This article has been updated for the 2023 & 2024 tax years

A few years ago, I moved from a traditional PPO health insurance plan to a high deductible health plan (HDHP) that was paired with a health savings account (HSA) during my employer’s open enrollment period. Why? I’m young, healthy, and I haven’t been to the doctor more than a few times in the last few years (knock on wood). As such, a HDHP offers me lower premiums than a traditional health insurance plan. That was a huge selling point, but the even bigger selling point of the HDHP was the access it permitted to the HSA it is paired with (which my employer contributed to).

HSAs are a key component to HDHPs, so let’s go into more detail on what they are, how to use one, HSA contribution amounts, how to start a new HSA, and what medical expenses can be paid for with an HSA.

What is an HSA?

Health savings accounts, also known as HSAs, are tax exempt accounts that allow you to contribute tax deductible funds that you can use to pay for qualified medical expenses. Many HSAs come with a debit card that makes payment and accounting for medical expenses simple. Unlike with FSAs, you own the HSA and can take it with you when you leave an employer. And when you turn 65, you can use HSA funds on not just medical expenses, but anything, without penalty. That is why I think, matching aside, HSAs are the best retirement account (even though they are not thought of as a retirement account). HSAs are very similar to traditional IRAs or 401Ks in many ways: you can contribute tax deductible contributions through your employer, much like a 401K. you can invest the funds in the account. there are annual maximum contributions. your employer can contribute to the account. the entirety of the balance rolls over from one year to the next.

What expenses does an HSA cover?

There are a lot of medical expenses that you can use your HSA funds to cover. Some of the most common include dentist and doctor visits and procedures, flu shots, prescription drug costs or co-pays, laser eye surgery, eye exams, prescription eyeglasses and contacts, chiropractor, and birth control. If you have any medical conditions that require special equipment or treatment, these expenses are typically covered as well. For a full list of what medical expenses are covered by a health savings account, check out my overview of HSA and FSA-eligible qualified medical expenses and IRS publication 502. For example, as a result of the CARES Act during the COVID-19 pandemic, OTC medications, telehealth, and menstrual care products are now considered qualified medical expenses.

Maximum HSA Contribution Limits

Much like IRAs and 401Ks, HSAs have annual contribution limit maximums that are adjusted every year with inflation. The IRS maximum HSA contribution limits are:

2023 Maximum HSA Contribution Limits:Individual Plan: $3,850 (+$200 over prior year)Family Plan: $7,750 (+$450 over prior year)

2024 Maximum HSA Contribution Limits:Individual Plan: $4,150 (+$300 over prior year)Family Plan: $8,300 (+$550 over prior year)

Note: The maximum HSA contribution includes both employer + employee contributions.