You need a high-deductible health plan first

A Health Savings Account (HSA) is not something you can open on its own. You must be enrolled in a high-deductible health plan (HDHP) through your employer, the individual market, or Medicare Advantage. The IRS sets the minimum deductible each year — for 2024, that is $1,600 for individual coverage and $3,200 for family coverage. If your current plan has a lower deductible, you cannot open an HSA until you switch to an HDHP.

Check your plan documents or call your health insurance company to confirm whether your plan qualifies as an HDHP. Some plans are labeled as HSA-may be able to access or HSA-compatible. If you are shopping for coverage on the individual market, filter for HDHP plans when you search — most insurers label them clearly.

You also cannot have other health coverage that is not an HDHP running at the same time. This means no spouse's traditional PPO plan, no Medicaid, and no Veterans Affairs coverage. Medicare beneficiaries can use HSAs only if they are enrolled in a Medicare Advantage plan that qualifies as an HDHP.

Key Takeaways

  • You must be enrolled in a high-deductible health plan before you can open an HSA; the plan itself does not automatically create the account.
  • Once you have an HDHP, you can open an HSA through a bank, credit union, or investment firm — not through your health insurance company.
  • Your employer may offer an HSA as part of payroll, which is the fastest route and often includes a company contribution.
  • You can contribute up to $4,150 for individual coverage or $8,300 for family coverage in 2024, and contributions are tax-deductible whether you make them yourself or through payroll.
  • Once the account is open, you can use the debit card or reimburse yourself for may have access to medical expenses out of pocket.

Open an HSA through your employer if one is offered

If your employer offers an HSA as a benefit, this is usually the simplest path. During open enrollment or when you first become may be able to access for the HDHP, your HR or benefits department will give you the option to enroll in an HSA. You will choose a provider — often a bank or investment firm the employer has partnered with — and set up contributions through payroll deduction.

Payroll deduction means the money comes out of your paycheck before taxes are calculated, which lowers your taxable income. Your employer may also contribute to your account as part of the benefits package. Ask your HR department whether they make matching contributions, a fixed deposit, or no contribution at all. Some employers deposit $500 to $1,500 per year into employee HSAs.

The enrollment window is usually during your company's annual open enrollment period, or immediately when you first enroll in the HDHP. If you miss the window, you may have to wait until the next open enrollment period to start contributions, though you can still open an individual HSA outside of payroll in the meantime.

Open an individual HSA if your employer does not offer one

If your employer does not offer an HSA, or you are self-employed or uninsured, you can open one directly with a bank, credit union, or investment firm. You do not need permission from your health insurance company — the HSA is a separate financial account. Common providers include Fidelity, Lively, HealthEquity, and many regional banks.

To open an account, you will need to provide proof that you are enrolled in an HDHP. Have your insurance card or a letter from your health plan showing the plan name, deductible amount, and out-of-pocket maximum. Some providers let you upload this online; others ask you to mail it in. The process usually takes a few days to a week.

Once the account is open, you can make contributions yourself. You are responsible for tracking how much you contribute and staying within the annual limit set by the IRS. For 2024, the limit is $4,150 for individual coverage or $8,300 for family coverage. If you turn 55 before the end of the year, you can contribute an additional $1,000 (called a catch-up contribution).

Contribute money and choose how to invest it

After your HSA is open, you can deposit money in several ways. If contributions come through payroll, they are deducted automatically. If you opened an individual account, you can transfer money from your bank account, write a check, or set up automatic monthly transfers. You can also contribute by mail or through the provider's website.

Once the money is in the account, you decide how to hold it. Most HSAs offer a cash option — money sits in a savings account earning minimal interest. Many also offer investment options such as mutual funds or target-date funds, similar to a 401(k). If you do not need the money for medical expenses this year, investing it can help it grow over time. If you expect to use it soon, keeping it in cash is simpler.

You can change your investment choices at any time, and you can move money between cash and investments as often as you want. Some providers charge a monthly maintenance fee ($2 to $5) or a transaction fee when you invest, so compare providers before you open an account if fees matter to you.

Use the account to pay for may have access to medical expenses

Once money is in your HSA, you can use it to pay for may have access to medical expenses. Most HSAs come with a debit card that you can use at the pharmacy, doctor's office, or hospital. You can also pay out of pocket and reimburse yourself from the account later — there is no time limit on reimbursement, so you can wait months or years to withdraw money if you want to.

may have access to expenses include doctor visits, prescriptions, dental work, vision care, mental health treatment, and medical equipment. They do not include health insurance premiums (except COBRA or long-term care insurance), cosmetic procedures, or over-the-counter medications unless they are prescribed by a doctor. Keep receipts for all expenses you reimburse yourself for, in case the IRS asks for proof later.

If you withdraw money for a non-medical expense before age 65, you pay income tax on the withdrawal plus a 20% penalty. After age 65, you can withdraw money for any reason without the penalty, though you still pay income tax on non-medical withdrawals. This makes an HSA a powerful retirement savings tool if you do not spend all the money on medical expenses.

Verify your HDHP coverage one more time before opening

Before you commit to opening an HSA, confirm that your plan actually qualifies. Call your health insurance company or log into your online account and look for language such as "HSA-may be able to access," "HSA-compatible," or "high-deductible health plan." Some plans have a high deductible but do not may have access to for HSA purposes because they offer certain benefits (like free preventive care beyond what the IRS allows) that disqualify them.

Also check whether you have any other coverage that would disqualify you. If your spouse has a traditional PPO plan and you are on a family plan together, you cannot use an HSA. If you are on Medicare, you can only use an HSA if you are in a Medicare Advantage plan that qualifies as an HDHP — Original Medicare does not work.

Once you confirm you are may be able to access, you can move forward with opening an account. If you are unsure, contact your health plan directly or ask your HR department — they can tell you definitively whether your coverage qualifies.

Frequently Asked Questions

Can I open an HSA if I am self-employed?

Yes. You must be enrolled in an HDHP purchased through the individual market (not through an employer). Once you have the plan, you can open an HSA with any bank or investment firm that offers them. You contribute the money yourself and track your own contributions to stay within the annual limit.

What happens to my HSA if I change jobs?

Your HSA stays with you. The money in the account is yours, not your employer's. If you opened it through your old employer's plan, you can keep it open and continue to use it. You can also roll it over to a new HSA if you want to consolidate accounts. The money does not disappear, and you do not lose it when you leave the job.

Can I contribute to an HSA if I am on my spouse's health plan?

Only if your spouse's plan is an HDHP and you have no other coverage. If your spouse has a traditional PPO or HMO plan, you cannot open an HSA even if you are on a family plan together. Both of you would need to be on the same HDHP to both have HSAs.

Do I have to use my HSA debit card, or can I pay out of pocket?

You can do either. The debit card is convenient, but you can also pay for medical expenses with your own money and reimburse yourself from the HSA later. There is no deadline for reimbursement, so you can let the money grow and withdraw it whenever you need it.

What if I do not spend all my HSA money in a year?

The money rolls over to the next year. Unlike a flexible spending account (FSA), there is no "use it or lose it" rule with an HSA. You can let the balance grow year after year, invest it, and use it whenever you need it — even in retirement.