How To Open a Health Savings Account (HSA)

Pharmacist helping patient choose a product

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A health savings account (HSA) is a valuable tool for covering your health care expenses. It can also help you reduce your tax bill. Picking the right account is essential for reaching your goals, so how do you know which provider is best?

Key Takeaways

  • You can open an HSA through your employer, but accounts are also available through some insurers and financial institutions.
  • To open an HSA, you must have health insurance coverage through a high-deductible health plan (HDHP).
  • HSAs are different from flexible savings accounts (FSAs). Anyone can open an FSA, but funding limits are lower and fund rollover is more restrictive than with an HSA.

Where To Open an HSA

You can open an HSA at almost any bank or credit union. Some insurance providers also offer HSAs. If you're happy with the financial institution you bank with and convenience is number one on your priority list, you can add an HSA to your existing relationship. Some companies have begun to offer HSAs designed to offer consumers a way to maximize their health care savings with low, transparent fees and easy online management.

What To Consider When Opening an HSA

Beyond deciding where to open your HSA, there are other important factors to consider before you open an account:

Your Intentions

First, think about how you plan to use the account. Will you spend the funds every year, or do you plan to let the money accumulate over the long term? If you spend it as it comes in, the interest rate paid on your savings might not be a big deal. But if this account will supplement your retirement savings, long-term returns are more important.

Adding Money

Will you make contributions, will your employer do it, or will both of you add to the account? It needs to be easy to make those contributions—preferably electronic—so that the money gets into the account and you can take advantage of the tax benefits.


Most tax-preferred accounts charge fees, but fees vary and are sometimes waived with larger account balances. Occasionally, you'll find a small credit union that offers fee-free HSAs. Find out how much it costs to maintain the account, and evaluate how those costs might affect your return.

A bank that pays 1% more isn't worth looking at if the fees more than erode that extra 1%. Again, consider how you'll use the account and look at the fees for spending the funds (if you never plan to spend the money, it doesn't matter what they charge per withdrawal).

Spending Your Money

If you plan to use money from your account regularly, how easy will that be? Do you get a debit card to access funds, or is the process more cumbersome? Debit cards help you keep an electronic record of where your money goes (although you should always save receipts) and they make quick trips to the pharmacy easier.

How To Open an HSA Account

Opening an HSA is similar to opening any other bank account. You'll need to provide information about yourself, including a form of government-issued ID.


Banks generally do not ask for verification that you have a high-deductible health plan—that's between you and the Internal Revenue Service (IRS), and account activity such as contributions and distributions (spending and withdrawals) will generally be reported to the IRS each year.

Who Qualifies To Open an HSA?

You must meet the following criteria to be eligible to open an HSA.

  • Your health insurance is classified as a high-deductible health plan (HDHP)
  • You aren't covered by Medicare
  • You have no other health coverage with a few exceptions, which include workers' compensation and long-term care
  • You can't be claimed as a dependent on someone else's tax return

An HDHP has a higher annual deductible than what typical health insurance plans require, and there's a maximum limit on the out-of-pocket expenses you'll pay. HDHPs may offer preventative care benefits with no or a low deductible.

Health Savings Accounts vs. Flexible Spending Accounts

HSA contributions are only available when you're covered by an eligible high-deductible health plan (HDHP). Unlike flexible spending accounts (FSAs or cafeteria plans), you can leave money in your HSA beyond the end of the year and save it for when you need it—it's not "use it or lose it."

What's more, the account is your account and is not tied to your employer. Don't feel like you need to spend down funds before you leave your job.

To get the best tax treatment, the funds must go toward qualified medical expenses, but there are other ways to use the money with less favorable treatment.

Here are some of the main differences between HSAs and FSAs.

Requirements Must have an HDHP  None
Annual Contributions Limits Annual contribution limits for 2022 are $3,650 for individual plans and $7,300 for family plans. Limits are $3,850 for individual plans and $7,750 for family plans for 2023. Individual FSA contribution limit is $2,850 for 2022 and $3,050 for 2023.
Tax Implications Tax-deductible pre-tax contributions can be made from your paycheck. Funds used for qualified medical expenses are not taxed. Contributions can be made pre-tax directly from your paycheck. Funds used for qualified medical expenses are not taxed.
Rollover of Funds You aren't required to use the funds within a certain period of time. They roll over into the next year. You must use the funds from the previous year within the next few months of the current year.
Changes in Contribution Amounts Can be made at any time. Changes only during open enrollment or when changes in insurance are permitted.
Changes in Employment You keep the money in your account even if you change jobs. When you change jobs, you may lose the money in your account.

Frequently Asked Questions (FAQs)

Can I open an HSA on my own?

Yes, you can open one through your employer if one is offered, but you may also open one through a bank or credit union.

How much does it cost to open a health savings account?

It is free to open an HSA, but some banks charge administrative fees or other fees once your account is open.

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  1. Lively. "Maximize Healthcare Savings Like a Pro."

  2. Fidelity. "How Much Cash Should You Keep in Your HSA?"

  3. Reliant Credit Union. "Health Savings Account."

  4. IRS. "Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans."

  5. Bend HSA. "How Preventive Care Helps You Save Even More With an HDHP and HSA."

  6. "High Deductible Health Plan (HDHP)."

  7. IRS. "Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans."

  8. IRS. "Rev. Proc. 2021-25," Page 1.

  9. IRS. "Rev. Proc. 2022-24," Page 2.

  10. IRS. "Rev. Proc. 2021-45," Page 14.

  11. IRS. "Rev. Proc. 2022-38," Page 14.

  12. U.S. Centers for Medicare & Medicaid Services. "Setting Up HSAs."

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