Do HSA Payments Count Towards Your Deductible?
Learn how using your Health Savings Account for medical care impacts your insurance deductible and what determines if a payment is credited toward your plan.
A Health Savings Account (HSA) is a tax-advantaged account paired with a high-deductible health plan (HDHP). It allows individuals to save for medical expenses with funds that are not taxed upon deposit, growth, or withdrawal for appropriate costs. Many people use these accounts to cover their out-of-pocket health expenses, but questions often arise about how these payments interact with their annual health insurance deductible.
How HSA Funds Apply to Your Deductible
Payments made from an HSA for qualified medical expenses do count toward your health insurance deductible. When you incur a medical cost, such as a doctor’s visit or a prescription, you can pay the provider directly using a debit card linked to your HSA. Alternatively, you can pay out-of-pocket and later reimburse yourself from the account.
Once the insurance carrier processes the claim, the amount you paid is credited toward your annual deductible. For example, if you have a $3,000 deductible and use your HSA to pay for a $250 specialist visit, your remaining deductible for the year is reduced to $2,750. After the deductible is met, your health plan begins to share the costs through coinsurance.
Defining Qualified Medical Expenses
For an HSA payment to reduce your deductible, it must be for a qualified medical expense as defined by the Internal Revenue Service (IRS). These are costs incurred for the diagnosis, cure, mitigation, treatment, or prevention of disease. The IRS provides comprehensive guidance in Publication 502, which lists the wide range of services and products that meet this standard.
Common examples of qualified expenses include payments for doctor and dentist visits, prescription medications, ambulance services, and vision care like eyeglasses or contact lenses. The list also covers costs for physical therapy, hearing aids, and necessary hospital services. These expenses must be primarily to alleviate or prevent a physical or mental illness. Expenses that are only for general health, such as vitamins, do not qualify unless recommended by a medical practitioner for a specific condition.
Payments That Do Not Reduce Your Deductible
Certain payments, even if made from an HSA, will not count toward your health insurance deductible. The most common exclusion is the monthly premium you pay to keep your health insurance active. These payments are considered the cost of having coverage and are separate from the costs of care.
If you use HSA funds for non-qualified expenses, those amounts will not be applied to your deductible. Using your HSA for items like cosmetic surgery for non-medical reasons or general wellness products is not permitted. Such withdrawals not only fail to reduce your deductible but will also be subject to income tax and a 20% penalty if you are under age 65.