Am I eligible for a Health Savings Account?

If you’ve read some our other articles, like Top 10 ways to use an HSA, you already know that millions of people choose Health Savings Accounts (HSAs) for their powerful tax advantages. In fact, HSAs are the only account with triple tax savings:

• Tax-free contributions¹
• Tax-free investment growth²
• Tax-free spending on HSA-qualified expenses

Plus, money in your HSA rolls over every year. Even if you change health plans or retire. HSA funds never expire.

So HSAs are truly awesome accounts.

But the big question is: Are you eligible to contribute to an HSA?

Key eligibility criteria for HSAs

Let’s take a look at the main eligibility requirements for contributing to an HSA.

1. You must be enrolled in a High-Deductible Health Plan (HDHP).

The primary eligibility requirement for an HSA is enrollment in a high-deductible health plan (HDHP). An HDHP is a type of health insurance plan characterized by higher deductibles, but also usually lower monthly premiums compared to traditional health plans.

This means you’ll pay more out-of-pocket costs before your insurance starts covering expenses, but you’ll likely benefit from reduced premium payments. Which means more money in your paycheck.

By choosing an HDHP, you gain access to the tax advantages of an HSA, which can significantly enhance your ability to save for medical expenses. HDHPs are designed to encourage consumers to make more informed healthcare decisions and manage their health expenses more effectively.

If you’re considering an HSA, it’s a good idea to evaluate your current and anticipated healthcare needs against the structure of an HDHP.

Check out our article that details important aspects to consider: Should I choose a high-deductible health plan?

2. You can’t be enrolled in any other non-qualified health plan.

Next, in order to be eligible for a Health Savings Account (HSA), you cannot be covered by any other health plan that is not a High-Deductible Health Plan (HDHP). This means you cannot have additional health coverage through a spouse’s plan or any other insurance that does not qualify as an HDHP.

However, there are exceptions to this rule. You can still be eligible for an HSA if you have secondary insurance that covers specific types of care, such as injury insurance, dental insurance, vision insurance, or long-term care insurance.

The key is to ensure that your primary health insurance is an HDHP, as having other non-HDHP coverage would disqualify you from contributing to an HSA. Evaluating your current insurance coverage and making necessary adjustments can help you take full advantage of the benefits offered by an HSA.

3. You can’t be enrolled in Medicare.

If you are enrolled in Medicare, you can no longer contribute to a Health Savings Account (HSA). This is because Medicare Parts A and B do not qualify as High-Deductible Health Plans (HDHPs). And you need to be enrolled in an HDHP in order to make HSA contributions.

If you plan to join Medicare, remember to stop HSA payroll contributions. Keep in mind also that Medicare coverage can be backdated up to six months, but no earlier than your 65th birthday. So, always consider this six-month backdating to avoid any penalties.

You can still make pro-rated HSA contributions for the months you had HDHP coverage before enrolling in Medicare.

Want more info about HSAs and Medicare? We have a quick guide for members 55 and older.

4. You are at least 18 years old and not claims as a dependent.

Finally, HSA eligibility requires that you’re at least 18 years old and not claimed as a dependent on someone else’s tax returns.

This requirement ensures that the HSA is used for your own healthcare expenses rather than those covered under another person’s insurance plan. Being independent on your tax return allows you to fully benefit from the tax advantages and savings potential of an HSA. Always verify your dependent status and age to ensure eligibility before contributing to an HSA.