The process of selecting a health insurance plan often feels like a three-dimensional puzzle, especially when you’re not even sure if a Health Savings Account is right for your personal situation. You may have noticed the term coming up over the past few years, from a coworker’s conversation around the watercooler or from your employer during open enrollment season, but what does it really mean to have an HSA compatible health plan? The good news is that choosing an HSA plan can potentially save you thousands of dollars in after tax dollars spent on medical care every year, but first you have to understand the eligibility requirements.
For starters, what exactly is an HSA and what makes an insurance plan compatible? A health savings account is a triple tax advantaged savings vehicle for qualified medical expenses. Your contributions are made pretax, the investment growth is tax free, and the money is withdrawn tax free for eligible expenses. For all three of these benefits to be true, your health plan must qualify as an HSA compatible plan based on IRS regulations.
Determining Whether a Plan Qualifies
The IRS has a long list of regulations that define an HSA qualified plan, but they can be distilled down to a few basic criteria. An individual HSA compatible plan must have a deductible of at least $1,650, and a family plan’s deductible must be at least $3,300 for 2025. These amounts will be adjusted annually, so it’s important to stay current if you are shopping for coverage a few years down the road.
A deductible is the amount of medical expenses you are required to pay out of pocket each year before your insurance coverage kicks in. In other words, an HSA compatible plan is one that has a high deductible. The idea is that you keep your monthly premiums low by covering routine and emergency care costs up to the deductible amount instead of through copayments and coinsurance. If you are healthy and rarely seek medical care, the HSA accounts for those higher deductibles and gives you a way to save and pay for them tax free. If you’re more prone to injuries and illnesses, the opposite strategy of a low deductible and higher monthly premiums will work better for you.
The annual out of pocket maximums that count toward the deductible are also capped by the IRS. In 2025 the max is $8,300 for individual plans and $16,600 for families. So if you have a qualifying HSA compatible plan, you are protected against catastrophic medical costs, but you can also put money into a health savings account that allows you to save up for your deductible each year. This all makes a lot more sense with an example.
Examining the Premium Dilemma
Say you have a choice between two plans that have a $6,000 deductible but one has a monthly premium of $200 and the other is $350. The $200 premium looks a lot more attractive, right? But if you need to use the plan for ongoing doctor visits and medications, that second plan might be cheaper for you after all. This is a crucial aspect to understand when evaluating HSA compatible health plans.
Your personal and family health history is also relevant. For example, if you have diabetes, high blood pressure, and high cholesterol, you will typically benefit from a plan with higher monthly premiums, but lower deductibles and copays. On the other hand, if you have no underlying medical conditions and need only preventive care, then the high deductible/low premium scenario plus HSA is much more attractive.
The thing many people miss is that an HSA is a long term investment, not a short term tax dodge. Faced with spending $600 per month versus $350 per month, the first reaction is to go with the cheaper plan. But take that $250 difference and invest it in an HSA tax free and over the long haul those are the dollars that compound and help you with healthcare costs during retirement. One of the oldest and largest independent insurance agencies in Oregon is Bowthorpe & Associates Insurance Producers. They can help you navigate the choices available and select a plan that makes the most sense for your needs.
Provider Networks Can’t Be Ignored
Another consideration is your doctors and local hospitals. In network refers to the fact that those doctors and hospitals have negotiated discounted rates with the insurance company. When you visit an out of network provider, those discounts go out the window and you will pay significantly more. The basic procedure or test that costs you $1,200 with an in network provider may cost four times that amount if you go out of network.
Make sure that your existing providers are in the network for any plan you are considering. You don’t want to have to start over with new doctors, as that may mean repeating tests, changing medications, and overall disruption of your ongoing care. This can be a real issue if you’re switching from a PPO plan that offers wider provider choice to a more restricted network.
Provider networks also vary in size and scope. Some have hundreds, even thousands of providers but the quality of those providers is mixed. A smaller network may mean a more selective set of providers and less choice, but they also may offer more specialized care and experience for your needs. Check to make sure the hospitals in the network are where you want to be treated if you need emergency services.
Geography also matters with provider networks. If you live near a state border or travel frequently to another state for business, that can impact the network size and coverage. Another thing to consider is whether specialists are in the network and to what extent. If you’re working with specialists on an ongoing basis for medical problems, this is important for ongoing coverage. Before making a final decision, research a few hospitals and your preferred doctors to confirm they are included.
Preventive Care Is a Key Benefit
HSA compatible plans have a big catch that make them a no brainer for many people. Even with the high deductible, preventive care is 100% covered even before you meet that deductible. This means things like annual physicals, immunizations, and cancer screenings will be covered at no cost.
The federal government required these benefits under the Affordable Care Act. So mammograms, colonoscopies, blood pressure checks and more will be covered by your insurance before you have to meet that deductible. This encourages preventive care that can stop serious conditions like cancer or heart disease before they start.
Notably, mental health is coming to be covered in more HSA compatible plans as well. In the past, mental health treatment and counseling sessions were not provided as preventive care services. That’s changing and can make a big difference for many people. Some plans offer additional wellness benefits like gym membership discounts, wellness programs, and nutrition counseling.
HSA Maximization Strategies
The next step is to put some money into the account and use it strategically. For 2025, you can contribute up to $4,300 for individual coverage and $8,550 for family coverage. In addition, if you or your spouse is 55 or older, you can contribute an additional $1,000 catch up contribution. Your employer may also contribute to your HSA, and the combined contributions from all sources cannot exceed these limits.
Contributions are tax deductible, so use your HSA as an investment account, and let that money grow over time. When the balance gets to a comfortable level, say $1,000 to $2,000, consider investing the additional funds in mutual funds or other investments. Pay for medical expenses out of pocket and save the receipts. You can reimburse yourself from the HSA account later tax free and there is no time limit on those reimbursements.
Bowthorpe & Associates Insurance Producers Is Here To Help
Bowthorpe & Associates Insurance Producers has been serving Oregon families since the early 1980s. As an independent agency they can work with multiple carriers to compare the best possible options for your situation, rather than selling you on a single company’s products.
Visit us to research and get expert, personalized advice on the best health insurance choices for your situation.
Conclusion
The annual open enrollment period is your time to research and make these decisions. Take the time to compare plans, work out the numbers based on your actual medical usage, and ask questions. Your health insurance affects your overall financial health as well as your personal health, so it’s worth taking the time to shop around and choose the best plan for your personal needs.