June 24, 2024

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Is Your Health Insurance Deductible Too High for an HSA? Here’s What to Do

4 min read

Getting a health savings account (HSA) is one of the best ways to pay for healthcare and invest for your future, while increasing your tax deductions. But not every health insurance plan will let you get an HSA. In fact, some high-deductible health insurance plans on HealthCare.gov do not qualify for an HSA because the out of pocket cost limits are “too high.”

The IRS rules say that if you want an HSA, you must have a high-deductible health plan (HDHP) with deductibles and maximum out-of-pocket costs within certain limits. For 2024, the limits to get an HSA-eligible HDHP are:

  • Single coverage: deductible of at least $1,600, maximum out of pocket costs of $8,050
  • Family coverage: deductible of at least $3,200, maximum out of pocket costs of $16,100

My family’s 2024 health insurance plan has out-of-pocket costs that are “too high” to get a health savings account. That means my family doesn’t get to pay for healthcare costs with tax-deductible dollars in 2024. This is bad news for our taxes, but I’m hoping to make the best of the situation.

If your health insurance plan does not qualify for an HSA, here are a few ideas to manage your out-of-pocket healthcare costs.

1. Open a high-yield savings account for healthcare

Instead of a health savings account (HSA), you could open…a savings account for healthcare costs. You don’t get a tax deduction for putting money into a regular high-yield savings account, but this could be the best move to keep you on track for covering your healthcare expenses in 2024.

Take the same monthly contribution of money that you used to put into an HSA, and put it into a high-yield savings account at a bank or credit union. You won’t get a tax break of 12% or 22% (or more, depending on your tax bracket) on the money you put into this savings account. But your money can grow at 5.00% APY or higher right now with the best high-yield savings accounts.

Read more: check out our picks for the best car insurance companies

2. Get a rewards credit card to pay for healthcare

I recently opened a travel rewards credit card that has a generous welcome offer that could be worth hundreds of dollars in free travel. I’m going to pay for some of our healthcare costs with that card to help earn the welcome bonus. Maybe we can get a free vacation out of this!

Let’s say that you open a rewards credit card with a welcome offer of 60,000 points, worth $600 to book travel — but to get those points, you have to spend $4,000 within three months of opening the account. Let’s say you have a $2,000 medical bill from a dental procedure or minor surgery. Here’s what you do:

  1. Use the newly opened rewards credit card to pay that $2,000 medical bill.
  2. Use the rewards credit card to spend another $2,000 over three months (about $667 per month) on other everyday expenses like groceries and restaurants.

After three months, you’d have spent $4,000 — enough to earn that $600 travel reward. That $2,000 of healthcare costs didn’t get you a tax deduction, but it helped you earn $600 of free travel. That’s a decent return on investment, and it lets you turn your medical bills into an affordable vacation. If you can’t get a tax break for your healthcare spending, you might as well have some fun with it.

3. Open a 0% APR credit card for big medical bills

If you have good enough credit to qualify, some credit card companies offer 0% APR cards that give you zero interest for a certain introductory period, like 15 months or longer. These 0% APR credit cards are not “medical credit cards” — you don’t have to use them only for medical expenses. But medical bills can be a good way to use these cards.

If you have a big medical bill in 2024, or if you know you’re going to have a big expense like an elective surgery or braces for a child, using a 0% APR credit card can give you flexibility to pay it off with no interest. But pay attention to when your 0% introductory period ends, so you don’t unexpectedly get charged interest.

Bottom line

This advice is best suited to people who have a pretty good income and can afford to sock away extra money each month to cover their healthcare bills. If you’re living paycheck to paycheck, have less-than-good credit, and don’t have much room in your budget to make clever moves with healthcare spending, this might not work for you. In that case, you should try to negotiate with your healthcare providers to see if you can get on a monthly payment plan or other help paying your medical bills.

But if you’re a self-employed person or small business owner who doesn’t get health insurance from a job (or through a spouse), these ideas might help you. You still have options to manage your healthcare expenses in 2024, even if you don’t get a tax break from a health savings account.

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