To be eligible to contribute to an HSA, account holders must be covered by a high deductible health plan (HDHP) that meets the IRS requirements. Let's discuss them here.
IRS definition
An HDHP has:
A higher annual deductible than typical health plans, and
A maximum limit on the sum of the annual deductible and out-of-pocket medical expenses that you must pay for covered expenses. Out-of-pocket expenses include copayments and other amounts but don’t include premiums.
Preventive care
An HDHP may provide preventive care benefits without a deductible or with a deductible less than the minimum annual deductible. Preventive care includes, but isn’t limited to, the following.
Periodic health evaluations, including tests and diagnostic procedures ordered in connection with routine examinations, such as annual physicals.
Routine prenatal and well-child care.
Child and adult immunizations.
Tobacco cessation programs.
Obesity weight-loss programs.
Screening services. This includes screening services for the following.
Cancer.
Heart and vascular diseases.
Infectious diseases.
Mental health conditions.
Substance abuse.
Metabolic, nutritional, and endocrine conditions.
Musculoskeletal disorders.
Obstetric and gynecological conditions.
Pediatric conditions.
Vision and hearing disorders.
Minimum annual deductible and maximum out-of-pocket expenses for 2024
| Self-only coverage | Family coverage |
Minimum annual deductible | $1,600 | $3,200 |
Maximum annual deductible and other out-of-pocket expenses* | $8,050 | $16,100 |
Note: Family coverage is determined by having an insurance policy that covers two or more individuals.
Are HSAs mandatory
To contribute to a health savings account, you need to be covered by an HSA-eligible high deductible health plan (HDHP)—but do you have to open an HSA if you are covered by an HDHP?
No, but you should consider getting one. You will be able to make contributions to your HSA and pay for qualified medical expenses using your pre-tax dollars! Why waste money if you don’t have to?
Even if you don’t have the money to put into an account today, you can open an account and “establish” it by funding it with as little as 1 cent. The moment you do that, all qualified medical expenses become eligible to be reimbursed out of your HSA whenever you do have funds to put into it. You can pay for them months or even years later when you fund the HSA more fully.
Source: "Publication 969 (2018), Health Savings Accounts and Other Tax-Favored Health Plans.