What Is an HSA Card and How To Use It?

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    Medical expenses are a major cause of bankruptcy in the U.S. The average American spends about $12,500 per year on health care. That’s a lot of money to pay out-of-pocket, especially when you consider that most people don’t have thousands of dollars sitting around in a savings account.

    What many people don’t realize is that there are ways to lower your medical expenses and save money without sacrificing quality care. One way to do this is by opening a health savings account (HSA).

    In this guide, we’ll cover what an HSA card is and how to use it, and what are HSA’s.

    What’s an HSA Card?

    The Health Savings Account (HSA) Card is a debit card tied to your HSA account. It allows you to access your funds for qualified medical expenses and can be used anywhere debit cards (Visa) are accepted.

    You can use your HSA debit card to pay for eligible medical expenses online, in-store, at a pharmacy, and even at a doctor’s office. If you don’t have one, you can request one from your HSA financial institution or HSA administrator. The card is free, but there may be an activation fee.

    What’s an HSA?

    An HSA is a tax-advantaged account that allows you to save money for future medical expenses. You can use the money in your HSA to pay for qualified medical expenses, such as copayments, coinsurance, and deductibles, as well as Medicare premiums. If you don’t use all of your HSA funds within a given year, they roll over to the next year.

    Qualified medical expenses are those that can be used to reimburse you for certain costs when you use your HSA. These include doctor visits and prescription drugs, but they also cover many types of dental care. You can even use your HSA account to pay for over-the-counter medications, but only if they’re prescribed by a doctor.

    How Do HSAs Work?

    Health Savings Accounts (HSAs) are designed to help you save money on your medical expenses. They’re similar to other types of savings accounts, but with some important differences:

    • You must have a high-deductible health plan (HDHP) to contribute to an HSA. This can include stand-alone plans or those offered through an employer that also offers traditional health insurance coverage. The deductible must be at least $1,400 for individuals and $2,800 for families in 2022. This amount increases each year as healthcare costs rise.
    • The money you deposit into the account grows tax-free until it is used for qualified medical expenses, and your contributions are always made before taxes are taken out. This means that if you contributed $1,000 into your account and paid $500 out of pocket towards your deductible, the remaining $500 would still grow tax-free until it was used for qualified medical expenses.

    You can withdraw funds from your HSA at any time without penalty if they’re used for qualified medical expenses such as doctor visits or prescription drugs. However, if they are not used for qualified medical expenses, you will have to pay a 20% penalty on the amount withdrawn as well as income tax.

    This condition only applies if you’re under 65 years of age. If you are over 65 years, you can withdraw money from your HSA and use it to pay for non-medical expenses without penalty.

    How Do I Open an HSA?

    The first step is to look for a health savings account-qualified health plan. This will usually be a high-deductible health plan that does not include coverage for preventative care such as routine physicals or immunizations. You can find these plans through your employer, but it’s also possible to purchase an individual policy directly from an insurance company.

    Once you have an HSA-qualified plan, you can open an HSA with any bank that offers HSAs. These banks often have convenient ways to make deposits into your account, such as direct deposit.

    Some banks also offer the option of depositing money directly into an HSA account from your paycheck. This can be a great way to ensure that your contributions are made on time and that you don’t miss any payments.

    Most banks charge monthly fees for their HSA accounts, but some offer them without any monthly charges. You may also be able to find an HSA provider that offers a free checking account along with your HSA.

    Once you’ve opened a health savings account, you should receive your HSA bank debit card in the mail within a few days. The length of time it will take for your to get the card will highly depend on your HSA provider. Some providers will send your card in less than a week, while others will take longer to process the request. If you don’t receive your HSA debit card within a week of opening an account, you should contact your provider directly to find out what is taking so long.

    How Much Can I Contribute to My HSA Each Year?

    Once you have opened an HSA, you will need to fund it. The maximum contribution for 2022 is $3,650 per person; the maximum contribution for a family is $7,000. If you are over 55 years old, you can contribute an additional $1,000 per year. The maximum contribution is expected to increase with inflation each year.

    The IRS limits how much you can contribute to your HSA each year. If your employer contributes to your HSA on top of what you put in yourself, then that amount will be added to what you contributed to determine whether or not your total contributions exceed the limit set by law.

    If you exceed the maximum contribution amount, then you will be charged a penalty. The penalty can be as much as 6% of your HSA balance if it is more than $100 over the limit.

     

    When Can I Start Using My HSA Funds for Qualified Medical Expenses?

    You can start using your HSA funds for qualified medical expenses at any time. You don’t need to wait until the end of the year, as many people assume. In fact, it can be beneficial for you if you start using HSA funds early in a given year because this will help lower your taxable income for that tax year.

    What Can I Use My HSA For?

    You can use your HSA funds for any qualified medical expenses, including:

    • Prescription drugs
    • Doctors’ visits
    • Hospital stays and other medical services (such as physical therapy)
    • Dental expenses
    • Vision care (glasses, contacts, or eye surgery)
    • Hearing aids 
    • Medical equipment and supplies (such as crutches or wheelchairs)

    You can also use your HSA funds to pay for over-the-counter medications that are not reimbursed by your insurance provider.

    Bear in mind that you can use your HSA money to pay for anything related to your health needs. That includes expenses for yourself, your spouse, and any eligible dependents. You can also use your HSA money to pay for qualified medical expenses of any family members who are covered under your health plan.

    Who Can Contribute To An HSA?

    HSAs are designed to make health care more affordable, and they’re available to anyone with a qualified high-deductible health plan. That means that you can contribute money to an HSA regardless of your income or whether you have access to employer-sponsored insurance.

    Your employer may also offer to contribute to your HSA. Some employers will contribute the same amount as you do, while others might contribute more or less.

    However, there are some restrictions on who is eligible for an HSA and how much they can contribute each year.

    You can also have a family member or friend make contributions on your behalf as long you’re eligible for HSA.

    The following people are eligible for HSAs:

    • Anyone who has a high-deductible health plan (HDHP) and is not enrolled in any other type of health insurance coverage, including Medicare. This includes individuals who have HDHP coverage through an employer-sponsored group plan (including self-funded plans), as well as those who purchase their own HDHP coverage.
    • Individuals who are not claimed as dependents on another person’s tax return

    If you meet any of the above requirements, you can open an HSA account and start contributing. As long as you remain eligible for an HSA, you can continue contributing to it throughout the year.

    How Long Can My Money Stay in My HSA?

    If you have a health savings account, keep in mind that the money you deposit into your account is yours to use for future medical expenses. You are not required to spend it right away or within any specific timeframe.

    However, if you do pass away and you have unused funds in your HSA account, any named beneficiary or beneficiaries will be able to use the money to pay for eligible medical expenses.

    If there’s no beneficiary named on your account, the money will be returned to your estate. Also, your HSA account will be closed upon your death.

    Do I Have To Report HSA Contributions and Withdrawals on My Taxes?

    Yes. You will need to report any contributions, as well as withdrawals to pay for eligible medical expenses, on your tax return. The IRS requires that you report HSA contributions on Form 8889, which is a part of your 1040 tax form. You will also need to report your withdrawals on Form 1099-SA when you file your taxes.

    You should receive these forms from your HSA provider, along with instructions on how to fill them out. The forms must be attached to your tax return.

    What Types of Health Plans Are Compatible With an HSA?

    Health plans that have an annual deductible of $1,250 for an individual or $2,500 for a family are compatible with an HSA.

    If you’re not sure if your plan is compatible with an HSA, check with your employer or health insurance provider. You could also check the IRS’s list of qualified HSA-compatible health plans. If your plan isn’t on the list, it might still be compatible with an HSA if it meets certain criteria.

    What Should I Consider When Choosing an HSA Provider?

    When choosing an HSA provider, it’s important to consider several factors. Here is what you need to consider:

    • Make sure the provider is FDIC-insured. If they’re not, they won’t be able to offer you insurance protection if anything goes wrong with your account. You can find out if they’re insured by checking their website or just by asking them
    • Look at what kind of investment options the provider offers. You might want to invest in stocks or bonds or both; it depends on your risk tolerance and goals. Some providers have more options than others, and others don’t offer any investment options at all. So make sure you compare different providers before making your decision.
    • Look at how much money you’ll have to deposit into the account each month. This can vary depending on your age and health status, but it’s important that you understand what kind of commitment is required before signing up for an HSA plan.
    • Consider the cost of the plan itself. The provider may charge a monthly fee or an annual fee, and there may be other costs associated with using the account. Make sure you know what these are so that you can budget accordingly.

    Final Remarks

    Health savings accounts are a great way to save money for healthcare. They can help you avoid paying large amounts of money out of pocket on doctor visits and other health-related costs, which can be particularly helpful if you have a chronic illness or are dealing with an unexpected emergency.

    However, HSAs are not for everyone. There are certain requirements you must meet in order to qualify for an HSA, and you should be aware of these before opening one. Also, while HSAs can save you money on healthcare costs, they don’t offer any protection against the financial consequences of a serious illness or injury.

    This means that HSAs are not a good option for people who want to save money for non-healthcare expenses. If you are considering an HSA, it’s important to understand how HSAs work and what they can do for you.

    Chad is a serial entrepreneur and founded Payment Savvy in 2011 armed with the goal of providing high-risk establishments with a pioneering and tailored payment processing solution that allows them to flourish. Having decades of knowledge in the financial services and debt recovery industries, he ensures every client receives the same level of expertise, resourcefulness, and strategic vision no matter the size of the organization. Always willing to push the envelope, Chad’s forward-thinking and leadership skills are responsible for Payment Savvy being on the map as an industry-leading payment processor.