Debunking 10 Common Myths About HSA Plans

Quick look: As the demand for comprehensive health insurance grows, health savings accounts (HSAs) are becoming a must-have workplace benefit. However, misinformation often deters employees from enrolling in an HSA plan. In this blog, we debunk 10 common HSA myths and set the record straight.

Health insurance remains a top employee benefit for workers across all markets. According to the Society for Human Resource Management (SHRM), 97% of organizations offer fully insured or self-insured health coverage. However, employees are also looking for voluntary and supplemental benefits to strengthen their employer-sponsored insurance.

That’s where HSAs come in. These personal, tax-advantaged accounts enable employees to save money and cover qualified medical expenses. But along the way, employers and staff alike may run into common misconceptions that can cloud their understanding of HSAs.

Here are 10 myths about HSA plans and the truth behind them.

Myth 1: You can use an HSA with any health insurance plan

HSA plans are only available if you enroll in a high-deductible health plan (HDHP). An HDHP differs from traditional coverage by providing a lower monthly premium and a higher out-of-pocket deductible rate.

HDHPs eligible for an HSA must set a minimum deductible and maximums for both self and family out-of-pocket costs. According to the IRS, the key coverage limitations for 2025 are:

• Self-only HSA contribution limit: $4,300
• Family HSA contribution limit: $8,550
• Self-coverage expectations for HDHP: A minimum $1,650 deductible; a $8,300 out-of-pocket maximum
• Family coverage expectations for HDHP: A $3,300 minimum deductible; $16,600 maximum for out-of-pocket costs

Members over 55 also get to contribute an extra $1,000 to their HSA for the year.

Myth 2: HSAs are “use it or lose it” accounts

People often compare HSA functions to those of a flexible spending account (FSA) benefit. Though both make health-based expenses more manageable, HSA funds roll over annually. This process is indefinite, enabling unused savings more flexibility to grow over time. Meanwhile, any FSA contributions expire and reset at the end of each year.

Other differences between an FSA and an HSA include, but are not limited to:

• Only an HSA earns interest on its available savings amount
• FSAs are not portable when an employee retires or leaves a job, unlike HSAs
• Anyone can add money to an HSA plan, while only FSA account holders and their employers can contribute

Myth 3: Only high-income earners benefit from an HSA

HSAs offer advantages to every savings holder, no matter their income level. All contribution amounts add to the account’s tax-free growth. Since HSAs honor annual rollover, any interest accrued also stays intact, making it easier to reach financial goals and fund unexpected medical expenses in the future.

Myth 4: Dependents can’t use an employee’s HSA funds

HSAs bring valuable support to your family’s healthcare necessities. Spouses, children, and other covered dependents may leverage these savings for their own medical costs. An HSA plan with family coverage also gains higher annual contribution limits and out-of-pocket maximums than an individual plan. These benefits help HSA funds grow faster and better safeguard your loved ones’ well-being.

Myth 5: If you’re healthy, HSA contributions aren’t necessary

Healthcare needs can change in the blink of an eye. In 2023, 23% of adults faced significant and unexpected medical expenses with the median ranging between $1,000 and $1,999.

An HSA plan reinforces your preparedness for similar scenarios. No matter your current well-being, the option to contribute to your account savings remains available. Untouched HSA funds still increase from interest, making it easier to cover sudden costs for future preventive care and medical emergencies.

Myth 6: I can’t use HSA funds to reimburse my out-of-pocket expenses

 Last-minute procedures or bills with strict due dates may require you to pull funds from personal accounts. When this happens, you can withdraw HSA savings to reimburse that out-of-pocket expense. Two core guidelines help ensure reimbursements are approved. First, the cost must qualify under your HSA plan. Second, save a receipt or another proof of payment for the savings provider to reference. Abiding by these rules lets HSA funds ease the pressure of dipping into everyday accounts for health reasons.

Myth 7: An HSA doesn’t cover everyday health expenses

HSA accounts are eligible for more than just routine care, major medical costs, copays, deductibles, and coinsurances. They also apply to a wide-range of daily expenses, including these lesser-known items:

• Cold and flu aid (cough drops, syrups, and suppressants)
• Family planning purchases (birth control, pregnancy tests)
• Feminine hygiene products (sanitary pads, tampons)
• First aid kits and supplies (bandages, skin creams, gauze)
• Gas, transportation, and lodging reimbursements for medical care purposes
• Mental health treatments and wellness classes
• Over-the-counter medications (aspirin, allergy relief medicine, eye drops, ibuprofen)
• Prescription eyeglasses, sunglasses, and contacts
• Sun and UV protection items (sunscreen, sunburn ointment)

Myth 8: Investments aren’t possible for HSA funds

Hoping to bulk up your personal investment portfolio? Look no further than your HSA plan. Account owners can invest any allocated money into stocks, exchange-traded funds (ETFs), and bonds. Though options may differ for HSAs given through an employer, these triple tax-advantaged accounts significantly impact how quickly long-term savings increase.

Myth 9: You lose your HSA if you change jobs or retire

Life shifts happen at any time, from accepting a dream work role to starting retirement. Some may wonder how these changes affect an HSA plan. The good news is these accounts remain accessible. HSAs are portable, meaning all accumulated savings belong to you, even if you switch jobs or retire. This advantage safeguards your funds for future health needs. It also allows you to add the account to a new employer’s insurance plan if it’s HSA-eligible.

Myth 10: An HSA only impacts short-term savings

Though its primary purpose is to cover healthcare costs, an HSA helps maximize overall long-term savings. Since contributed and withdrawn funds are income tax-free, you get to pay more on medical expenses without diving into other spending accounts for additional money.

HSAs also helps you improve spending while retired. By using an HSA to cover emergency and unexpected medical needs, you can save more retirement income for cost-of-living payments. Both cases allow you to elevate financial wellness and maintain personal health.

Ditch HSA confusion with ExtensisHR

It’s time to face facts: HSAs are here to stay. In 2023 alone, 24% of national workers enrolled in an employer-sponsored HDHP with qualified HSA options. This trend is pushing more small- and medium-sized businesses (SMBs) to enhance their healthcare offerings. However, choosing the right HSA-eligible coverage can be challenging without the support of an employee benefits expert leading the charge.

That’s where a professional employer organization (PEO) like ExtensisHR comes in. By providing large-group employee benefits, we help smaller employers access competitive, enterprise-level benefits packages at a more cost-effective rate than seeking similar coverage on their own.

These packages include HSA plans, which allow your employees to:

• Make pre-tax payroll contributions
• Use savings on approved expenses related to medical, dental, vision, and more
• Cover qualified health payments for themselves and their dependents
• Leverage tax-free investing, like a 401(k)
• Update their contribution amounts any time

ExtensisHR also offers additional supplementary and ancillary benefits like 401(k) retirement savings, life and disability insurance, family-forming assistance, and coverage for accidents, critical illness, and hospital indemnity.

We strengthen your benefits strategy with a dedicated customer support team that handles the administrative heavy lifting. This allows your team to enjoy seamless healthcare management while staying focused on the business initiatives and goals that drive success.

Give HSA the “okay” to help boost workers’ financial wellness and job satisfaction. Contact us for more details on how our certified professionals redefine employee benefits.