November 24, 2020
In layman's terms, a health savings account or HSA let's you put away pre-tax income to cover your healthcare costs that your healthcare provider would not cover until you have met your deductible amount.
In order for you to be able to open and contribute to a HSA account, you need to qualify with a high-deductible health insurance plan*. A high-deductible plan means that you would need to pay out of pocket x amount of dollars before the healthcare provider takes over.
For an example, if you have an insurance with Aetna and your deductible is $2,000. Then you need to pay that $2,000 out of pocket before Aetna pays for your medical expenses. Therefore, a HSA helps you set aside money so you don't have to come up with a large sum unexpectedly.
For 2020, an individual can contribute up to $3,550 and a family can contribute up to $7,100. More information can be found on Investopedia.
When I entered the workforce, I was not enrolled in my company's health care plan, therefore, I missed out on HSA my first year. Last year, I finally enrolled with my company and got qualified for the HSA.
Before actually jumping into opening an HSA, I really had to dig deep with the pros and cons. Since insurance is mandated by the United States and based on my religion, it was safe for me to open an HSA.
My company actually helps contribute to my HSA as long as I put a minimum amount into it over the course of a year. It comes out of my paychecks and there's no hassle. The HSA company sends me a debit card that is only used for medical/health care related things like paying for my glasses, dental check-ups, over-the-counter medications, and much more**. The perks are pretty awesome so I really can't complain there.
*HSA lets you set aside money to help with health expenses and essentially invest it.
**Check with your HSA company for a list of eligible uses with your HSA account.