. You should keep copies of your receipts for expenses paid with HSA money.
HSA funds roll over each year—there’s no “use it or lose it” rule.
Many banks and credit unions offer HSAs. You are free to choose any bank you like to open an HSA. If you are not currently a member of a credit union, consider opening an account with MN Credit Union Network, an association of nonprofit credit unions that are dedicated to serving Minnesotans. Search on creditunionhsa.org finder to locate a credit union near you.
Note: This material is provided for general informational purposes only and should not be considered legal, tax or financial advice. You should consult with a lawyer, tax professional or other financial advisor to determine what may be best for your individual needs.