Health savings accounts, explained

There’s a lot to keep up with in today’s rapidly-changing healthcare environment. And as insurance deductibles increase for many people, it’s more important than ever to understand all of your healthcare options.

One option that could help you manage your expenses is a Health Savings Account (HSA).

What is a Health Savings Account (HSA)?

HSAs are tax-free investment accounts designed to help people pay for future medical costs, like deductibles and co-pays.

To be clear, an HSA is not a substitute for health insurance. An HSA goes hand-in-hand with your health insurance coverage. It functions like a checking account to pay for your health-related expenses.

Anyone enrolled in an HSA-qualified health plan is eligible to open a Health Savings Account. Generally, this means a plan that’s covered by a high-deductible health plan (HDHP).

But is an HSA right for you and your finances? Let’s weigh the options.


  • Your contributions to your HSA are tax-deductible to pay for current and future health care costs. As of 2022, an individual can save up to $3,650, and a family can save up to $7,300. People age 55 and older are allowed to save an additional $1,000 annually, totaling a savings limit of $4,650 each year for an individual and $8,300 for a family.*
  • Any money that is not spent for your designated health care expenses will roll over to the next year. It also continues to grow tax-free.
  • Many employer-sponsored HSA plans allow the employer an option to contribute to the HSA. The money is often treated like a 401K plan and taken out of your paycheck on a pre-tax basis. If you’re a business owner, you can explore the benefits of HSAs for your business here.
  • Anyone can contribute to an HSA, including spouses, parents, and even friends. In addition, to help offset deductibles, HSAs can help build savings to cover unplanned healthcare costs or out-of-pocket healthcare expenses. This is especially helpful for expenses that are likely to have in retirement.


  • If the money in your HSA is used for anything other than defined medical expenses, you will be subject to taxes; and if you’re not 65 years old, you’ll pay an extra 10% penalty.
  • Predicting your overall health condition and healthcare needs can be unpredictable, making it hard to accurately save and budget for healthcare expenses.
  • It may be challenging for those who are older and/or unhealthy to save as much as younger or healthier people.

If you think an HSA is right for you, or if you have any questions, explore our free HSA resource guide on the Bank Midwest website. Or, give us a call. We would love to help answer your questions.

*Consult your tax advisor to discuss your financial situation.

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