H.S.A. Health insurance plans and the Individual Health Savings Account

Key Benefit Concepts Actuarial, Services

An H.S.A. stands for Health Savings Account.  A health savings account is a type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses.

There are 2 facets to this program:

  1. An employer or individual health insurance plan that meets certain IRS requirements.

In 2022 a health insurance plan that qualifies as an H.S.A. plan must have of at least deductible of at least $1,400 single or $2,800 family and a maximum out of pocket of no more than $7,050 single and $14,100 family.  The IRS adjusts these plan requirements each year and issues the new requirements in June that will be effective the following January. Besides these requirements, the HSA health plan must subject all expenses to the deductible except specifically identified preventive care services.  While the IRS does not mandate it, many health plans will charge an office copay and/or a prescription drug copay after the annual deductible is met.

  1. An individual account – like a bank checking account that an individual can set up with a qualified HSA. administrator.

If an employee or individual only has health insurance coverage through a plan that meets the HSA plan requirements, the individual can open a Health Savings Account.  This account is like a bank checking account. 

An employee may open an individual health savings account if he/she has a high deductible health benefit plan that qualifies according to federal guidelines. 

The HSA plan is attractive to many employers and employees because:

  1. The premiums are typically lower and increases are more controllable, especially since the deductibles and out-of-pocket maximums may adjust annually
  1. This plan allows the employee to open an individual health savings account into which up to up to $3,650 single and $7,300 family in 2022 may be deposited annually and not subject to state or federal taxes.  However, funds put into a HSA accounts should only be used to health expenses applied to the health plan deductibles or other eligible expenses the individual pays for.