What’s new for HSAs in 2022

If you’re looking to save money on medical expenses — and who isn’t? — it’s a smart idea to consider an HSA (health savings account). It’s similar to an FSA (flexible spending account). Both types of accounts allow you to save money tax-free to pay for your eligible medical expenses. For example, if you contribute $1,000 to the account, that’s $1,000 less of your income you have to pay taxes on in April.

But there are some key differences that may make the HSA a better choice for you.

The biggest one is that with an HSA, you don’t have to spend the money by the end of the year. You can let it roll over year to year indefinitely, which allows you to accrue bigger amounts over time. That could come in handy if you’re ever hit with medical expenses that are more than you could have put away in a single year. An FSA, by contrast, requires you to cash out your fund each year (though you might get a grace period of a few months). You lose any money that you don’t spend on that year’s health-related purchases.

The other main difference is who’s eligible: In order to qualify for an HSA, the IRS requires that your insurance be a high-deductible health plan (HDHP). What “high deductible” means hasn’t changed for 2022. Just as in 2021, it means that your deductible must be at least $1,400 for an individual or $2,800 for a family. (There are also limits on your out-of-pocket expenses, which we’ll talk about in a bit.) Compare that to FSAs, which are available to anyone whose employer offers one, no matter what insurance plan it has.

If an HSA is looking like the right choice for you, or you already have an HSA and plan to continue it into next year, there are a few updates for 2022 that you need to know about:

Optum Store carries a range of HSA- and FSA-eligible products, including over-the-counter medications, medical devices and more. And you can have it all delivered to your door.

What’s changing for 2022

1. Eligible insurance plans will have higher out-of-pocket limits
The gist: In addition to requiring the minimum deductible of $1,400 per individual/$2,800 per family, there is also a maximum out-of-pocket amount for HDHPs. Since those limits are going up for 2022, it’s possible an insurance plan that didn’t qualify in past years will for the next.

Out-of-pocket costs are basically anything your insurance doesn’t reimburse you for. With an HDPH, you’re on the hook for at least $1,400 (individual) or $2,800 (family) before your insurance actually starts to cover the bills. And that is, of course, exactly what an HSA is useful for.

“You can use your HSA funds to pay for qualified out-of-pocket medical expenses if you haven’t reached your deductible,” says Jamieson Hopp, CFP. He is a financial planner at Seattle-based financial advisory firm Millennial Wealth. Copayments and coinsurance also count toward out-of-pocket expenses.

The details: For 2022, your insurance plan’s maximum out-of-pocket amount — in other words, the most you would have to pay from your own funds in a year — is $7,050 for an individual (an increase of $50 over 2021) or $14,100 for a family ($100 more than in 2021).

2. You can contribute more (which means save more)
The gist: Almost every year, the amount of tax-free money you can put into your HSA increases to try to keep pace with inflation, which is great because it’s a smart idea to maximize your contribution, according to Hopp.

The details: For 2022, the maximum contribution is going up to $3,650 per year for individuals (a $50 increase from last year) and $7,300 per year for a family ($100 more than in 2021). And remember, this isn’t money you have to spend all in one year. With an HSA, it rolls over.

One crucial point, Hopp says, is that if your employer contributes to your HSA (lucky you), the money it puts in counts toward that $3,650/$7,300 limit.

What’s staying the same for 2022

It can be helpful to recap some of the other features and restrictions of an HSA, even though those won’t change from 2021 to 2022:

1. If you’re 55 or older, you can contribute even more
For both this year and next, the amount allowed for “catch-up” contributions is $1,000. That means anyone 55 or older can pay in $1,000 over and beyond the $3,650/$7,300 2022 contribution limits.

One tricky provision with catch-up contributions: Only individuals can make them. If you have a family plan, you’ll need to open a second, individual HSA in your name in order to put in the extra amount.

2. You can invest the money you’ve saved
If you begin the new year with money left over in your HSA, you can choose to invest a portion of that rather than leaving it parked in your account, says Logan Allec. He’s a Los Angeles–based CPA and founder of the personal finance site Money Done Right.

“The biggest HSA benefit that people tend to miss is the opportunity for tax-free growth over decades,” he notes. “Some people view the HSA as just a quick win in order to pay medical expenses, but it can be much more than that. You should at least consider viewing your HSA as essentially another tax-free retirement account you can invest in for the long run.”

That means maxing out your contribution and investing the qualifying funds, he says. In fact, in some cases it may be advantageous to pay medical expenses from your regular bank account so your HSA money can be invested and continue to grow. (You’ll want to get expert advice on whether that’s a smart strategy for you. You don’t want to be caught in a situation where you really do need the money to pay medical bills and it’s not easily accessible.)

You typically need to have a certain amount of money in the account before you can begin investing. For 2022, that’s $2,000, according to Optum Bank.

Get all of your health care needs take care of with the Optum Store. From virtual care options to prescription medication to over-the-counter products, we have you covered.

Additional sources
2022 changes: Society for Human Resource Management. IRS Announces 2022 Limits for HSAs and High-Deductible Health Plans.
Investment and HSAs: Optum Bank. Options to Invest Your HSA Funds.
Benefits of HSAs: Mayo Clinic. Health Savings Account: Is an HSA right for you?
HSA qualifications: IRS.gov. Publication 696, Health Savings Accounts and Other Tax-Favored Health Plans.