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Individual vs. Family HSA

A health savings account, or HSA, allows you to put money aside on a pre-tax basis, and use those funds to pay for medical expenses not covered by your individual or employer-sponsored health care plan. When you open a health savings account, you can choose either an individual or a family plan, depending on your needs.

  1. Contribution Limits

    • The contribution limits for both individual and family HSAs are set by the Internal Revenue Service. The IRS reviews the current limits each year and adjusts those limits based on a number of factors, including the rate of inflation. For the 2010 year, the contribution limit for an individual HSA is $3,050. The contribution limit for a family HSA is higher, at $6,150.

    Health Care Spending

    • If you open an individual HSA plan, you can only use the funds it contains to pay for your own health care spending. For instance, you can use your HSA debit card to pay for your own prescription costs, but not for the prescription costs of other family members. If you have a family HSA plan, anyone covered by your family health insurance plan can use the money in the HSA to pay for medical expenses not reimbursed by that plan.

    Health Plan Requirement

    • To open an individual or a family HSA plan you must first have a high-deductible health plan, known in the insurance industry as an HDHP, in place. The HDHP carries a higher deductible than normal insurance plans, and therefore generally has a lower monthly premium. Check with your employer if you have a plan through work or your insurance broker if you bought your plan on the individual market. Ask if your current plan qualifies as an HDHP. If it does not, you will have to change plans before you are eligible for an individual or family HSA.

    Rollover

    • Both an individual and a family HSA rolls over from year to year, rather than expiring like a flexible spending account. That means you can contribute to your individual or family HSA depending on your needs and have the money build up on a tax-deferred basis each year. You can continue to use the money in your HSA to pay for your own health care spending if you have an individual plan or for the expenses of your family if you have a family HSA plan.

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