what-is-an-hra

Lauren Hargrave - Headshot

healthcare-rising-costs

Sarah

hsa-faq-employees

Renee - Headshot

using-benefits-wisely

Married-Couple-Health-Insurance.jpg

ben-luthi

telehealth benefit offering infographic

everyday products services fsa eligible

hra-vs.-hsa.png

Healthcare

FSA Eligible Items

HRA (Health Reimbursement Account)

HSA Account Rules

Lauren Hargrave is a writer from San Francisco who focuses on technology, finance and wellness. She follows comedians like most people follow bands and believes an outdoor sweat session can cure almost any bad mood. She’s also been writing her first novel for so long, her mom doesn’t ask about it anymore.

Lauren Hargrave

Employee Benefits

 Discover what expenses are eligible for a Healthcare FSA, Dependent Care FSA, and Limited-Purpose FSA. And which FSAs can work paired with a Health Savings Account (HSA).

Common Flexible Spending Account (FSA) Eligible Items

Sarah Laoyan is a Marketing Associate at Lively. She has written articles ranging from inbound marketing strategy, to pet care, and financial health and wellness. She currently resides in San Francisco with her pets, Miles and Charles. 

Sarah Laoyan

Health Insurance

Personal Finance

A Health Reimbursement Account (HRA) can help you save money on health expenses in the future. Here’s how. 

What is an HRA and How Does it Work?

CDHP (Consumer Driven Health Plan)

 Brokers, learn why employers and employees are seeking telehealth as part of a comprehensive benefits package.

[Infographic] Why Telehealth is a Crucial Benefit Offering

have or was offered job-based insurance?

Adding your partner to your health insurance plan can cause your premiums to spike. Here’s what you need to know.

Average Cost of Health Insurance for a Married Couple

Renée knows that the healthcare industry is complicated. With so many options, choosing the right path can be unnecessarily complex. At Lively, she employs storytelling to make it easier for you to make informed healthcare and financial decisions. When she's not writing, she's flexing her green thumb.

Renee Sazci

Let’s take a look at Health Reimbursement Accounts (HRAs) and Health Savings Accounts (HSAs) and see how each can help you save for healthcare.

HSA vs HRA Plan: Which is Better for Individuals and Families?

Dependent Care FSA

Flexible Spending Account Rules

Benefits

am married or getting married?

Healthcare Benefits

Employee Health Insurance

Ben is a Freelance Content Specialist who specializes in personal finance and travel. Ben’s work can be seen in publications such as NerdWallet, Experian, Wirecutter, Credit Karma, and Bank Rate. When he’s not writing, you can find him trying new foods, hiking, and spending time with his kids.

Ben Luthi

Employer Health Insurance

Review the top HSA FAQs that employees ask and equip yourself with standardized short-form and in-depth responses.

From Employees: Top 10 HSA FAQs

HSA (Health Savings Account)

__Editor's Note:__ This blog post was originally published on October 4, 2018. We have edited content with more up-to-date information. 

---

The notion that healthcare costs are on the rise is ubiquitous. What’s not as obvious is what you as a consumer can do about it. It can see like the options are limited. That’s when opening either a Health Reimbursement Arrangement (HRA) or a Health Savings Account (HSA) can help you.

Both of these accounts can be used to pay for qualified medical expenses. But which account is better for you as an individual, or for your family? It’s going to depend on your specific needs. Let’s start with the basics.

## What is an HRA?

A [health reimbursement arrangement](https://livelyme.com/what-is-an-hra/) (HRA) is an employer-funded account from which employees can reimburse their out-of-pocket medical expenses. It can give you flexibility in terms of health insurance since it’s not tied to a particular plan.  Sometimes you can even use your HRA to pay for your health insurance premiums, depending on which type of HRA your employer offers.

Your employer can choose to allow your HRA contributions to rollover to the following year. Or allow you access to your balance once you retire or leave the company for another reason.

There are four different types of HRAs: 

1. __Group HRA__: This type of HRA is offered as part of an employer-sponsored group health plan. Your employer funds the account and from it you can reimburse yourself for qualified medical expenses.
2. __Individual Coverage HRA (ICHRA)__: Employees may use deposits to pay for health insurance premiums as well as qualified medical expenses. This enables employees to purchase their own health plans in the private market.
3. __Excepted Benefit HRA (EBHRA)__: You can use deposits for out-of-pocket expenses related to dental, vision, short-term disability, etc. 
4. __Qualified Small Employer HRA (QSEHRA)__: If your employer has fewer than 50 employees, they might offer this type of HRA. It helps employees buy health insurance plans in the private market and pay for other employer-approved expenses.

### The Benefits of an HRA

- You don’t need to buy a specific health insurance plan so you’re free to choose the one that works for you and your family. 
- Employers can make unlimited contributions to: Group HRAs, ICHRAs, and EBHRAs. Qualified Small Employer HRAs, do have contribution limits: $5,050 for individuals and $10,250 for families. 
- Can be paired with a [Flexible Spending Account](https://livelyme.com/how-does-an-fsa-work) (FSA).

## What is an HSA?

A [health savings account](https://livelyme.com/what-is-hsa) (HSA), is a savings account into which you, your employer or anyone else can deposit money tax-free. You can use this money to pay for qualified medical expenses directly by using the provided debit card. You can also reimburse yourself for expenses you paid for using your personal checking or savings accounts or credit card.

To qualify to open and contribute to an HSA you must also enroll in a [High Deductible Health Plan](https://livelyme.com/what-is-a-high-deductible-health-plan-hdhp/) (HDHP). If your employer doesn’t offer an HSA or an HDHP, you can buy both in the private marketplace.

In 2021 the annual contribution limits for HSAs are: $3,600 for individuals and $7,200 for families. Any unused contributions roll over to the following plan year and never expire. Meaning you can even take your savings into retirement. 

### The Benefits of an HSA

- __Multiple sources of contributions__. You, your employer, relatives or anyone else can contribute to your HSA.
- __Tax-free contributions__. You won’t pay federal income taxes, (most) state income taxes, or payroll taxes (FICA) on deposits taken directly from your paycheck. If your employer makes contributions, that money is not included in your gross income.
- __Tax-deductible contributions__. Any contribution made with after-tax dollars can be deducted from your gross income.
- __Tax-free distributions__.  If you use your HSA funds for a qualified medical expense, you will not have to pay taxes - ever. 
- __Your contributions never expire (even those made by your employer)__. This allows you to use your HSA as a retirement account. 
- __You can invest your contributions__. Plus, your funds can gain interest tax-free.
- __Make changes anytime__. You can start an HSA, change the amount you’re contributing or stop contributions altogether at any time during the year. You don’t have to wait for open enrollment.

## HRA vs. HSA: Which is Better for Me or My Family?

To decide between an HRA and an HSA, look at your specific circumstances. Each account has different pros and cons, and every family has a different situation. Here are a few things to consider for each type of account:

### When You Should Choose an HRA

1. __You really want to keep your doctor__. If using your employer’s health insurance plan won’t allow you to do that, you could choose an HRA over their health insurance plan. Whether it's a specialist or a pediatrician you love, sometimes keeping your doctor is important. If your employer offers an ICHRA or a QSEHRA, you could use it to buy a health insurance plan that allows you to keep your doctor.
2. __Your employer’s health insurance plan is inadequate for your needs__. If your out-of-pocket expenses are too high, you could use a Group HRA to help pay for them. Or you could use an ICHRA or a QSEHRA to buy a health insurance plan that works better for you.  
3. __Your medical expenses don’t change much from year-to-year__. Consistent expenses make it easy to plan how you'll use your HRA money.
4. __A HDHP won’t work for you or your family__. One drawback to high deductible health plans is the high deductible. If you’re not sure you can afford it, then an HRA and a more comprehensive health plan might be more suitable for your family.

### When You Should Choose an HSA

1. __You want to lower your monthly health insurance premium__. HDHPs typically have lower monthly premiums than other health plans. You can deposit the money you save on your monthly premium into your HSA tax-free. Then use it to help pay for your deductible or other qualified medical expenses.
2. __You rarely go to the doctor__. If you rarely use the medical system outside of preventative care (vaccines count as preventative care), then an HDHP/HSA combo might work for you.
3. __You can afford to put your own money into a health savings account__. Contributing your own money could allow you to save up for larger medical expenses down the road. Remember, HSA contributions never expire!
4. __You want to use your account to save for retirement__. Once you turn 65, your HSA works like a traditional retirement account. You can still use distributions tax-free for medical expenses, but you can also use them for things like groceries. It’s important to note that you will pay income tax on any disbursements you use for non-medical related expenses.
5. __You want to invest your deposits__. Investing is a great way to make passive income and to grow your HSA balance.
6. __You want flexibility on the timing of your deposits__. Maybe you get a year-end bonus and you want to deposit a portion of that into your HSA. Maybe you have major medical expenses for which you want a tax-free way to save. HSAs allow you to change the amount you contribute at any time, so you can deposit money when you have it (or need it), and forgo deposits when you don’t.

To decide between an HRA and an HSA, you’ll have to answer the following questions for your unique situation: 

- Why do I want to use one? 
- What will put me and/or my family in the best health and financial situation?
- Do the rewards of either account outweigh the potential risks or vice versa?

Both HRAs and HSAs can provide enormous benefits to the consumer. If you have questions about your specific employer-sponsored account, health plan or how these plans might affect your situation, reach out to your Human Resources department.


__Editor's Note:__ This article has been edited to include more accurate and relevant information. This piece was originally posted on February 13, 2019. 

---

You might have heard someone joke about getting married for the tax benefits and think marriage would make everything, including health insurance, cheaper. Unfortunately, that’s not always true. 

As a married couple, the cost of health insurance will largely depend on the type of insurance plan you have, who’s covered, where you got it, and, in some cases, your income level.

## 3 Health Insurance Scenarios for Married Couples

The cost of health insurance plans depend on a few different factors. Here are some of the situations you may find yourself in:

- You both have employer-sponsored health insurance
- One of you has employer-sponsored health insurance
- Neither of you has employer-sponsored health insurance

It’s also important to remember that the more people on your plan, the pricier it will be. So if you’re married with children, expect a higher premium to cover everyone in the family.

### You Both Have Employer-Sponsored Health Insurance

If you’re both employed by a company or companies that contribute to your health insurance premiums, maintaining your individual coverage with your respective employers is almost always the cheapest way to go. 

That’s because employers typically require very low contributions from their employees to the plan cost — even if it feels like a lot coming out of your paycheck. According to the [Kaiser Family Foundation](https://www.kff.org/report-section/ehbs-2020-summary-of-findings/) (KFF), employees pay only 17% of the premiums on individual plans on average, which you can do if you both have that option, and 27% on family plans. 

In 2020, that breaks down the average health insurance costs you can expect to pay for an individual or family plan:

![chart 8](//images.ctfassets.net/6j8y907dne6i/31zxbpAt1QpFXJvTjkdTRR/04db72d96181b4f998887e657131e8a1/chart_8.svg)

Again, the cost of a family plan may vary depending on how many people you’re adding to the plan. Also, it’s important to note that the cost of your premium will also depend on where you’re located and the amount to which your employer is able and willing to contribute to your health insurance costs.

In some cases, an employer may pay the full amount, but most employees can pay at least some of the cost. 

Speak with your human resources representative about how much it would cost to combine health insurance coverage with your partner into a single plan, and have your spouse do the same. Note that you can add your spouse to your plan within 60 days of getting married. Otherwise, you’d need to wait until open enrollment.

Then, compare the price increases to what you’d end up paying individually. Also, consider the amount of coverage you’re getting with each plan. While one may be much cheaper, you may end up paying more out of pocket on health care expenses throughout the year before you hit your deductible.

Finally, family deductibles are typically double the deductible for individuals or more. If your plan has a separate deductible for each person on the policy, it won’t make much of a difference. But if you have to reach the family deductible before your insurance company starts helping with the costs, it may be better to maintain separate health insurance plans. 

### One of You has Employer-Sponsored Health Insurance

If only one of you has employer-sponsored health insurance, the situation may sound similar to the one above, but it’s not entirely. 

Again, adding your partner to your plan may more than double, triple, or even quadruple the cost of your coverage, based on KFF’s data. Also, remember the other factors that go into determining your premiums, including:

- The type of coverage
- The plan benefits (silver plans, platinum plans, etc.)
- Your employer’s contribution
- Where you live

If only one of you has employer-sponsored health insurance and that employer doesn’t contribute to the cost of dependents, buying the family coverage through the employer-sponsored plan might still be worth it. 

That’s because employers can actually negotiate better rates with health insurance providers with group policies, something an individual can’t do. So the premium you’ll pay for each individual added to the plan could be cheaper than what you’d find out in the marketplace for the same level of coverage. 

You’ll also get the added benefit of paying for the premium pre-income tax, therefore lowering your overall income tax liability. If you pay for a marketplace plan with after-tax dollars, you can only deduct them on your taxes if you itemize your deductions, and even then, there are limits on what you can include.

### Neither of You Has Employer-Sponsored Health Insurance

If you’re both self-employed or don’t have an employer that offers health insurance as a benefit, your only option to get coverage is through the [Affordable Care Act (ACA) Marketplace](https://www.healthcare.gov/).

As with pricing for employer-sponsored plans, the cost of health insurance on a marketplace plan partly depends on your location, how many people are covered, the type of coverage, and the benefits the plan offers. The biggest difference is that there’s no employer to contribute to the plan costs, which means you’re on your own.

The ACA compensates for this with the premium tax credit. This refundable tax credit is available to low-income individuals and families who typically have a difficult time paying for health insurance on their own. 

To qualify, your household income must be between 100% and 400% of the federal poverty level based on your family size. If you’re eligible, you may choose to get some or all of the premium tax credit paid in advance, which reduces your out-of-pocket costs for monthly premiums. Otherwise, you’ll pay the full premium each month and get the full credit when you file your taxes for the year.

In 2020, the average costs per month for an individual marketplace plan was $456, according to [eHealth](https://news.ehealthinsurance.com/_ir/68/20205/eHealth_2020_ACA_Index_Report_Unsubsidized_Consumers.pdf). For families, that cost more than doubles to $1,152. To get an estimate of marketplace health insurance costs in your area, including subsidies, check out the [KFF Health Insurance Calculator](https://www.kff.org/interactive/subsidy-calculator/).

Depending on the plans available in your area, it might be cheaper to get coverage individually than as a family unit.

## The Bottom Line

When you get married, you often start to think of yourselves as a family. But whether or not it makes sense to buy health insurance as a family will depend largely on your individual situation. That’s especially the case if there are no children to consider yet.

It may make sense to combine checking and savings accounts, but think twice before you do the same for health insurance. Because health insurance can be a costly line-item in any budget, even if it’s an employer-sponsored plan, take the time to explore all of your options before making a decision.


How Much Married Couples Pay for Health Insurance

Employers can provide employees with several different options for health benefits. One of those options is a Health Reimbursement Arrangement or an HRA for short. In this article, we break down the major elements of an HRA and how they can help pay for your health care expenses.

## What is a Health Reimbursement Arrangement (HRA)?

A health reimbursement arrangement is a special employer-funded account dedicated for employees. Employees can use this account to help pay for out-of-pocket medical expenses.

Your employer must offer the HRA, as it is not a health account available to individuals. Employers can define what expenses their HRA provisions cover. HRA qualified expenses are akin to FSA qualified expenses and still need to stay within IRS guidelines. Some of these common expenses include dental and vision expenses, and prescription drug costs. For more eligible expenses, check out Lively’s [“What’s Eligible?”](https://livelyme.com/whats-eligible/) page or [IRS publication 502](https://www.irs.gov/pub/irs-pdf/p502.pdf). 

It's important to note that an HRA is __NOT__ health insurance. Think of it more like an account in which your employer gives you a monthly allowance of tax-free money. Employees can then use those tax-free funds on qualified healthcare expenses.

__NOTE:__ The Affordable Care Act requires employees to enroll in their employer's healthcare plan to be eligible for an HRA.

![hra-proof-of-expense](//images.ctfassets.net/6j8y907dne6i/4TAyabdlmBkXyXy1muZteF/9cf51e88cec6cbbf5989edc682a33561/hra-proof-of-expense.jpg)

### How Do I Qualify for an HRA?

According to the IRS, employers can offer an HRA to different classes of employees. Some of these segments of employees include:

- Full-time, part-time, or seasonal status
- Employees covered by a collective bargaining agreement
- Salaried or non-salaried (like hourly workers) employees
- Employees who haven't satisfied a waiting period
- Non-resident aliens with no U.S.-based income
- Employee work locations
- Any combination of 2 or more employee types listed above

Employees can use their HRA for eligible dependents. This includes:

- A spouse
- Children under the age of 26
- Children over the age of 26 who are tax dependents
- Domestic partners who qualify as tax dependents

## How Does a Health Reimbursement Arrangement (HRA) Work?

HRA limits are set by the IRS every year. In 2021, the employer contribution limit for small business HRAs is $5,300 for individuals and $10,700 for families. 

The key to understanding how HRAs work is in the R - reimbursement. Because an HRA is considered a "notional arrangement," you will not receive funds from your HRA until you show a receipt for a qualified expense. This means that employers will reimburse funds from an HRA after an employee makes a qualified medical expense. 

![hra-reimbursement](//images.ctfassets.net/6j8y907dne6i/6u30K7fSvgZ1VWDk7b7u8z/6e54d214540c3d07e89cf16b9b2c2d45/hra-reimbursement.jpg)

Most HRAs follow the same usage structure:

1. __Employers set an allowance__. Employers will set the amount of tax-free funds aside every month. This is the greatest amount an employee can spend in a given month on qualified expenses.
2. __Employees make a qualified expense__. Employees go out and make qualified expenses. This includes health insurance premiums.
3. __Employees submit a receipt.__ An employee submits proof of expense to their employer. This is often done through receipts, invoices, or an explanation of benefits. 
4. __Employers review proof of expense__.  Employers look for three things on a proof of expense: the type of service or product, the date of the expense, and the amount. If the proof covers these items and is HRA eligible according to the IRS, the employer approves expense for reimbursement.
5. __Employers provide reimbursement to the employee__. Employers provide reimbursement either via direct deposit or check to their employees, given that their expense stays within their monthly allowance and plan period. 

Remember: all HRA administrators are different. Be sure to double-check with your employer for the correct reimbursement procedures.

![hra-eligible-expenses](//images.ctfassets.net/6j8y907dne6i/3abUsycqKsIYYkmUVgZMSA/373a93a6c14ac39cc40872270f85915a/hra-eligible-expenses.jpg)

## The Benefits of an HRA

One of the reasons why an HRA is a popular choice is because they give employees the flexibility of choice.

- __Tax-Advantaged__: The money that your employer contributes to an HRA is not considered part of your income. This means that you will not be taxed for your HRA allowance. 
- __Lower Cost__: Since your employer is the one funding your HRA, there is a possibility that you may end up paying less for your health care in the long-run. 
- __Tax-Free Reimbursements__: After paying for your healthcare expenses out-of-pocket, the reimbursements that you receive from your employer are not taxed.
- __Funds available on Day 1__: With other tax-advantaged accounts, like an HSA, you have to wait until your funds accumulate to use them. With an HRA, you can use these funds on Day 1 when your plan starts.
- __Rollover Possibility__: If an employee doesn't use up all the resources within their HRA, their employer can choose to roll over those funds into the next month or year, depending on the type of HRA implemented.

## Is an HRA Right for Me?

Everyone's healthcare situation is unique, and if you have the opportunity to take advantage of an HRA, consider it. An HRA is a good way for employees to save money on health expenses that they would have to spend their own money on. 

Interested in learning about other tax-advantaged accounts? Learn more about similar accounts, such as a [Healthcare Flexible Spending Account](https://livelyme.com/what-is-a-healthcare-fsa) or a [Health Savings Account](https://livelyme.com/hsa-guide) at the [Lively Blog](https://livelyme.com/blog).


Telehealth is an asset to employers because it reduces healthcare costs. And employees that use it are happier, healthier, more productive, and engaged team members. Although telehealth was already a growing trend, the industry has increased exponentially because of COVID-19's strain on traditional healthcare. Now, telehealth visits are indispensable for patient diagnostics and care.

Employers and employees are [seeking telehealth](https://livelyme.com/telemedicine-white-paper) as part of a comprehensive benefits package. And thanks to the CARES Act, telehealth services are covered under [Consumer-Driven Health Plans](https://livelyme.com/blog/employer/consumer-directed-health-plan). This makes it an ideal time for brokers to address this critical employer and employee need.

## Why Telehealth is a Crucial Benefit Offering Infographic

Telehealth technologies allow remote patient care, health education, research, and health care delivery. Services are typically administrative and do not include patient care, such as a doctor's appointment. [Telemedicine](https://livelyme.com/blog/employer/telemedicine-employer-health-care-delivery) lies under the telehealth umbrella. It includes only remote patient care, such as an appointment with a [psychologist](https://livelyme.com/telepsychiatry-white-paper-broker), doctor, or other health care practitioner. 

__Continue reading to learn how the telehealth industry has grown since COVID-19, and forecasts of what’s to come.__

[![telehealth demand increasing lively hsa](//images.ctfassets.net/6j8y907dne6i/6DBnM00obDS9JI035DKRmw/2f466d7623da35ede1bcc8782f1259ac/telehealth_demand_increasing_lively_hsa.jpg)](https://assets.ctfassets.net/6j8y907dne6i/h9B9oZ6jU2r0YAmla06MD/6d79fc1f2da3fcab3112bf20aed70556/Telehealth_Infographic_Lively_HSA_Broker.pdf)

### Industry Growth Before COVID-19

- 1,398% [industry growth](https://www.benefitspro.com/2019/07/30/telemedicine-use-is-booming-kind-of/) between 2014 and 2018
- 20 million people had tried [telehealth](https://www.healthitoutcomes.com/doc/telemedicine-what-s-old-is-new-again-0001) in 2019—up from 350,000 in 2013.

### Industry Growth Since COVID-19

- __8,336% rise__ in the [volume of claims](https://s3.amazonaws.com/media2.fairhealth.org/infographic/telehealth/apr-2020-national-telehealth.pdf) between April 2019 and April 2020.
- The United States [Telemedicine Market ](https://www.gminsights.com/industry-analysis/telemedicine-market)could reach __$176 billion in 2026, up from 2025’s $64 billion forecast__.

### Why Telehealth Use is Growing

__81% of Americans own a [smartphone](https://www.pewresearch.org/internet/fact-sheet/mobile/#who-owns-cellphones-and-smartphones)__. Enabling more people to access video and chat, at the tip of their fingers.

### What are the Savings?

[Telehealth saves](http://www.launchways.com/home-telehealth-can-reduce-your-businesss-healthcare-costs-heres-how) individual employees $300 per year, and a family of four saves $1,000 per year in medical costs.

### Confidence in Telehealth is Increasing

- 59% say they are more likely to use [telehealth now](https://www.forbes.com/sites/joeharpaz/2020/05/04/5-reasons-why-telehealth-here-to-stay-covid19/#37dc97c853fb), than before COVID-19.
- 33% of patients would leave their current physician for a provider who offered [telehealth access](https://www.forbes.com/sites/joeharpaz/2020/05/04/5-reasons-why-telehealth-here-to-stay-covid19/#37dc97c853fb).

### Telehealth with a Consumer-Driven Health Plan

The [CARES Act](https://livelyme.com/guides/covid19-health-savings-account#telemedicine-or-telehealth-services-temporarily-covered) has made telehealth temporarily HSA-eligible. Any appointments or services covered under an HSA-eligible plan are covered before the deductible and will not lose their HSA eligibility status. Also, should telehealth services require payment, those services can be paid for using HSA funds.

__[Download our infographic](https://assets.ctfassets.net/6j8y907dne6i/h9B9oZ6jU2r0YAmla06MD/6d79fc1f2da3fcab3112bf20aed70556/Telehealth_Infographic_Lively_HSA_Broker.pdf) to discover how telehealth confidence and demand is building amongst employers and employees.__

[![telehealth benefit infographic](//images.ctfassets.net/6j8y907dne6i/78uGGY8i6GoSfgU8DhZILh/54ba716956af2e656c7502660595c3cf/telehealth_benefit_infographic.jpg)](https://assets.ctfassets.net/6j8y907dne6i/h9B9oZ6jU2r0YAmla06MD/6d79fc1f2da3fcab3112bf20aed70556/Telehealth_Infographic_Lively_HSA_Broker.pdf)


We know that employees come to you with common HSA questions. As a result, you spend time searching online, but sourcing answers can be a challenge. We've scoured our [support center](https://support.livelyme.com/hc/en-us/sections/360000401651-General-HSA-FAQs) and compiled the most frequently searched questions. So you can equip yourself with responses to the top HSA FAQs. Read on for answers to their questions supported by further reading and resources.

## 1. “What is an HSA?”

### A: An HSA is a personal savings account for health expenses.

An HSA can be an interest-bearing health account used for qualifying medical expenses, with the [IRS's maximum contribution limits](https://www.irs.gov/forms-pubs/about-publication-969) set annually. The account holder can contribute to an HSA when enrolled in a [qualifying high-deductible health plan](https://livelyme.com/what-is-a-high-deductible-health-plan-hdhp/) (HDHP), traditionally known for lower premiums and high-deductibles. A qualifying HDHP has a minimum deductible and out-of-pocket maximum that is set annually by the IRS.

HSAs are owned by individuals (not employers) and can be transferred from job-to-job or institution-to-institution, similar to a 401(k) or IRA. Contributions are 100% tax-deductible (until the maximum contribution limit is reached), and HSAs are triple tax-advantaged (tax-deductible contributions, tax-free interest, and tax-free withdrawals for qualifying medical expenses).

__Read more about [HSAs](https://livelyme.com/what-is-hsa). __

## 2. “How does an HSA work?”

### A: Funds are deposited into the HSA, which can later be withdrawn for qualified medical expenses.

An HSA is an individually-owned triple-tax-advantage account that works with a [qualifying high-deductible health plan](https://livelyme.com/what-is-a-high-deductible-health-plan-hdhp/). An individual can open the account on their own, but it’s often offered by an employer. With recurring payroll contributions, up to the [maximum annual contribution limit](https://livelyme.com/hsa-guide#maximizing-your-savings) set by the [IRS](https://www.irs.gov/pub/irs-drop/rp-20-27.pdf), the account holder can make tax-deductible contributions, earn tax-free interest, and make tax-free withdrawals for qualified medical expenses. The funds can be withdrawn to help pay for [qualifying medical expenses](https://www.irs.gov/pub/irs-drop/rp-20-30.pdf), including those not covered by health insurance - like dental and vision care.

__Discover more of the details of [how an HSA works](https://livelyme.com/how-does-a-health-savings-account-hsa-work). __

![how-hsa-works](//images.ctfassets.net/6j8y907dne6i/1rXlbk0b36XoXakragPBc5/27ac02e0091b0c1114bbde07568b3bd4/how-hsa-works.jpg)

## 3. “What are the requirements of an HSA? Am I eligible?”

### A: That depends. There are personal requirements for HSA-eligibility:

1. Before opening an HSA, the individual must be [covered](https://www.law.cornell.edu/uscode/text/26/223) by a qualifying [High-Deductible Health Plan](https://livelyme.com/what-is-a-high-deductible-health-plan-hdhp/). 
2. They [can’t be concurrently](https://www.law.cornell.edu/uscode/text/26/223) enrolled in any other non-HSA qualified health insurance plan.
3. They can’t have or be eligible for [reimbursement](https://www.law.cornell.edu/uscode/text/26/223) under a general-purpose [Flexible Spending Account](https://livelyme.com/what-is-an-fsa) (FSA). However, they are allowed to have a [limited-purpose FSA ](https://livelyme.com/what-is-a-limited-purpose-fsa)for dental, vision, and/or dependent care if their HDHP doesn’t cover those services.
4. They cannot be [claimed as a dependent](https://www.law.cornell.edu/uscode/text/26/223) on someone else’s tax return.
5. They can’t be [enrolled in Medicare](https://www.law.cornell.edu/uscode/text/26/223) (Part A or B) or Medicaid. 

__Need more details? Read more on the health plan and personal requirements for [HSA-eligibility](https://livelyme.com/hsa-eligibility-requirements).__

## 4. "What designates a qualifying High-Deductible Health Plan?”

### A: A qualifying high-deductible health plan must meet the minimum deductible and out-of-pocket maximum set by the IRS.

A High-Deductible Health Plan ([HDHP](https://livelyme.com/what-is-a-high-deductible-health-plan-hdhp/)) is a health insurance plan traditionally defined by lower premiums and higher deductibles. For a health plan to be considered a qualifying, high-deductible health plan, or HSA-eligible, it must meet the IRS's annual minimum deductible and out-of-pocket maximum set annually. These two amounts are indexed annually for inflation. 

The health insurance plan must also be designed so that the individual or family (defined as the account holder and at least one other person) pay the cost of healthcare up to the [deductible ](https://www.irs.gov/pub/irs-drop/n-13-57.pdf)before any insurance kicks in (preventative care excluded from this definition).

__Discover the high-deductible health plan guidelines for plan years [2020](https://livelyme.com/2020-hsa-contribution-limits) and [2021](https://livelyme.com/2021-hsa-contribution-limits). __

![what-high-deductible-health-plan](//images.ctfassets.net/6j8y907dne6i/61rRXH4x9SHx3nHwAglkyf/2e0e2e4c79c49cdd8ae476dc8ebb7dbb/what-high-deductible-health-plan.jpg)

## 5. "What are the benefits of an HSA?”

### A: There are five primary benefits of an HSA.

1. __Tax-free money for qualified medical costs__. Because [HSA contributions](https://www.irs.gov/irb/2004-02_IRB) are tax-deductible, and they earn tax-free interest, with tax-free withdrawals, [tax-free money](https://www.law.cornell.edu/uscode/text/26/223) from the HSA can be used to pay for [health expenses](https://livelyme.com/whats-eligible/). This means that the account holder saves 35%* off the retail cost of their medical services. 
2. __Flexibility__. The account holder [owns the HSA](https://www.law.cornell.edu/uscode/text/26/223). If they change employers, they can [roll the account over](https://livelyme.com/trustee-to-trustee-transfer-vs-direct-rollover) to a new provider, similar to a 401(k).  
3. __Long-term savings__. With an [interest-bearing HSA](https://www.irs.gov/forms-pubs/about-publication-969), and investment opportunities, account holders that plan for the long-term can mitigate the cost of health care expenses during retirement.  
4. __A health safety net__. An HSA helps individuals save for the unknown. HSA funds can be used for unexpected health expenses and healthcare costs like health insurance if the account holder is between jobs. It also covers Medicare-related expenses, or any other qualified medical expense, even after a change of plans or providers. 
5. __Versatility in retirement__. Once the account holder turns 65 years old, HSA funds can be used for non-health-related expenses without any penalties, similar to a 401(k) or IRA.

__Discover more [benefits of a health savings account](https://livelyme.com/what-are-the-benefits-of-an-health-savings-account).__

* Assumes 35% combined federal and state income tax savings.

## 6. “Are there limitations to what I can spend using my HSA?” 

### A: Yes. For tax-free distribution, funds must be spent on eligible medical expenses.

For funds to be tax-free upon a distribution, they must be used for __eligible medical expenses__ (as defined by the IRS). IRS Publication 502 has the full list. If HSA funds are used for something other than a qualified medical expense, they can be subject to significant [IRS penalties](https://www.irs.gov/pub/irs-drop/rr-03-57.pdf).

__Review [IRS Publication 502](https://www.irs.gov/forms-pubs/about-publication-502) or use Lively’s [“What’s Eligible”](https://livelyme.com/whats-eligible) search tool. __

![joint-hsa-spouse](//images.ctfassets.net/6j8y907dne6i/11UrmKZZRjjKWObNnY2DLn/f58a148f0314aa6d71afc327c02ac29b/joint-hsa-spouse.jpg)

## 7. “Can I have a joint HSA with my spouse?”

### A: No. An HSA cannot be a joint account because they are individually owned.

HSAs are [individually owned](https://livelyme.com/family-hsa-vs-individual); therefore, spouses cannot have a joint HSA. However, each spouse who is an eligible individual and wants an HSA can open a separate HSA. While the accounts would be owned separately, either spouse’s HSA could be used to pay for the other spouse's expenses if they both meet the eligibility requirements. The combined annual contributions for both spouse’s HSAs cannot exceed the [annual family maximum](https://livelyme.com/hsa-guide#maximizing-your-savings). 

Alternatively, one spouse could open an HSA, which would cover the spouse and any other dependents. Then, the family would be subject to the annual maximum contribution limit [set for families](https://www.law.cornell.edu/uscode/text/26/223).

__Read more about [individual versus family plan](https://livelyme.com/family-hsa-vs-individual) HSAs and the annual [contribution limits for 2020](https://livelyme.com/2020-hsa-contribution-limits) and [2021](https://livelyme.com/2021-hsa-contribution-limits). __

## 8. “If I have a family can I still have an HSA?”

### A: Yes, if a qualifying high-deductible health plan covers the spouse and/or family.

A family of two dependents or more can have an HSA if a qualifying [high-deductible health plan](https://livelyme.com/what-is-a-high-deductible-health-plan-hdhp/) covers them. One caveat is that none of the family members [can be claimed](https://www.irs.gov/irb/2004-02_IRB) on another person’s tax return, or they would be unable to contribute the maximum [family contribution limit](https://livelyme.com/hsa-guide#maximizing-your-savings) set annually by the [IRS](https://www.irs.gov/irb/2004-02_IRB).

__Read more about the difference between an individual and a [family HSA](https://livelyme.com/family-hsa-vs-individual).__

![what-family-hsa](//images.ctfassets.net/6j8y907dne6i/2ScdOuPzVnfDIrv0MK5IRp/d030f961efe9ea9acaec28a09e052148/what-family-hsa.jpg)

## 9. “How much can I contribute to an HSA?”

### A: That depends on the type of HSA and the maximum contribution limit set by the IRS. 

The HSA maximum contribution limits for 2020 are $3,550 for an individual and $7,100 for a family. If the account holder is 55 or older, their catch-up contributions are limited to an extra $1,000 a year. 

The maximum [contribution limits](https://www.irs.gov/pub/irs-drop/rp-20-27.pdf) for 2021 are $3,600 for individuals and $7,200 for families. If the account holder is 55 or older, the $1,000 catch-up contribution still applies. 

__Read more about maximum contribution limits in the [HSA Guide](https://livelyme.com/hsa-guide#maximizing-your-savings). __

## 10. “What records do I need to keep to justify spending money on a qualified medical expense?”

### A: The insurance carrier’s Explanation of Benefits statement and receipts for items or services paid for with an HSA.

The account holder should keep records of all HSA documentation for as long as their tax return is considered open and subject to an audit (typically three years), or as long as they maintain the HSA account, whichever is longer. 

These records include any insurance carrier’s Explanation of Benefits (EOB) statement that documents the expenses for services covered under the [High-Deductible Health Plan](https://livelyme.com/what-is-a-high-deductible-health-plan-hdhp/). The account holder should also keep receipts for items or services paid for with the HSA, for example, vision and dental services. 

The IRS indicates that, in case of an audit, the account holder should keep records sufficient to show the following:

- The distributions were exclusively to pay or reimburse qualified medical expenses,
- The qualified medical expenses had not been previously paid or reimbursed from another source, and
- The medical expenses had not been taken as an itemized deduction in any year. 

__Read more about [HSA receipt documentation](https://livelyme.com/hsa-reimbursement-rules).__

__Want all 15 questions and answers in a convenient PDF for future reference? Download our ebook for ease and confidence when answering common HSA questions. __

[![top-hsa-questions](//images.ctfassets.net/6j8y907dne6i/5nFo567SeakZReZoUjTTC2/03c86d0d68460d051d664f11cd3dac1b/top-hsa-questions.jpg)](https://livelyme.com/15-most-frequently-asked-hsa-questions-employer)


You’ve heard all about the wonders of [Flexible Spending Accounts](https://livelyme.com/what-is-an-fsa) (FSAs) and how they can save you money. But only if you actually need the items you’re purchasing, right? If you seldom go to the doctor and don’t take prescriptions regularly, you might think your FSA contributions would go to waste.

We’re here to tell you that everyone can find something they need on the list of common FSA eligible items. You can use your contributions to pay for the products and services you commonly need to keep your family healthy.

## The 3 Most Common Types of FSAs

__There are three major types of FSAs:__

- [Healthcare FSA (HCFSA)](https://livelyme.com/what-is-a-healthcare-fsa)
- [Dependent Care FSA (DCFSA)](https://livelyme.com/what-is-a-dependent-care-fsa) 
- [Limited Purpose FSA (LPFSA)](https://livelyme.com/what-is-a-limited-purpose-fsa)

Each type of FSA serves a specific purpose. As such, they have their own list of eligible items for which you can use your contributions.  

### Healthcare FSA (HCFSA)

You can use contributions to your [Healthcare FSA](https://livelyme.com/what-is-a-healthcare-fsa) (HCFSA) for out-of-pocket medical expenses. These include things like deductibles and copays. You can also buy common everyday items like sunscreen and bandaids with your HCFSA. For a more comprehensive list, see the Common HCFSA Eligible Items section below.

### Dependent Care FSA (DCFSA)

![dependent care fsa child adult care](//images.ctfassets.net/6j8y907dne6i/1RICSZTWYl1r3ocRVlZUXN/b23059d3658f6eaf9cd1a9d9f5826085/dependent_care_fsa_child_adult_care.jpg)

The [Dependent Care FSA](https://livelyme.com/what-is-a-dependent-care-fsa) (DCFSA) works to help full-time caregivers pay for day time child and adult care so they can earn money. The child or adult who is receiving care must live with the caregiver the majority of the time. They cannot be able to take care of themself on their own. 
That means they are either under the age of 13 or disabled. 

The person providing care must not be a member of the family. This means you cannot pay teenage children to watch younger siblings with your DCFSA. They must also be willing and able to provide a social security number or tax ID number. This ensures the person using a DCFSA can reimburse their expenses correctly.

This type of FSA allows you to also contribute to an HSA. 

### Limited Purpose FSA (LPFSA)

You can use funds from a Limited Purpose FSA (LPFSA) only for dental and vision-related expenses. But this type of FSA does not bar you from also contributing to an HSA.

## Common Healthcare FSA Eligible Items

![common healthcare fsa eligible items](//images.ctfassets.net/6j8y907dne6i/1WEISc6GVurdXzU9hcbIy7/ae712dd435d4f4f49890edac69e781de/common_healthcare_fsa_eligible_items.jpg)

The Health Care FSA has the broadest list of eligible items, some of which might surprise you. While not a comprehensive list, this gives you an idea of how many different types of items and services are available.

### Eligible HCFSA Health Insurance Costs

- Deductibles
- Copays
- Coinsurance costs

### Eligible HCFSA Products

- [First aid kits](https://fsastore.com/SearchProducts.aspx?q=first%20aid&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner)
- [Bandaids](https://fsastore.com/SearchProducts.aspx?q=bandaids&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner)
- [Sunscreen](https://fsastore.com/SearchProducts.aspx?q=sunscreen&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner)
- Over-the-counter medicine with a prescription ([insulin](https://fsastore.com/SearchProducts.aspx?q=insulin&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner) doesn’t need a prescription)
- Out-of-pocket prescription drug costs
- Vaccines
- Birth control (e.g pill, IUD, condoms, patch, ring, spermicide)
- [Crutches](https://fsastore.com/SearchProducts.aspx?q=Crutches&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner)
- [Wheelchair](https://fsastore.com/SearchProducts.aspx?q=Wheelchair&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner)
- [Braces](https://fsastore.com/SearchProducts.aspx?q=Braces%20&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner) (for joints not teeth)
- [Breastfeeding supplies](https://fsastore.com/SearchProducts.aspx?q=breastfeeding&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner) (pump, pump bustier, breastmilk storage bags, absorbent breast pads)
- [Baby monitor](https://fsastore.com/SearchProducts.aspx?q=Baby%20monitor&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner)
- Baby formula (with a letter of medical need)
- [Diaper rash cream](https://fsastore.com/SearchProducts.aspx?q=diaper+rash&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner) (with a letter of medical need)
- Hearing aids
- [Batteries to power a medical device](https://fsastore.com/SearchProducts.aspx?q=hearing%20aid%20battery&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner) (like a hearing aid)
- Hypoallergenic pillow and mattress covers (with a letter of medical need)
- Air conditioning (with a letter of medical need)
- Air filter (with a letter of medical need)
- Glasses/contacts
- [Denture adhesive](https://fsastore.com/SearchProducts.aspx?q=Denture%20adhesive&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner)
- [Acne treatments](https://fsastore.com/SearchProducts.aspx?q=Acne%20treatments&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner)
- [Acupressure tools](https://fsastore.com/SearchProducts.aspx?q=Acupressure&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner) (e.g. mats and bands)
- [Compression socks](https://fsastore.com/SearchProducts.aspx?q=Compression%20socks&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner) and gloves
- [Menstrual care](https://fsastore.com/SearchProducts.aspx?q=menstrual+care&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner) products
- Anything else you can find on our partner, [FSA Store](https://fsastore.com/?utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner).

### Eligible HCFSA Services

![chiropractic services eligible healthcare fsa expenses](//images.ctfassets.net/6j8y907dne6i/1BoiuXl9gqdHcTy20b75mL/4ca0a06346c430d45a76d599571903cf/chiropractic_services_eligible_healthcare_fsa_expenses.jpg)

- Alternative medicine (Homeopathy, Naturopathy, Reiki, Chinese Medicine, Chiropractor, Acupuncture)
- Gym membership and personal trainer if you have diabetes or extreme obesity (need a letter of medical necessity)
- Infertility treatment like IUI and IVF
- Speech therapy
- Inpatient alcohol treatment
- AA meetings
- Vasectomy
- Physical therapy

### Misellaneous Eligible HCFSA Items

- Parking for your doctor’s office
- Transportation to see a doctor, specialist, receive treatment, or attend an AA meeting
- Airfare to visit an out-of-town doctor (you’ll need to provide the proper documentation to prove the travel wasn’t for personal use)
- Halfway house if leaving an inpatient addiction treatment facility 

## Common Dependent Care FSA Eligible Items

![pay childcare dependent care fsa](//images.ctfassets.net/6j8y907dne6i/J8qyCGdlxZANFiVL5SCPy/e5dd4d07a94f1a5fed170aa8e5ad00e4/pay_childcare_dependent_care_fsa.jpg)
A Dependent Care FSA (DCFSA) helps you save for child and adult daycare costs that allow you to work. As such, eligible items focus around daycare. If you use your child or adult care for personal engagements it is not considered an eligible expense. 

__Here is a list of the common eligible DCFSA items:__

- Babysitter (for work)
- Au pair
- Nanny
- Child daycare
- Preschool
- After-school care or program
- Summer day camp (no overnight camps)
- Adult day care programs
- Daytime caretaker for a disabled adult or child over the age of 13

## Common Limited Purpose FSA Eligible Items

Limited-Purpose FSA contributions focus on dental and vision care related supplies and services. Since you can buy a minimal set of items, this type of FSA allows you to also contribute to an HSA.

### Eligible LPFSA Health Insurance Costs

- Deductible
- Copays
- Coinsurance

### Eligible LPFSA Products

- Braille books and magazines
- Glasses and contact lenses
- [Contact solution](https://fsastore.com/SearchProducts.aspx?q=Contact%20solution&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner)
- [Denture care](https://fsastore.com/SearchProducts.aspx?q=Denture%20care&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner)
- Guards for teeth grinding

### Eligible LPFSA Services

- LASIK surgery
- Laser eye surgery
- Vision exam
- Optometrist/Ophthalmologist fees
- Guide dog
- Dental exam
- Fluoride treatments
- Dental sealants
- Dental veneers (with a letter of medical necessity)
- Orthodontics (e.g. braces for teeth)
- X-ray fees

### Miscellaneous Eligible LPFSA Items
- Transportation and parking expenses necessary to receive care

## Submitting an FSA Reimbursement

![how submit fsa reimbursement](//images.ctfassets.net/6j8y907dne6i/2d2nZ7LVUjr2FTy27z3LTc/afbf3feb2110126a35138d182d88bf23/how_submit_fsa_reimbursement.jpg)

__There are two main ways you can access your FSA funds:__

1. Your FSA provider gives you a debit card to use at the point-of-purchase.
2. You pay for the expense out-of-pocket, and your FSA reimburses you later.

It's more common to see a healthcare FSA have a debit card, as there are a lot more uses for those funds. Dependent Care FSAs are more likely to require more detailed receipts, as daycare is a much more specific need than healthcare. 

There are many FSA-eligible items that you can buy to keep you and your family safe and healthy. This list is not exhaustive either. The IRS can change the list of eligible expenses at any time. If you're curious if a specific item is eligible under your FSA, contact your HR Department or FSA administrator.

To lower your healthcare costs you enroll in a high-deductible health plan (HDHP). That's because HDHPs have lower insurance premiums (but higher deductibles).

Since HDHPs have higher deductibles, you can help keep your healthcare costs low by using preventive care and a medical savings account (known as an HSA).

1. Most HDHPs cover preventive care (like a physical exam) with zero out-of-pocket. So keeping up with preventive care is a smart way to avoid costly illnesses (and to feel good!).

2. You can continue to lower your healthcare costs by using a health savings account. In fact, a high-deductible health plan works best in combination with a health savings account.

Read this guide if you want to learn how to use a tax-advantaged health savings account (HSA) to pay for qualified medical expenses, save money, and lower your taxes.

<h2>Who should read this</h2>

This material applies to individuals & families that want to lower their healthcare costs and be financially effective with their high-deductible health plan (HDHP).

It’s important that you learn about HSAs if you have (or plan to enroll in) an HDHP. It will help you save big.

If you’re in the process of enrolling in an HDHP then choose a plan that is compatible with an HSA. The IRS defines an HDHP as having:

- $1,350 minimum annual deductible for self-only health care coverage and $2,700 for family coverage (both unchanged from 2018)

- $6,750 maximum for self-only health care coverage (a $100 increase from 2018), and $13,500 for family coverage (a $200 increase from 2018)

Jump to:

- [Health Plan Terms](#health-plan-terms)
- [Definition of an HSA](#definition)
- [HSA vs FSA](#hsa-vs-fsa)
- [HSA vs PPO](#hsa-vs-ppo)
- [Benefits of an HSA account](#benefits)
- [How to qualify for an HSA account](#how-to-qualify)
- [How to maximize your savings](#how-to-maximize)
- [How to use your HSA funds](#how-to-use)
- [How to open an account account](#how-to-open)
- [Frequently asked questions](#faq)

<h2 id="health-plan-terms">Some Health Plan Terms</h2>

Before we move forward, let’s define a few terms you’ll come across when shopping for health plans. If you know these feel free to skip to the next section.

- Deductible: This is what you pay upfront for your medical care before your insurer’s coverage kicks in. Once you meet your deductible your insurer covers a large part of the bill. It resets every year.

- Premium: This is what you pay every month to the insurance company to have health insurance whether you use it or not.

- Copay: Predetermined rate you pay to access healthcare services. With your plan, you could have to pay $20 every time you go to the doctor’s office or a $10 copay for your monthly medication.

- Coinsurance: Once you meet your deductible, your health insurer takes up the bulk of your medical bills. But not all of it. Your co-insurance is the percentage of a medical bill you pay for after you meet your deductible. For instance, with a 25% coinsurance, you would pay 25% of each medical bill, and your health insurance provider will cover the remaining 75%.

- Out-of-pocket limit: But you can’t just keep paying for your healthcare, otherwise in a bad health year even with the best plan you would become bankrupt. Your out of pocket limit is the absolute maximum you would need to pay for your healthcare in a year before your health provider covers 100% of the bill.

<h2 id="definition">What is an HSA?</h2>
Health care costs for Americans have been skyrocketing. And an HSA can help you (and your family) plan for and beat the rising costs.

So what exactly is an HSA?

A Health Savings Account (HSA) is an easy and smart way to pay for qualified medical expenses for you and your dependents. With its tax-advantages, easy access to savings, and future growth potential it’s an effective savings vehicle that provides benefits today and in the future.

You can [open an HSA easily and in only a few minutes with Lively](https://livelyme.com/). Then you can contribute to your account (which is FDIC insured) with pre-tax dollars. As a result, you’ll lower your income tax (which is a significant tax benefit).

Using your HSA funds is also easy. We cover it below in the ‘[How to use your HSA funds](https://paper.dropbox.com/doc/2019-Guide-to-HSA--AR5sdUz22mf7__AoRI1xvIORAg-EtPIRt4gBzgxqKMnnuDyY#:uid=463786104738843322001399&h2=How-to-use-your-HSA-funds)’ section.

<h2 id="hsa-vs-fsa">HSA vs FSA</h2>

Health savings account versus a flexible spending account

FSA stands for flexible spending account. It’s an account your employer makes available to you so you can pay for medical expenses with pre-tax dollars.

With both an HSA and an FSA, you can pay for out-of-pocket medical expenses—like copays, medical bills, and vision expenses—while __lowering your taxable income.__

But an FSA is different than an HSA. Read our HSA vs FSA blog post to find out which account is better for you.

<h2 id="hsa-vs-ppo">HSA vs PPO</h2>

It's not a choice between an HSA plan and a PPO plan.

__An HSA account helps you save for medical expenses. It’s not a form of health insurance.__

__A PPO, on the other hand, is a form of health insurance.__ PPO stands for Preferred Provider Organization and refers to the type of network you can access for healthcare.

PPO plans are traditional plans that tend to have lower deductibles and higher premiums. Other healthcare plans like a health maintenance organization (HMO) have lower premiums and low or almost no deductibles, but you have a smaller choice of providers.

The question isn’t whether an HSA is better than a PPO. The question is do you want a high-deductible plan, or do you want a low deductible plan? And if you opt for a high-deductible plan then you’ll be financially efficient if you also enroll in a health savings account.

Our [HSA vs PPO blog post](https://livelyme.com/hsa-vs-ppo/) helps you decide if a PPO or an HDHP + an HSA is right for you.

<h2 id="benefits">Benefits of an HSA account</h2>

An HSA is like a supercharged IRA. It’s approved by the Internal Revenue Service (IRS). And it’s great for your federal tax and state tax returns.

That’s because your HSA contributions are tax-deductible from your income tax, __meaning you can lower your tax burden.__

An HSA offers triple tax savings:

- Pre-tax or tax-deductible contributions
- Tax-free interest and investment earnings
- Tax-free distributions, when used for qualified medical expenses

HSAs are also portable. This means that you always keep your HSA. This is true even if you change employers or stop working. Unlike a [Flexible Spending Account (FSA)](https://livelyme.com/hsas-vs-fsas/), there is no “use-it-or-lose-it” rule with HSAs. If you don’t use funds, they remain in your HSA each year. They also continue to earn tax-free interest.

So take control of your healthcare costs and plan for your future by [opening an HSA](https://livelyme.com/).

__1. Save more for your health__

Contributions to an HSA are tax deductible. Paying with these funds means you’ll pay less for health expenses.

__2. Health safety net__

Rollover your HSA funds from year to year. Unlike a flexible spending account, your contributions don’t have to be used within the year.

__3. Put your money to work__

From day 1, you can establish an investment account using your HSA contributions, with a variety of mutual funds to choose from.

__4. The 401(k) of healthcare__

After age 65 you can use your HSA money for non-health related expenses and just pay income taxes on your withdrawals. No penalty!

<h2 id="how-to-qualify">Qualifying for an HSA account</h2>

To qualify for an HSA you need to a health insurance plan known as an HDHP.

High-deductible health plans have lower premiums and higher deductibles. And to qualify for an HSA,the HDHP must satisfy certain IRS requirements with respect to deductibles and out-of-pocket expenses.

Based on 2019 IRS specifications, qualifying HSA health plans must have minimum deductibles of $1,350 for individuals and $2,700 for families. In addition, qualifying plans must have maximum out-of-pocket amounts of less than $6,750 for individuals and $13,500 for families.

With an HDHP, you generally pay more up front for medical expenses before the plan begins to pay for covered services. In return, you will generally pay less in premiums than in other medical plan options. Otherwise, an HSA-eligible health plan is much like a traditional health care plan.

For more information on if you qualify for an HSA check out [IRS publication 969](https://www.irs.gov/forms-pubs/about-publication-969%5d).

__Not sure if you qualify? Use our free calculator__

Lively created the industry’s first [HSA eligibility calculator](https://livelyme.com/signup-eligibility/). It algorithmically calculates hundreds of HSA contributions scenarios to show you exactly how much you can contribute. You can see it live here.

<h2 id="how-to-maximize">Maximizing your savings (2019 contribution limits)</h2>

To take full advantage of tax savings and to build a reserve for the future, it is suggested that you make the maximum contribution as set by the IRS. So there are HSA contribution limits? Yes.

For those of you who want the quick answer: the HSA contribution limits for 2019 are __$3500 for an individual__ and __$7000 for a family__. If you are 55 or older your catch-up contributions are limited to an __extra $1000 a year__.

Read our [2019 HSA Contribution Limits](https://livelyme.com/2019-and-2018-hsa-contribution-limits/) blog post for a complete look at contribution limits and to learn how to maximize your savings.

<h2 id="how-to-use">How to use your HSA funds</h2>

You can use your HSA funds as you would the funds in your bank account: with your debit card.

After you enroll in an HSA, Lively sends you a branded debit card.

The catch is you can only use HSA money for qualified medical expenses. These costs generally include payment to doctors or dentists, over-the-counter [prescription](https://www.nerdwallet.com/blog/health/2014/03/24/cheap-prescriptions/) drugs, imaging such as MRIs, medical services (such as home care) and medical equipment or supplies.

With a Lively HSA, you can also reimburse yourself for any qualified medical expenses that your insurance didn’t cover and you had to pay out-of-pocket.

Lively created a [free-to-use search engine](https://livelyme.com/whats-eligible/) to find out if what you want to buy is a qualified medical expense. You can also visit [HSA Store](https://hsastore.com/?a_aid=59ee38ee1506b&a_bid=87383ed8&utm_source=Lively&utm_medium=TPA+Portal+EL+List&utm_campaign=TPA+Partner) to find and purchase thousands of eligible expenses.

Q) Can an HSA be used for glasses?

A) Yes, as long as the sunglasses have prescription lenses and were not bought over-the-counter.

Q) Can an HSA be used for dental?

A) You can include in medical expenses the amounts you pay for the prevention and alleviation of dental disease. Preventive treatment includes the services of a dental hygienist or dentist for such procedures as teeth cleaning, the application of sealants, and fluoride treatments to prevent tooth decay. Treatment to alleviate dental disease include services of a dentist for procedures such as X-rays, fillings, braces, extractions, dentures, and other dental ailments.

<h2 id="how-to-open">How to open an account</h2>

Open and FDIC-insured health savings account in minutes with Lively.

Lively brings HSA into the modern era so it’s easier for you to keep healthcare costs low today and plan for the costs of tomorrow.

__1. Why Lively HSA__
<iframe title="Why Lively HSA?" width="640" height="360" src="https://www.youtube.com/embed/6Yx8YS3wQ2o?feature=oembed" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>

__2. How to easily open an HSA__
<iframe title="Setup HSA Account Tutorial 💵 How to set up a Health Savings Account with Lively" width="640" height="360" src="https://www.youtube.com/embed/jysGYakLFQ8?feature=oembed" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>

<h2 id="faq">Frequently asked questions</h2>

Q) Is an HSA also health insurance?

A) No, it isn’t. Health insurance is provided by an insurance company. An HSA is not insurance coverage. For our full answer, read our [Is HSA health insurance?](https://livelyme.com/is-hsa-health-insurance) blog post.

Q) Is an HSA tax-deductible?

A)Yes. But you need to fill out the right forms. Read our blog post on [HSA Tax Forms](https://livelyme.com/what-hsa-tax-forms-do-you-need-to-fill-we-know/).

Q) Are HSA contributions pre-tax?

A) Your HSA contributions are pre-tax if made by payroll deduction.

Q) What happens if I use my money to pay for a non-qualified expense?

A) If you are under 65 years old, you will have to pay ordinary income taxes as well as pay a 20% penalty for the amount you’re disbursed out of your HSA account. If you are 65 or older, disabled or die, then you will just pay ordinary incomes taxes (no penalty). If you find yourself in this situation, you can attempt to put money back into your HSA funds before tax time each year.

Q) Does an HSA roll over?

A) Once funds are deposited into the HSA, the account can be used to pay for qualified medical expenses tax-free, even if you no longer have HDHP coverage. The funds in your account roll over automatically each year and remain indefinitely until used. There is no time limit on using the funds.

<h2>Get a free HSA</h2>

Things like your flexibility in contributing, the ability to keep your unused balance and additional tax benefits make HSAs the wisest choice. So [sign up for an HSA – it's free →](https://livelyme.com/)

HSA Guide 

Learn how to use a Health Savings Account to pay for qualified medical expenses for you and your dependents.

Health Savings Account Guide - IRS-Qualified Medical Expenses & More

2019 HSA Guidebook

<p>It’s that time of year again, when 80% of Americans spend less than an hour researching one of the most important decisions they’ll make this year: their health coverage.  Unfortunately, this often leaves many people under-insured or without the right coverage for their needs.  To prevent this from happening to you, we have a few tips that’ll help you make the right decisions for you and your family this open enrollment season.</p>

<p></p>

<h2>Tip #1- Review Your Family’s Recent Health History</h2>

<p>To make sure you’re buying the right coverage for your family’s needs, you need to know what those needs are.  During open enrollment, roughly 90% of Americans choose the health plan they had the previous year, despite any changes in health.  Sometimes this is fine.  Other times, it leaves them under-insured.</p>

<p>So take a look at what your family’s medical needs have been over the last two years.  How did your current plan support you?  Where did it fall short?  Then ask yourself if you or a family member has been recently diagnosed with a condition that will require ongoing treatment.  If so, you’ll want to take that treatment into account when choosing a plan.</p>

<h2>Tip #2- Assess Recent or Near-Future Life Changes</h2>

<p>Are you getting married?  Pregnant or wanting to get pregnant?  Are you planning to move away from your preferred doctor and want to make sure you have access to another health provider you like?  To make the right decision for your 2019 health coverage, you’ll want to anticipate how these future changes will affect your healthcare needs.</p>

<h2>Tip #3- Check Your Current Benefit Options</h2>

<p>Plan names can stay the same but the benefits included within them could change.  So even if you keep the same plan as you had last year, it could end up costing you more or less depending on what changes your employer or the plan provider made.  Possible changes to look for are:</p>

<ul>
  <li>Coverage levels</li>
  <li>Pricing</li>
  <li>Types of products offered</li>
  <li>New providers for existing products</li>
  <li>New products from existing providers</li>
</ul>

<h2>Tip #4- Check to see if Premiums and Deductibles Have Changed</h2>

<p>Sometimes companies change the amount to which they’ll contribute to their employees’ health plans.  If your company has changed its contribution levels, this will likely affect the amount you pay in premiums and deductibles.  It might also affect the attractiveness of HSAs and FSAs in order to help with those deductibles.</p>

<h2>Tip #5- Do Your Own Research</h2>

<p>Your company will likely put out official communication regarding your benefits options and reviewing its resources is a good place to start.  But it’s not a place to end.  Many companies like <a href="https://www.alegeus.com/insights/1232-choosing-a-health-insurance-plan">Alegeus</a>, which is an administrator of health benefits for organizations, provide resources to help consumers make the right choices when it comes to their benefits.  By doing your own research, you’re more likely to get a neutral third party assessment of your plan options, and you might even find better benefits in the marketplace than your company is offering.</p>

<p>If you do find better plans that you think your company should consider, try sending them to your Human Resources (HR) Department.  When HR knows what employees need, they can make better choices in terms of what benefits they offer in the future.</p>

<h2>Tip #6- Check Your Company’s Wellness Initiatives</h2>

<p>Companies have realized that a healthier workforce is a more productive workforce.  To incentivize healthy behavior, many have started programs that reward such behavior with increased benefits like more HSA money, lower premiums and other perks.  Check with your HR Department to see if you might qualify for any increased benefits.</p>

<p>Navigating the healthcare labyrinth can feel like a job in and of itself.  But if you follow our six tips, you’re more likely to make the right decisions for your family and could end up saving money over the course of the year.</p>

open-enrollment-employee-tips.png

We have six tips that’ll help you make the right decisions for you and your family this open enrollment season. 

Open Enrollment Tips for Employees

__Editor’s note__: An earlier, and shorter version of this [blog post](https://livelyme.com/individual-vs-family-hsa/) was previously published. We published this update because it’s vital you know the differences between a family HSA and individual HSA, and how to tap into your HSA funds for your family.

---

Familiar with the tax-saving benefits of a health savings account (HSA), and wondering how you can extend those benefits to your family? While an HSA is owned by one person, there is a way to tap into those HSA funds for the rest of your family. Discover how, and the differences between a family HSA and individual HSA.

## Your HSA is Dependent on Your Health Care Coverage

To contribute to an HSA, you must enroll in an eligible [High-Deductible Health Plan](https://livelyme.com/what-is-a-high-deductible-health-plan-hdhp) (HDHP). 

__For 2020, the [HSA eligibility requirements](https://livelyme.com/hsa-guide#qualifying-for-an-hsa-account) are as follows:__

- The annual minimum deductible for individual health care coverage must be $1,400. And $2,800 for family health care coverage. 
- The health plan’s out-of-pocket maximum cannot exceed $6,900 for individual coverage. And $13,800 for family coverage. 

__These eligibility requirements change in 2021:__

- The annual minimum deductible for individual health care coverage must be $1,400. And $2,800 for family health care coverage (No change from 2020).
- The health plan’s out-of-pocket maximum cannot exceed $7,000 for individual coverage. And $14,000 for family coverage ($100 and $200 increase from 2020).

## What is a Family HSA?

![what-is-family-hsa](//images.ctfassets.net/6j8y907dne6i/2AyTsX5zWqJw75Sf8dPxjn/27b942e17c0757642c853d85db8abfe4/what-is-family-hsa.jpg)

While often referred to as a “Family HSA” account, there is actually no such thing. 

Each HSA is owned by one person. But family coverage under a qualifying HDHP allows you to use your HSA to pay for qualifying medical expenses for yourself and your family. The type of health plan (individual or family) you’re enrolled in decides how much you can contribute to your HSA account in one calendar year. 

If you are enrolled in an individual qualifying high-deductible health plan, you will only be able to contribute the individual maximum contribution amount set annually by the IRS. If you and your family are covered by the same qualifying health plan, then your contribution limit is increased to the annual contribution limit set for families. One rule: To contribute the maximum family contribution limit, none of the family members can be claimed on another person’s [tax return](https://www.irs.gov/irb/2004-02_IRB). 

## Annual HSA Contribution Limits

![hsa annual contribution limit](//images.ctfassets.net/6j8y907dne6i/3mripn4V4Q51N7FfM26AEf/283c4bf5ded5d8aefbf448ea77e7b317/hsa_annual_contribution_limit.jpg)

In 2020, you are allowed to contribute the following amounts to an HSA:

- $3,550 for individual health plans
- $7,100 for family health plans

These contribution limits change slightly in 2021:

- $3,600 for individual health plans
- $7,200 for family health plans

If enrolled in an HSA-eligible HDHP, and at least 55 years old—or will be 55 any time in the calendar year—you can make an extra $1,000 contribution. This is a [“Catch-Up” Contribution](https://livelyme.com/what-is-an-hsa-catch-up-contribution). 

The catch-up contributions for 2020 and 2021 are the same: $1,000 on top of your maximum contribution limit.

## Real-Life Examples
### Individual Health Plan with HSA

During open enrollment, James chooses an HDHP because he wants to take advantage of his employer’s contributions to an HSA. James is not currently married and doesn’t have any dependents, so his health plan will cover only him.

As an individual, James can contribute $3,550 dollars into his HSA account in 2020 without a penalty.

### Family Health Plan with HSA
Fast forward a few years, and James is now married with two children. James is at a different company, but still has his HSA and an HDHP that covers him and his family.

James is now eligible to contribute the family limit to his HSA. We won’t know exactly what that amount will be in the future. But if James had his family covered by his health plan in 2020, he would be able to contribute $7,100 within one calendar year.

## Can I Have a Joint HSA With My Spouse?
![no-joint-hsa-with-spouse](//images.ctfassets.net/6j8y907dne6i/4JyBNCLJUiCy6ietwyTrGn/588c28e6b0352282f87b6d0c6643cfe9/no-joint-hsa-with-spouse.jpg)

*Short answer:* No. An HSA is owned by one person. 

Yet, there is a way for you and your spouse to have HSAs of your own. If you and your spouse are covered under the same HDHP, you can each open your own HSA and contribute separately. But, the amount you and your spouse contribute, combined, cannot exceed the contribution limit for a family plan. 

### Real-Life Examples:

#### Family HSA Contribution Limit with Two Accounts

Jack and Diane are married and covered under Jack’s high-deductible health plan. Diane wants to take advantage of her employer’s HSA contributions, so she decides to open up an HSA of her own. 

In 2020, Jack and Diane’s total contributions cannot exceed $7,100. That means that whatever Jack contributes to his HSA and whatever Diane contributes to her HSA added together needs to be $7,100 or less. 

Jack and Diane can use these funds to pay for the [qualified medical expenses](https://livelyme.com/whats-eligible/) of those covered under their health plan, including each other.

#### Family HSA Contribution Limit with One Account

The other option is to have the entire amount of the HSA in one account holder’s name. In this case, Jack opts not to contribute anything into his HSA for the year, and Diane and her employer will be able to contribute the entire amount into her account.

## The Benefits of an HSA

![hsa-retirement-benefits](//images.ctfassets.net/6j8y907dne6i/1okT5ICuYiKx6c18Oof9dK/0e331b4135f6588ed8df49e0f2a24bdd/hsa-retirement-benefits.jpg)

There are four primary [benefits of having an HSA](https://livelyme.com/what-are-the-benefits-of-an-health-savings-account).

1. __Three levels of tax savings__. Pre-tax or tax-deductible contributions. Tax-free interest, and investment earnings. And tax-free withdrawals when used for qualifying medical expenses.
2. __Portability__. HSAs aren’t tied to your employer. If you decide to move to a different company or retire, your HSA stays yours. The funds added to your account stay there until you choose to withdraw or roll it over; like a 401(k).
3. __ A safety net in the event of a health-related emergency__. An HSA helps you save for the unknown. It can be used for unexpected health care expenses or health insurance if you’re between jobs. An HSA covers all qualified medical expenses, even after a change of plans or providers.
4. __ Flexibility in retirement__. When you turn 65, your HSA can be used for non-health-related expenses without penalties; like a 401(k), or IRA.

An HSA is a great safety net in the event of a health-related emergency. And with options to invest, choosing to open an HSA is one of the best financial choices you can make for you and your family. 
















family hsa and individual hsa contributions are dependent on health care coverage

family-hsa-vs-individual-hsa

Learn the differences between a Family HSA vs Individual HSA. And how to extend HSA benefits to your entire family. 

Family HSA vs Individual: What’s the Difference?

Dividing your assets, such as 401(k)s and Health Savings Accounts (HSAs) is a central piece of negotiating a divorce settlement. If you receive health insurance through your spouse’s employer, you want to carefully consider whether it makes sense to stay on your partner’s health insurance after you divorce.

## Tips for navigating health insurance when divorcing

### You can pay for health insurance through an ex’s health insurance.

If your health insurance was through your partner’s workplace plan, you may be able to stay on the plan for up to 36 months. The federal COBRA legislation requires any firm or organization with at least 20 employees to offer health insurance to the divorced partner. If your soon-to-be-ex works for a smaller employer, you may be eligible for extended COBRA coverage through a state-run plan.

But there’s a big expensive catch to COBRA health insurance coverage: Once you are divorced, the employer no longer will subsidize the premium cost for the non-employee. 

You will be required to pay the full cost. According to the Kaiser Family Foundation, the average monthly premium for single coverage through a group plan was nearly $7,200 in 2019.  And the employer is also allowed to tack on an additional 2% annual fee to cover administrative charges.

### Check out your employer’s health insurance. 

If you were on your partner’s plan because it was more robust or cost-effective than the plan offered by your employer, time to circle back to your workplace plan. It may now be more cost-effective than staying on your ex’s plan through COBRA. 

Getting divorced is considered a [qualifying life event](https://livelyme.com/life-events-that-can-change-your-healthcare-costs), so you’ll be able to enroll for health insurance outside of open enrollment. 

### Compare COBRA coverage to an ACA-marketplace plan.

Before you finalize your divorce, spend some time pricing out purchasing your own health insurance through the ACA marketplace. Depending on your income you may be eligible for subsidies. You can start your search at the [healthcare.gov](https://www.healthcare.gov/) website.

### Include the cost of paying for health insurance in your divorce negotiations. 

It’s likely that whatever health insurance solution you land on, the premium is going to be a sizable line-item cost in your monthly budget. You should factor that into negotiations for assets. And keep in mind that if there is a family HSA account that has a sizable balance, that is a valuable asset to also bring into your discussions. 

### Consider a legal separation as a temporary step. 

If you are legally separated, but not divorced, you may be able to stay on a spouse’s plan, but it varies by employer and insurer.

### Sort out who pays for insurance coverage of the kids.

This is obviously a key part of your divorce negotiation. If you opt for joint custody and you both assume responsibility for health insurance, the spouse whose birthday falls earlier in the calendar year will have the “primary” insurance for the children. If there isn’t joint custody, the custodial parent typically assumes responsibility for health insurance for children. If the custodial parent remarries, and doesn’t have health insurance, the responsibility can fall to the custodial parent’s new spouse. If that isn’t an option the non-custodial parent will be required to step in and provide health insurance coverage.

Given the complexity of divorce, including health insurance coverage. consulting with a lawyer experienced in divorce law is a smart move to ensure that everyone in the family is covered. 



stay-on-insurance-divorce

Divorce is a complicated process - and it doesn't help that your health insurance gets tied up into the process as well. We detail some information that you will need to know regarding your healthcare if you are getting divorced from your partner.

How Long Can I Stay on My Partner's Insurance After a Divorce? 

<p>Helping employees understand the benefits of an HSA (like any new HSA user), takes time and resources. In order to make the HSA education and engagement process easier for employers and employees, we have outlined our best practices.</p>
<p></p>
<p>Our employee HSA education guide will help you get HSA strategies&nbsp;in place from day 1 so employees can take advantage of the&nbsp;<a href="https://livelyme.com/what-are-the-benefits-of-an-health-savings-account/">triple-tax benefits</a>&nbsp;immediately.</p>
<h2>HSA Employee Education Tips</h2>
<p>Opening, establishing and contributing to an HSA should be easy.&nbsp;It shouldn&#8217;t be rocket science, that&#8217;s at least what we think at Lively! Here is what every employee needs to know to get started with their new HSA:</p>
<ol>
<li>Confirm&nbsp;<a href="https://livelyme.com/hsa-eligibility-details/">HSA-Eligibility</a></li>
<li>Understand&nbsp;<a href="https://livelyme.com/2018-hsa-contributions/">Contributions&nbsp;Limits</a></li>
<li><a href="https://livelyme.com/add-1-hsa-day-1/">Open and Establish their HSA</a></li>
<li>How to&nbsp;<a href="https://livelyme.com/hsa-rollovers-transfers/">Rollover or&nbsp;Transfer</a>&nbsp;an Existing HSA</li>
<li><a href="https://livelyme.com/set-forget-hsa/">Automating HSA Contributions</a></li>
<li>Use an HSA&nbsp;<a href="https://livelyme.com/hsa-debit-card/">Debit Card</a>&nbsp;for Eligible&nbsp;Purchases</li>
<li>Review&nbsp;<a href="https://livelyme.com/can-i-invest-my-hsa-money/">HSA Investment</a>&nbsp;Options</li>
</ol>
<p>No employer health or financial situation is the same. Once employees have opened&nbsp;an HSA, customizing&nbsp;HSA strategies can help each and every eligible employee take advantage of their HSA benefits. This will better ensure success (and renewal). Let&#8217;s look at two likely employee HSA scenarios:</p>
<ul>
<li><b>HSA Saver</b>&nbsp;&#8211; HSA savers are more focused on the long-term savings value of an HSA. They can invest their funds or simply take advantage of FDIC-Insured interest bearing&nbsp;HSA accounts. Thereby taking advantage of compound interest and save HSA funds for future health costs.</li>
<li><b>HSA Spender</b>&nbsp;&#8211; These employees are using pre-tax HSA funds to pay for expected and unexpected health costs. They can use their dedicated HSA funds to reduce their out-of-pocket health expense liability.</li>
</ul>
<p>Many HSA account holders are a mix of both. Helping employees save for health costs today and plan for anticipated health costs well into retirement will only increase HSA adoption.</p>
<h4>Employee Engagement and Support</h4>
<p>Things come up. Employees get stuck. We get it. We have&nbsp;been through it ourselves. Making sure on-demand support options are available for employees is crucial in this process. It saves everyone time. Employee HSA education is an ongoing process. So we created an on-demand resource center to help &#8211; from an&nbsp;<a href="http://support.livelyme.com/">HSA FAQs</a>&nbsp;to&nbsp;<a href="https://livelyme.com/calculator/">HSA saving calculators</a>. We backed it all up with a dedicated&nbsp;customer&nbsp;service team to answer employee&nbsp;questions via&nbsp;<a href="mailto:support@livelyme.com">email,</a>&nbsp;<a href="tel:1-888-576-4837">phone</a>&nbsp;or chat (via our website).</p>
<h4>Don&#8217;t&nbsp;Forget! Talk About Retirement &amp; Health Costs</h4>
<p>Many employees are stuck on a year-to-year&nbsp;ferris&nbsp;wheel when it comes to health insurance and cost planning. Employees are forced into rising yearly health insurance premiums and out-of-pocket costs. Not planning for health costs in retirement &#8211; which are&nbsp;<a href="https://www.cnbc.com/2017/11/24/health-care-costs-in-retirement-can-top-275000.html">expected to exceed&nbsp;$275,000 per couple</a>&nbsp;&#8211; can be a financial mistake. Employees can use their HSA to plan and save for retirement. In fact, an HSA might be the&nbsp;<a href="https://livelyme.com/stealth-ira/">new stealth IRA</a>.</p>
<p>Opening an HSA is easy (at least at Lively). Helping employees understand the value of an HSA should be too. Use this employee HSA guide&nbsp;to fast-track benefits education to save employees time.</p>

Employee-HSA-Guide.jpg

Helping employees understand the benefits of an HSA (like any new HSA users), takes time and resources. In order to make the HSA education and engagement process easier for employers and employees, we have outlined our best practices.

Employee HSA Guide

Lively Blog

__Editor’s note:__ An earlier, and shorter version of this [blog post](https://livelyme.com/what-is-an-hsa/) was previously published. We published this update to provide a more comprehensive response to “What is an HSA?” This new blog outlines the rules and uses of account ownership, and more.

---

It’s a fact. The cost to be - and stay - healthy rises each year. And even the comprehensive  (expensive) health insurance plans are covering less for the cost of care. So what’s a person to do? Open an HSA.

A Health Savings Account (HSA) allows you to set aside money on a pre-tax basis to pay for qualified medical expenses. You, your employer, and even friends and family can contribute money to your HSA. The contributions are tax-deductible and never expire. So you can save them for a rainy day, retirement, or to help pay for an expensive procedure you have coming up.

## How Do I Qualify for an HSA?

To qualify for opening and contributing to an HSA, you must meet these criteria:

1. You must enroll in a [High-Deductible Health Plan](https://livelyme.com/what-is-a-high-deductible-health-plan-hdhp) (HDHP). In 2020, the IRS defined HDHPs as any plan with a deductible of at least $1,400 for an individual and $2,800 for a family. The total annual out-of-pocket expenses can’t exceed $6,900 for an individual or $13,800 for a family.  
2. You can’t have any other supplemental health insurance coverage. Meaning, you can’t be covered under your spouse’s health insurance plan too.
3. You must not be eligible for or enrolled in Medicare.
4. You must be under the age of 65.
5. You can’t contribute to a [Health Flexible Spending Account](https://livelyme.com/what-is-a-healthcare-fsa) (HFSA). But you can contribute to a [Dependent Care](https://livelyme.com/dependent-care-fsa-dcfsa-work) (DCFSA) or [Limited-Purpose FSA](https://livelyme.com/what-is-a-limited-purpose-fsa) (LPFSA) and contribute to a health savings account in the same year.

## How Does a Health Savings Account Work?

![how-does-health-savings-account-work](//images.ctfassets.net/6j8y907dne6i/3zynuAFE9SoOfJRy8MT7lO/d0078bf16189f8141aeeaa5b7ae1da54/how-does-health-savings-account-work.jpg)

### Step 1: Elect a high-deductible health plan during open enrollment.

### Step 2: Open a health savings account and decide how much you want to contribute. 

To enroll in an employer-sponsored health savings account, you'll likely open your HSA during open enrollment. Let your employer know how much you want to contribute for the year (up to the IRS contribution limit). And your employer will begin making payroll deductions each month.

Your employer may choose to contribute to your HSA. But they’re not required to. If they do, those contributions will count toward your annual limit. But will remain tax-free to you.

Maybe your employer doesn’t offer a health savings account. Or it’s outside of open enrollment and you want to get started on saving for your health care costs today. You can open an HSA with a financial institution in the private market.

With this route, you will make arrangements to fund your HSA with the account administrator. And your contributions will be deducted from your gross taxable income when you pay taxes for that year.

### Step 3: Use your funds for qualified medical expenses.

To use your funds, your account administrator may provide a debit card so you can pay for your health care costs at the point of sale. Or you will pay for costs upfront and submit documentation for [reimbursement](https://livelyme.com/hsa-reimbursement-rules). Your withdrawals are tax-free as long as you use the money to pay for qualified medical expenses. If you use your money for something else, the money you withdrew will be subject to income tax plus a 20% penalty.

![mobile-wallet-hsa-expenses](//images.ctfassets.net/6j8y907dne6i/xFSNWNpRjvuAnTymT4F18/108a46d5452cfb9b855a03c76bab9755/mobile-wallet-hsa-expenses.jpg)

__Additional health savings account details:__

- You own your account so you can take it with you from employer-to-employer (or employer to unemployed). 
- Even if you choose a health insurance plan that isn’t an HDHP, you can still use past contributions for out-of-pocket, qualified medical expenses. But you won’t be able to contribute to your account.
- Employer contributions are tax-free.
- If you’re under the age of 65, you must use your contributions for qualified medical expenses.
- Once you reach 65, you can no longer contribute to your account. But you can use your savings to pay for whatever you’d like.  
- An HSA offers triple tax savings: pre-tax or tax-deductible contributions, tax-free interest and investment earnings, and tax-free distributions when used for qualified medical expenses.

## How Much Can I Contribute to My HSA?

[Contribution limits](https://livelyme.com/hsa-guide#maximizing-your-savings) are set annually by the Internal Revenue Service. 

For __2020__, those limits are:

- $3,550 for someone with an individual health plan.
- $7,100 for a family health plan.
- An additional $1,000 “catch-up” if one or both members of the family are aged 55 or older.

For __2021__, those limits are: 

- $3,600 for someone with an individual health plan.
- $7,200 for a family health plan.
- An additional $1,000 “catch-up” if one or both members of the family are aged 55 or older.

## What Can I Use a Health Savings Account For?

![hsa-eligible-expenses](//images.ctfassets.net/6j8y907dne6i/42Oe00AuAcE2fs9KFkcmHS/b30013424117eb2a8c42b7c42b094e5c/hsa-eligible-expenses.jpg)

HSA-eligible expenses include (but are not limited to):

- Deductibles
- Copays
- Coinsurance
- Out-of-pocket costs related to diagnostic services like x-rays and blood tests
- Prescriptions
- Quality of life enhancers like air purifiers (with a letter of medical need)
- Medical supplies like band-aids and crutches
- Alternative medicine treatments like acupuncture

This list is not exhaustive. For a comprehensive list of IRS-qualified medical expenses check [“What’s Eligible."](https://livelyme.com/whats-eligible)

## What Happens to My HSA if I Switch Employers?

You get to keep your account and every dollar you’ve saved. Although you may not be able to continue contributing to that same account. 

If your new employer uses a different health savings account administrator, you will have two options. Roll the HSA from your previous employer into the new account or maintain two different HSAs. One account from your previous employer - from which you can withdraw but not contribute. And one from your current employer into which you can start contributing.

For more details about your specific situation, contact your HR department.

## Where Can I Sign-Up for an HSA?

![sign-up-lively-hsa](//images.ctfassets.net/6j8y907dne6i/4sUTWDriKFMgGBrIHxeyH9/a36ee79d497005f21445666727ab98e6/sign-up-lively-hsa.jpg)

You can sign up for an HSA in two places. Through your employer, if it offers this benefit. Or through a financial institution in the private market.

Here, at Lively, we offer a private-market HSA that allows you to put your contributions into mutual funds or other investments. That way you can access an even greater benefit: growing your money with the market.

As you can see, there are many ways an HSA can help you save money for health care expenses and retirement. A health savings account can also offer security should you lose your health insurance coverage for a period of time. For more information about HSAs, check out our [HSA Guide](https://livelyme.com/hsa-guide).







what-is-hsa

Learn more about HSAs including the qualifications for opening and contributing to a health savings account, how much you can contribute annually, how to use your account for qualified medical expenses, and more.

What is an HSA? Qualifications, Contributions, Uses, and More

*__Editor’s note:__ This post was originally published on June 29, 2017 and updated on September 3, 2020.*

In a world of text, chat and email it can feel like everything is (or has) an acronym. Health insurance plans are no exception. You may have come across the acronym HDHP and are wondering "What is a High Deductible Health Plan (HDHP)?" Continue reading to learn how choosing an HDHP could benefit you. Provided it gives you the coverage you need.

To start, an HDHP is a health insurance plan defined by lower premiums and a higher deductible. But don't let "higher deductible" scare you off. Here are two reasons why an HDHP could make sense for you:

1. All preventative care is covered before the deductible, and
2. HDHPs are an affordable way to get the coverage you need without paying more for extras you may not need.

HDHPs are also the only health insurance option that can be paired with a Health Savings Account (HSA). An HSA can help pay for the high-deductible or to save money for future medical costs.

<iframe src="https://player.vimeo.com/video/377355900" width="640" height="360" frameborder="0" allow="autoplay; fullscreen" allowfullscreen></iframe>

## What is Considered an HSA-eligible HDHP?

Annually, the IRS redefines what it considers an HDHP (adjusting for inflation). In 2020, their parameters were a [health plan](https://livelyme.com/hsa-guide) with a deductible of at least $1,400 for an individual and $2,800 for a family. As well as out-of-pocket expenses that didn’t exceed $6,900 for an individual and $13,800 for a family.

In 2021, the minimum deductibles will be the same. But the maximum out-of-pocket limits will rise to $7,000 for an individual and $14,000 for a family.

There's one other qualifying characteristic of HDHPs. The individual pays for the cost of healthcare, up to the deductible, before insurance pays for services. The one caveat here is preventative care. All preventative care is covered before the deductible.

## How Does a High Deductible Health Plan Work?

![preventative-care-included-hdhp](//images.ctfassets.net/6j8y907dne6i/5j1glZm5E5y47Fi5eW2T2K/1ebc0d46beb92be8021d514656948957/preventative-care-included-hdhp.jpg)

HDHPs charge participants lower monthly premiums. This is in exchange for requiring higher deductibles and out-of-pocket maximums.

Choosing an HDHP could make sense if you don't need many health care items or services. Or if you only visit the doctor for preventative care. This is because you'll be spending less on your monthly [health insurance plan](https://livelyme.com/compare-health-insurance-plans) premium. An HDHP could also make sense if you need more care. Here's why.

Because HDHPs have a higher deductible, the IRS allows you to deposit pre-tax money into a savings account called an HSA. Also known as a [Health Savings Account](https://livelyme.com/what-is-hsa). HSAs are tax-advantaged accounts because contributions are pre-tax.

The distributions and any gains those contributions make can also be tax-free. That's as long as the contributions are used to pay down your deductible or to pay for other qualified medical expenses. Depending on your tax bracket, this could help you save up to 30% on medical expenses.

Where an HDHP could get you into trouble is if you suffer a catastrophic event that requires an expensive procedure or treatment. And you can’t afford the out-of-pocket maximum. Or if you have or develop a chronic condition that needs management.

__Decide which plan is right for you with our [Health Plan Comparison Calculator](https://livelyme.com/compare-health-insurance-plans).__

To choose an HDHP, you would make the election during the open enrollment period for either your place of employment or in the private market. The other time is after a [Qualifying Life Event](https://livelyme.com/when-should-i-consider-changing-my-health-plan). If you’ve experienced a life event like the loss of health insurance, marriage, the birth of a child, or death of a dependent, you can sign up for an HDHP at any time during the year with a special enrollment period.

## What Are the Benefits of a High Deductible Health Plan (HDHP)?

![high-deductible-health-plans-lower-premium](//images.ctfassets.net/6j8y907dne6i/45YNFcVTSqOIH1GiPuzUVQ/150ddbbe5981bcf60c7150e50f13f6d1/high-deductible-health-plans-lower-premium.jpg)

Whether you’re considering an HDHP or have been using one for years, there’s no question that higher deductibles are a tough pill to swallow. The good news is, this type of health plan does offer some unique flexibility and opportunities that other health insurance plans lack.

1. __Flexibility__ – HMO health insurance plans require referrals from a primary care physician. This can be extremely frustrating for individuals who need to have some kind of care outside of a general practitioner. While HDHPs still have in and out of network designations, the list of in-network providers is extensive. And you can see a dermatologist, cardiologist, or other specialists even if you haven’t yet designated a primary care physician.
2. __Lower cost__ – The problem with large, overarching health plans is they try to cover everyone. This might sound good on paper, but not in practice. This often leads to people with low health care needs paying more to cover people with high health care needs. HDHPs reward limited use of the medical system by charging participants low monthly premiums. While also covering preventative care before the deductible is met.
3. __Health savings for the long term__ – HDHPs are the only health insurance plan that you can pair with an HSA. You own the contributions both you and your employer make to your HSA. And they never expire. The funds can be saved or invested in stocks and mutual funds, making these accounts function as a medical safety net. This is beneficial if you lose your employment or your employer changes your health insurance options. Or if your health insurance company decides to discontinue the plan you’re on, or you experience a catastrophic event. Any of which could leave you scrambling to cover unexpected medical expenses. And in the event you don’t spend your contributions before the age of 65, you can use that money, tax-free, for any expenses. Just like another retirement account. 

## How Do I Know If an HDHP Is Right for Me?

![is-hdhp-right-for-me](//images.ctfassets.net/6j8y907dne6i/1lGHA7VDq1QmkbEHtrozbq/8ce9096c3149cd21eca124e9fb2a5cf3/is-hdhp-right-for-me.jpg)

*The right health insurance plan for you lies at the nexus of affordability and appropriate coverage.* You must be able to afford the monthly premium but also the annual out-of-pocket maximum in case you experience a catastrophic event.

The plan must also provide adequate coverage for your current medical needs. As well as those in the foreseeable future (e.g. having a baby, knee surgery, etc.). Inadequate coverage could cause your out-of-pocket expenses to get out of hand quickly.

So take a look at the specifics for the HDHP you’re being offered. Can you afford that monthly premium? If yes, then take a look at what procedures, treatments, and prescriptions are covered and at what levels. When taking coverage levels into account, can you afford the copays, co-insurance, and other out-of-pocket costs?

Do you have the ability to contribute even a small amount to an HSA? Something to remember about HSAs is the money is contributed pre-tax. That means you could end up saving up to 30% on medical expenses depending on your income taxes bracket.

If, after answering these questions, an HDHP looks like it makes financial sense, then it could be the right plan for you. If you have questions about your specific situation, you should always reach out to your HR department.

HDHPs are often thought of as an affordable health insurance option, especially for the healthy or if you know you’ll exceed your out-of-pocket maximum. Combine an HDHP's monthly affordability with the option to pair the plan with an HSA, and you have an attractive setup. Not only for those who have limited medical care needs but those who can afford to contribute a little extra each month toward future costs and savings. 

discover "what is a high deductible health plan?"

what-is-a-high-deductible-health-plan

Wondering “What is a High Deductible Health Plan?” Discover how they work, the benefits, and if an HDHP is right for you.

What is a High Deductible Health Plan (HDHP)?

__Editor’s note:__ *This post was originally published on March 17, 2018 and updated on September 2, 2020.*

You’ve heard about HSAs and FSAs. And you think they are a good way to save money for and on medical expenses. And your employer offers both as part of its benefits plan. 

You’re in luck. You get to choose the option best suited to your needs. And yes, you do have to choose. Because you can’t contribute to an HSA and a Healthcare FSA at the same time. Let’s discover which account type will win in HSA vs FSA.

So how do you choose? To make the best decision for you and your family, consider the details of each account. And compare those to the realities of your family’s medical and financial needs.

To start, let's look at what these accounts have in common.

Health Savings Accounts (HSA) and Healthcare Flexible Spending Accounts (FSA) are pre-tax accounts. And are both used to pay for qualified, out-of-pocket medical expenses. These include, but aren’t limited to, copays, deductibles, coinsurance, and prescriptions. Because contributions are pre-tax, you can save up to 30% on those out-of-pocket expenses. Depending on your tax bracket.

How are HSAs and FSAs different? Account functionality and account holder requirements are different for the two account types. Let’s learn a little more about each account type.

## What is a Health Savings Account?

![how-to-choose-between-hsa-fsa](//images.ctfassets.net/6j8y907dne6i/1JfvzE56bAaAExlGqDmfjd/eafd5bc19e833ef342e4349e4eb6f630/how-to-choose-between-hsa-fsa.jpg)

A [Health Savings Account](https://livelyme.com/what-is-hsa) is a kind of savings account that allows you to save for health care costs. And reduce your taxable income. In other words, HSAs are individually owned, tax-advantaged medical savings accounts. You can open one as an individual or as part of a family plan. As long as you and your family are enrolled in an HSA-eligible [High Deductible Health Plan](https://livelyme.com/what-is-a-high-deductible-health-plan-hdhp/) (HDHP).

### What’s Considered an HSA-eligible Health Plan?

For 2021, the IRS considers HSA-eligible HDHPs to be [health plans](https://livelyme.com/hsa-guide#qualifying-for-an-hsa-account) with a minimum deductible of $1,400 for individuals. And $2,800 for families. And a maximum out-of-pocket amount of $7,000 for individuals and $14,000 for families.

The IRS adjusts its allowed annual HSA contribution limits annually for inflation. Those limits for 2021 are $3,600 for individuals and $7,200 for families. If you have a [mid-year change](https://livelyme.com/hsa-contribution-limits-mid-year-changes) – like moving from self-only coverage to family coverage, or vice versa, then your annual contribution limit becomes prorated.

### How Does an HSA Work?

When you open your HSA, you choose how much you’d like to contribute annually. Then, your employer will deduct the appropriate amount from each paycheck. Your employer may choose to also contribute to your account. But they’re not required to.

If they do contribute, those contributions will count toward your [maximum annual limit](https://livelyme.com/hsa-guide#maximizing-your-savings). Choose your individual contribution amount carefully. And keep in mind that contributions are cumulative. Otherwise, you could end up going over the annual contribution limit.

If you’re under the age of 65, you must use your contributions to pay for qualified medical expenses. These include, but are not limited to:

- Copays
- Coinsurance
- Deductibles
- Acupuncture
- Mental health treatment
- Prescriptions
- Medical supplies like [bandages](https://hsastore.com/SearchProducts.aspx?q=band+aid&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), [crutches](https://hsastore.com/SearchProducts.aspx?q=crutches&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), [joint braces](https://hsastore.com/SearchProducts.aspx?q=braces&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), and more
- Hearing aids
- Dental health
- Vision tests

Want to see the full list of HSA-eligible expenses? Visit [What’s Eligible?](https://livelyme.com/whats-eligible/)

### How Age Affects HSA Use & Taxes

![age-affects-hsa-taxes](//images.ctfassets.net/6j8y907dne6i/1mxiaR9se6IhBYokKGgsdd/86de5569ecab00a84ae82f763e30789e/age-affects-hsa-taxes.jpg)

If you’re under the age of 65 and use your contributions for qualified medical expenses, those funds are not subject to federal income tax. But, your state tax liability for contributions depends on your state.

If you choose to use the money for something other than qualified medical expenses, you will incur a 20% tax penalty. And have to pay income taxes on the misused money. After age 65, you can use your health savings on anything you want provided income tax is paid on the amount of the non-qualified disbursement.

## What is a Flexible Spending Account (FSA)?

A [Healthcare FSA](https://livelyme.com/what-is-a-healthcare-fsa), aka Healthcare Flexible Spending Account, is a spending account your employer makes available to pay for medical expenses with pre-tax dollars.

### How Does a Healthcare FSA Work?

If you decide you would like to open an FSA, the good news is that you don’t have to purchase a specific health plan. In fact, you don’t have to purchase any health plan.

But you must elect to participate during your employer’s open enrollment period. Or within 30 days of starting employment if you begin your job mid-year. Then, you select the amount you would like to contribute to your account at that time. Your employer will then deduct the appropriate amount from each paycheck.

Your employer can choose to contribute to your FSA but is not required to do so. And their contributions don’t count toward your annual max. Unfortunately, you can’t change this election at any point outside of open enrollment. Unless you’ve experienced a [qualifying life event](https://www.healthcare.gov/glossary/qualifying-life-event/) like the birth of a child, death of a dependent, marriage, or divorce. 

![qualifying-life-event-fsa-contribution-amount](//images.ctfassets.net/6j8y907dne6i/td25GiIFP70vewqfrlrSD/751854829eee489fc8a0c81fddb11efb/qualifying-life-event-fsa-contribution-amount.jpg)

You also lose any unused money at the end of the year. Unless your employer offers either the option to rollover $500 to next year’s account or a 2.5 month grace period during which you can use leftover funds. So choose your contribution amount carefully.

Like with HSAs, the IRS imposes an annual limit on FSA contributions that adjusts annually for inflation. For 2021 that limit is $2,750. Unlike HSAs, FSAs are only opened on an individual basis, so there are no “family plan” increases for annual contribution limits. But if both you and your spouse are offered the opportunity to take part in an FSA at work, you can do so and each can contribute up to the maximum allowed amount.

FSA funds can be used to pay for out-of-pocket medical, vision, and dental expenses not covered by your health insurance plan. Including, but not limited to:

- Copays
- Coinsurance
- Deductibles
- Acupuncture
- Mental health treatment
- Prescriptions
- Medical supplies like [bandages](https://fsastore.com/SearchProducts.aspx?q=bandages&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), [crutches](https://fsastore.com/SearchProducts.aspx?q=crutches&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), [joint braces](https://fsastore.com/SearchProducts.aspx?q=joint%20braces&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), and more
- Hearing aids
- Dental health
- Vision tests

For a full list of medical expenses that you can use your FSA (or HSA funds) on, check out [Publication 502](https://www.irs.gov/forms-pubs/about-publication-502) from the IRS. You can also visit the [FSA Store](https://fsastore.com/?utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner).

## Choosing Between an HSA and Healthcare FSA

![choose-between-hsa-fsa](//images.ctfassets.net/6j8y907dne6i/EqKcpDQS9JGMip8psYcVj/994cea7acae40c6fc14eecff7688fdfc/choose-between-hsa-fsa.jpg)

### Eligibilty Requirements

- __FSA:__ Only employers can establish an FSA plan for employees to contribute. Employees can open an FSA regardless of if they have a HDHP or not. Self-employed individuals cannot open an account.
- __HSA:__ Employees are eligible only if they have an [HSA-eligible HDHP](https://livelyme.com/hsa-guide#qualifying-for-an-hsa-account). Individuals are not dependent upon their employer to offer an HSA. And an HSA can be opened from the private market. Self-employed individuals can open an account.

### Contribution Sources & Changes

- __FSA:__ The contribution amount is chosen during open enrollment or at the time of a qualifying life event. And the contribution amount can not be changed outside of these two time periods.
- __HSA:__ You can change your contribution amount at any time, no major life event required. This gives you the flexibility to increase or decrease your contribution at any time. *__Multiple contribution sources:__* You can grow your HSA in multiple ways. Not only can you add money to your HSA, but your employer, relatives, or anyone who would like to contribute can help your HSA grow.

### Rollover Rules

- __FSA:__ Employers choose whether an employee can keep their unused funds or not. There are three options: *__Forfeit__*: Employee forfeits money, and employers get to keep it. *__Grace period__*: Employee has a 2.5 month grace period after the plan year ends to use on expenses. Any remaining money after the grace period is employer’s. *__Carryover__*: Employees can add up to $500 of unused funds to next year’s plan (in addition to contribution limit). Employers decide the carryover limit, and any funds over the limit are the employer’s.
- __HSA:__ Funds do not expire from year-to-year. Rollover money is in addition to the contribution limits. Money in your HSA can be carried with you and is available even if you change health insurance plans, get a new job, or retire. And funds left in your account grow tax-free through interest or any investment gains.

### Account Ownership

- __FSA__: An FSA is owned by the employer. Unused funds belong to employers, not the employee.
- __HSA__: Funds stay with you. One of the best perks of an HSA is that the money you save always stays with you because you own the account. If money is left in your HSA at the end of the year, it stays put. No scrambling around trying to find ways to spend the money before the timer runs out.

### Access to Money

![accessing-hsa-fsa-contributions](//images.ctfassets.net/6j8y907dne6i/4lJ6EN6128M5SHmAuh8hzk/60301225072d2cec1be8a6e2fda926ca/accessing-hsa-fsa-contributions.jpg)

- __FSA:__ Money available from day one. Every penny you contribute to your FSA is available at the beginning of the benefit year. Or shortly after the first contribution is made. Say you add $2,000 to your FSA for the year, you’ll likely contribute about $80 per paycheck. Yet, the entire $2,000 is available to use at any time even though you only make small contributions during the year. Another perk? If you leave a position before the year is over, the money spent from your FSA doesn’t have to be paid back.
- __HSA:__ As the employee contributes to their plan. An employee only has access to what has actually been deposited into their HSA account.

### HSA: A Savings Asset

- *__After the age of 65, your HSA functions like any other retirement account.__* And you can use your HSA money on anything you wish. How does it differ from other retirement accounts? You don’t pay income taxes on money used for medical expenses. You do, however pay income taxes on money used for anything else.
- *__HSAs are assets you can pass on to your kin:__* If your spouse inherits the HSA, it retains its status as a retirement-like account. With the same rules and allowances as it had when you were the account holder. If you pass it on to someone other than your spouse, it stops being an HSA, and inheritance laws apply.

## Is an HSA or FSA Better for You?

![is-hsa-fsa-better](//images.ctfassets.net/6j8y907dne6i/7dkm3u9Ez0B7z6r7ZndKdK/d746299a286d54387aae669880b9cbb2/is-hsa-fsa-better.jpg)

Deciding between an HSA and FSA depends on your medical and financial needs. The principal requirement for an HSA is enrollment in an HDHP. And while preventative care is covered before the deductible under HDHPs, most other care is not. That means you will have to pay for your medical expenses for you and your family out-of-pocket until you reach your deductible.

An HSA-eligible HDHP makes the most sense in two cases. First, if you or one of your family members has a condition that needs managing by either a specialist or with speciality prescriptions or treatments. In this case, you’ll likely exceed the deductible and be able to use HSA funds to save up 30% on out-of-pocket medical costs.

Secondly, if you rarely use the medical system except for routine preventative care (that includes vaccines and well visits for children) and really want the ability to use your pre-tax account as an investment vehicle to save for retirement. Then, an HSA/HDHP arrangement may be the best choice for you.

To make the best decision for you and your family, start by assessing your past medical needs and those you can project. Then take a look at your finances. Choose the account and health insurance plan arrangement that sits at the nexus of best health coverage and account flexibility.

hsa-vs-fsa

An HSA and FSA provide up to 30% savings on out-of-pocket healthcare expenses. But you can’t contribute to both at the same time. Let’s explore each account type to help you decide which wins in HSA vs FSA.

HSA vs FSA: How to Choose Between an HSA and Healthcare FSA

pexels-photo-259363.jpeg

Paying for out-of-pocket medical expenses with an HSA and paying lower premiums with higher deductible heath care is better than a PPO plan.

HDHP HSA vs PPO Plans: Which is better for healthcare?

HDHP HSA vs PPO: Is HSA or PPO Better?

Editor’s note: An earlier, and shorter version of this [blog post](https://livelyme.com/what-does-it-mean-to-reimburse-myself-with-my-hsa) was previously published. We published this update to help you learn about HSA reimbursement rules and choose the best timing for your reimbursements. Plus, learn how delaying reimbursement can build wealth and security in retirement.

---

When you have a medical expense there are two ways of paying. You can either 1) swipe your [Lively Visa debit card](https://www.benefitnews.com/news/lively-visa-partner-on-debit-processing-hsa) at the time of purchase, or 2) reimburse yourself later. 

What does it mean to “reimburse” yourself with your Health Savings Account (HSA)? It means paying out-of-pocket for an HSA-qualified medical expense and then using money from your HSA to pay yourself back. This can be done even if you don’t have money in the account the day the expense incurred, and at any time in the future. Whether you reimburse yourself now⁠—or later⁠—has some interesting benefits.

## Paid for a Medical Expense Out-of-Pocket? What’s Next?

As long as the qualifying medical expense was made after the establishment of your HSA, you can use your HSA to pay yourself back for your out-of-pocket expense. And while it isn’t required that you submit receipts to be reimbursed from your HSA, we recommend it in case of an IRS audit. 

### Know What Qualifies as an HSA-Eligible Medical Expense

There are thousands of HSA qualified medical expenses. Expenses are likely pretty obvious if you’re at the doctor’s, having an eye exam, or at a dentist appointment. But what about over-the-counter products like sunscreen, prenatal vitamins, or contact lens cleaning solution? 

Use “[What’s Eligible](https://livelyme.com/whats-eligible/)” to find qualifying medical expenses without the requirement of a doctor’s note, with a prescription, or with a doctor’s letter. Better yet; let Lively’s Expense Scout do the searching for you.

### Expense Scout

Don’t spend your time scanning receipts trying to find your HSA-eligible medical expenses. 

Instead, use Lively’s [Expense Scout](https://livelyme.com/expense-scout/) to scan and alert you of potential HSA-eligible expenses from linked external accounts. Like your personal debit card or credit cards. Expense Scout prompts you to a list of expenses for review. Then you have the option to reject or submit them⁠—with receipt—for reimbursement, now or later.

## Document All Medical Expenses

![document-all-expenses](//images.ctfassets.net/6j8y907dne6i/4FopIwi9mrF1zEqiMZQpxi/aadc96e2bbe2ec9a3e7426a5a4f48b6d/document-all-expenses.jpg)

To justify spending money on a qualified medical expense, you should keep or track your expense receipts. Receipts should be kept for as long as your tax return is open and subject to an audit; usually three years. Or as long as your HSA is open. Whichever is longer.

Some HSA companies (like Lively) offer digital receipt filing so you can document your receipts without having to save piles of receipts. This is helpful if you plan on paying for out-of-pocket expenses and reimbursing yourself “20 years” from now. But, more on that hack in a bit. 

### Records to Keep in Case of an IRS Audit 

It’s best to save a copy of your health insurance carrier’s Explanation of Benefits (EOB) in case the IRS audits you. This documents the expenses for services covered under your High-Deductible Health Plan (HDHP). You should also keep receipts for all products or services you paid for.

In case of an [IRS audit](https://www.irs.gov/forms-pubs/about-publication-969), you need to have records that prove:

- Distributions were to pay or reimburse qualified medical expenses,
- Qualified medical expenses had not been paid or reimbursed from another source, and
- The medical expenses had not been taken as an itemized deduction in any year. 

When you choose to be reimbursed for an eligible medical expense that’s called a __distribution__.

If you take a distribution your HSA provider will send you [Form 1099-SA](https://livelyme.com/what-is-irs-tax-form-1099-sa). You should be prepared to file [Form 8889](https://livelyme.com/irs-tax-form-8889) with your annual taxes. If there’s something that doesn’t match between forms 1099-SA and 8889, resolve it before filing your taxes. Keep reading to learn how HSA distributions are taxed and reported.

## When Can I Reimburse Myself for an Out-of-Pocket Expense?

![when-hsa-reimbursement](//images.ctfassets.net/6j8y907dne6i/2DcikyDJz1nLL4z6MHOCy1/36828f85b62ccab059de8b6a9336d31b/when-hsa-reimbursement.jpg)

You can reimburse yourself __anytime__. 

Today, tomorrow, or 20 years from now. The only rule is that your HSA was established at the time that the expense was incurred (date of service). And that the expense was not reimbursed in any other way. 

This is one of the reasons why knowing the exact date of the establishment of your HSA is important. You cannot be reimbursed for expenses that were incurred prior to that date.

Did you know that you can also reimburse yourself for expenses even if you are no longer eligible to contribute to an HSA? That’s because the use of your funds is not tied to HSA eligibility. Once you add money to your HSA, it’s yours. And it can be used at any time in the future.

## Want More Money in Retirement? Reimburse Yourself Later

One of the major financial benefits of an HSA is that you can choose to reimburse yourself anytime. This gives you the opportunity to save the funds in your account. It also provides the opportunity to increase interest earned or provide more time for invested funds to grow.

Many people choose to pay for medical expenses out-of-pocket and reimburse themselves later. Since there’s no reimbursement deadline, you can choose to reimburse yourself years later. Even during retirement.

This requires you to save your receipts and invoices for reimbursement. In the event that you ever get audited by the IRS, they will ask for proof. If you’re unable to provide those records, you would have to pay regular income tax plus a 20% penalty on your reimbursements.

## How HSA Distributions Are Taxed and Reported

![hsa-distribution-tax](//images.ctfassets.net/6j8y907dne6i/1Qp2iGiBLoBkr48xsxV81z/ad237aa0e2034eae881b12050d5fa8c8/hsa-distribution-tax.jpg)

If you use your HSA to buy a qualified medical expense, you will not have to pay income taxes on those funds. If you use your HSA for something other than a qualified medical expense, that distribution is taxable income. And you can be subject to a 20 percent penalty for early withdrawal. When an HSA account holder reaches the age of 65 or becomes disabled, they are no longer subjected to that 20 percent penalty.

In terms of reporting HSA tax information, the HSA trustee or custodian keeps all reports of distributions. The trustee then shares that information to the account owner through IRS Form 1099-SA. HSA account holders are responsible for reporting their own distributions to the IRS through Tax Form 8889. It’s recommended that HSA owners keep records of all their distributions, in the event, they ever become audited by the IRS.

## Reimbursement in Action

### Real-Life Example: When Your HSA is Low in Funds 

James recently got a new job and has a variety of health plans to choose from. He decides on a high-deductible health plan so that he can take advantage of his employer’s HSA contributions. Upon opening his account, he deposits a dollar to establish his account. 

A few weeks after opening his account, James gets into an accident and sprains his ankle. Since he doesn’t have those funds in his HSA yet, he pays for his treatment out-of-pocket. He saves his receipts with a digital receipt organizer, so he can reimburse himself later.

Fast forward to a year from then. James now has enough money in his HSA to pay himself back for those out-of-pocket expenses. Because he kept such diligent records, he was able to reimburse himself with his HSA.

He reports this information to the IRS using IRS Tax Form 8889. If James did not report his distribution to the IRS correctly, the money he withdrew could receive a 20% tax penalty. Since James saved his receipts, he won’t have to pay this penalty. And he receives the tax-free benefits from using his HSA for qualified medical expenses.

### Real-Life Example: Your Savings Strategy

![hsa-reimbursement-wealth-building](//images.ctfassets.net/6j8y907dne6i/6R7cjd9se6Xrgawi2jo8UB/6d65ef236dfdd131080e9af01ae762b8/hsa-reimbursement-wealth-building.jpg)

Juliet is a smart, money-savvy individual and she wants to get the most out of her HSA when she retires. She enrolls in an HDHP for several years and also maxes out her HSA every year. When she needs to pay for a health-related expense, she pays out-of-pocket. She tracks her health expenses by taking pictures of her receipts and logging them into Lively App to reimburse herself later.

Fast-forward to years from now when Juliet is in retirement. Since she hasn’t withdrawn any of the money in her HSA, she was able to earn more interest with her higher account balance. And even earned more through investing some of her funds. 

Juliet has diligently logged years’ worth of glasses, contacts, prescriptions, and other qualified health-related expenses into her account. Which, when added together totals thousands of dollars. She chooses this opportunity to finally reimburse herself for those expenses with her HSA. And uses those funds to help her travel during retirement.

## Reimbursing Yourself For Out-of-Pocket Medical Expenses with Lively

Have a couple of out-of-pocket expenses that you can use your HSA for? Here’s how you can reimburse yourself through the [Lively app](https://livelyme.com/app/):

1. Access your Lively account through our online portal, iOS, or Android App.
2. Navigate to “Transactions” in the menu or click on “+ Expense.”
3. Choose “Add Expense: For purchases made using your personal fund.”
4. Enter the amount of the medical expense, who the merchant/provider was, and the date you made the purchase or started receiving service.
5. Choose “Get Reimbursed Later” or “Process Immediately.” 
6. Add a receipt by taking a photo or uploading an image.
7. Click the “Submit” button.

This process is quick and easy, and you’ll have those funds in your account within 2-3 business days. 

We suggest taking a picture of all of the receipts you have for your healthcare expenses so you can keep them attached to your transactions within your Lively account. Having your information ready to go makes using your HSA simple.






hsa-reimbursement-rules

Learn about HSA reimbursement rules: How to efficiently track expenses in case of an IRS audit, how distributions are taxed, and how to determine whether to delay reimbursements as part of a wealth-building and retirement strategy.