HSAs Explained: Advantages and Disadvantages of Health Savings Accounts

Updated on August 20, 2019

According to one survey, about 22 million Americans have a Health Savings Account (HSA).

Many people know about health insurance, but some people may be confused as to what an HSA is. 

Need to have HSAs explained simply to clear up any confusion? Learn everything you need to know about health savings accounts, including the pros and cons here.

HSAs Explained

When you sign up for your health insurance, you may also see the option to sign up for an HSA. You may have wondered what it was, but you had never had HSAs explained to you. 

Don’t worry; we have your back. The bottom line is that HSAs are a great way to save money for medical expenses and reduce the amount of income the government can tax.

Most HSAs can be opened through your health insurance. However, if your insurance doesn’t offer it, you can normally sign up for one through a different company.

At the beginning of each year, you can decide how much you want to put into your account. The government changes the limit for how much you are able to put in there though, so you should check what the limit is. 

Once you have an account, you will have a card or checks that are connected to your account. You can use this money for medical expenses, like paying deductibles, coinsurance, and even some co-ops. Make sure you know what you can pay for with your HSA before you sign up for one.

An HSA is actually different from a flex spending account. A flex spending account doesn’t let any money rollover at the end of the year. With an HSA though, the money will roll over, so you won’t have to worry about losing any of your savings.


Before you can sign up for an HSA, you need to make sure that you are qualified for one.

Most people are qualified if they have a high-deductible health insurance plan, according to the government. The IRS also sets different determining factors for what the max amount of money you can put into an HSA is. 

The numbers can be different for family and individual plans. If you are single, check out these HSA plans for individuals


There are a lot of benefits to signing up for an HSA. Here are some of our top reasons.

Anyone Can Contribute

If you have the high-deductible health insurance plan, anyone can donate into your HSA. Your family, friends, strangers, and even your employer can put money into that account for you. 

There is a cap on how much you or someone else can put in there though. This account is similar to a retirement account or any other accounts with a tax advantage.

Tax Advantages

There are three different advantages for taxes when you use an HSA. 

When you put money into this account, the money is put in before taxes are taken out. Which means that you don’t have to pay tax on whatever amount of money you end up putting in there. If you withdraw money for an expense, you won’t have to pay tax on that either. 

Another benefit is that if your account and your money grow, you won’t be taxed on the growth amount either. 

For example, if you make $50,000 a year, and you put $5,000 into your HSA, you will be taxed as if you only made $45,000 that year. 

A Lot of Expenses Qualify

Another great reason to have one is that they can be used for a lot of different things. 

You can use this money to pay for medical, mental health, or even dental appointments. There are even some medicines and other health-related items you can purchase with this money. 


Another pro is that this is convenient to use. Not only will you know that you always have money saved up to use for health-related reasons, but you will also be able to easily access that money.

With your HSA-issued card, you can pay for services right then and there. It is your money, and you should be able to have access to it at any time. 


Although there are great pros to having an HSA, there are also some cons, as with anything. Keep reading to find out if they are a deal-breaker for you. 

Forces You to Save

This could be a pro or a con, depending on how much disposable income you have available. 

While you do have to put some money in an HSA, it could take away from money that you could put towards other bills, like paying off a car or student debt. 

However, on the other hand, it is nice to have money saved up when you are in a pinch and need something medical immediately. 

Not Ideal for Chronic Illnesses

If you have a chronic illness that is going to keep sending you back to the doctor, you may want to skip an HSA. Managing all your expenses with an HSA can become quite a hassle due to how an HSA is set up.

With this insurance, you will have to reach a really high deductible before you can enjoy all the benefits of your insurance. If you are going to the doctor a lot, you will reach that deductible soon, but you will also have to pay for everything until you reach that. 

If you don’t have enough money to do that, you may end up in debt.


Some HSAs actually charge a monthly or transaction fee to use their account. It depends on what type of insurance you have, so make sure you check before you sign up for one.

Most fees aren’t really high, but it will be more money that isn’t in your pocket. You could also look into getting the fees waived if your account does have them. 

Learn More About HSAs

Now that you have had HSAs explained to you, you can decide whether or not to sign up for one.

There are a lot of great benefits to having one, so you should sign up for one to save some money. 

To learn more about health care, make sure you check out some of our blog posts!

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