Whether you’re considering a plan that’s eligible for a health savings account (HSA) or already have an HSA, it’s likely you’re not aware of all the useful and unusual things it can cover. First things first: What is an HSA? An HSA is similar to a regular savings account, but is tax free as long as all funds are used for medical expenses. To have one, you must have a qualifying health insurance plan. A high deductible health plan (HDHP) — meaning it has an annual deductible of $1,250 for self-coverage or $2,500 for family coverage — is the only type of plan that is eligible for an HSA. A deductible is the amount you have to pay out of pocket before your insurance plan begins to pay. The benefit of having an HDHP is that monthly premiums are among the lowest available. The flipside is that if you need emergency medical care you could be stuck with a huge bill. Health savings accounts go hand-in-hand with HDHPs, and function as a way to help cover some of those out-of-pocket costs tax-free. Either you or your employer can contribute the funds, pre-tax. The HSA covers tests and copays for doctor visits, but it can be used for a lot more, including the following:
1. Cover Dental and Vision for the Whole Family
If your insurance doesn’t cover vision or dental, you can use HSA funds to pay for these types of care. This includes costly vision and dental charges in addition to artificial teeth, glasses, laser eye surgery, contacts, and saline solution. And that goes for the whole family. Even if you are the account holder, HSA funds can cover medical costs for your spouse and dependents, including your children up to age 26, even if members of your family are on a different health insurance plan.
2. Pay for Transportation
In the case of an emergency, HSA funds can be used to pay ambulance bills, which can cost as much as some visits to an emergency room. For those with mobility issues, HSA funds can also be used for taxi or shuttle services to and from medical facilities. Unless you have an HSA with a debit card, you’ll probably have to pay these up front and reimburse yourself through withdrawal. In any case, keep documentation of appointments and the transportation bills with receipts to avoid taxes.
3. Make You Money
Any funds in an HSA can be invested, so long as the bank holding it offers that option; in fact, HSAs are on the rise as a way to save for retirement. “Contributions are tax-deductible or pretax, investment growth is tax free, and distributions at any time for eligible expenses are tax free,” says Matt Irvine, vice president of sales and marketing for Health Saving Administrators, which deals exclusively in HSAs. “That is a triple tax advantage. All other retirement accounts provide only a double tax advantage.” Fidelity Investments, which tracks retiree health care costs, estimates health expenses for the average couple retiring this year to be $220,000. That includes insurance premiums, but HSAs can be used to cover Medicare Parts B and D, and some long-term care premiums as well.
4. Pay for Prescriptions
Depending on your health condition, prescriptions can really take a toll on your bank account. This is especially true for people with autoimmune diseases, for which drugs can cost thousands of dollars per month, and the patient is usually on the hook for those costs until the deductible is met. In fact, HSA funds can help pay for any and all prescription costs — for example, contraceptives not covered by an exempt employer, or other drugs not covered by your health plan.
5. Cover Nonmedical Therapeutic Charges
An HSA can also be used for more holistic care approaches. Therapeutic care, such as psychological counseling, is eligible for tax-free HSA funds, as is addiction treatment, acupuncture, and chiropractic fees. HSA money can also be used to pay for assistive devices such as hearing aids, car adaptations for the disabled, and even to purchase a guide dog. At this point, you may be wondering if there’s anything an HSA won’t cover. Well, yes. “Examples of those items would be elective cosmetic surgery, funeral services, gym memberships, over the counter medications — unless prescribed — dance lessons, teeth whitening, and standard health insurance premiums,” says Irvine. Even with those restrictions, HSAs can really be a lifeline for medical costs, and are worth considering if you’re going to be looking for a new insurance plan this fall.
