Pros and Cons of Health Savings Accounts

Health savings accounts can keep you protected, but are there any drawbacks?
Pros and Cons of Health Savings Accounts

Do you have a health savings account? This type of account, also known as an HSA, contains money for healthcare expenses such as copays and prescription medications. HSAs are becoming more popular especially with families and individuals who have health insurance policies that carry a high deductible. Consider some health savings account pros and cons to determine whether this option would work for you.

Health Savings Account Pros

Withdraw Money Tax-Free

One of the biggest pros of HSAs is you can withdraw money without paying federal income taxes on it. The only requirement being that the money is used for qualified medical expenses. You must have proof in the form of receipts that you spent the money on things that qualify.


A health savings account is convenient to use. Many employers issue a debit card connected with your HSA. This makes it easy to pay for prescriptions, copays at the doctor’s office, or even make a payment via telephone.

Anyone Can Contribute to Your Account

Another benefit to using this type of account is anyone can contribute to it. Many companies put a specific amount in employees’ health saving accounts each year. You can add to your own account along with family members, friends, and others.

Tax-Free Savings

Over time, the money in your account increases tax-free. Plus, if you happen to change health insurance plans, you can continue to use the money in this account. You don't have to worry about losing it if you change plans.

Take a Deduction

Money that you add to this account is tax deductible. If the money you add has already been taxed, you can deduct it from your gross income on your tax form. This can lead to a lower tax bill.

Rolling Over Funds

If you have money left in your account at the end of the year, then you can roll it over into the next year. This makes it simple to continually add to your account in case a big medical expense comes up and you haven’t yet met your deductible.

Health Savings Account Cons

Keeping Records

One con to a savings account for health expenses is you must keep the receipts to prove you spent the money on approved medical expenses. This can be a little time-consuming, and a nightmare if you don't keep records. 

The Possibility of Fees

Some savings account cards for health expenses have maintenance fees attached to them. Also, there are some that have a per transaction fee. Though these are small, they can take away from a growing balance in your account. Be sure to check the details connected with any savings account cards you receive.

Withdrawal Penalties

Another con of this type of account is the penalty fee you pay if you take out money for non-qualifying expenses before you reach the age of 65. The penalty is 20%.

Another Card to Protect

Your savings account card for health expenses is another card to keep track of in your wallet or purse. Like any other card, it can be lost and you must go through the proper channels to get a new one and ensure that no one uses your lost one.

Avoiding Trips to the Doctor

If you notice you are beginning to build up a significant amount of money in your account, you may be disinclined to see the doctor for an illness or injury. You may not want to see that balance decrease. When it comes to health savings account cons, this one could adversely affect the overall state of your health.

Not Enough Funds

Many people carry a high deductible on their health insurance policies today. Even though you have a health savings account, there may not be enough money in it to reach the deductible.

Whether you have an HSA or not, finding the right health insurance policy for you and your family is important. A good health insurance plan will be both affordable and provide you with the coverage you need to stay healthy. First Quote Health is an easy way to find a health insurance plan that fits your needs because it instantly lets you compare quotes and plans in your area for free!

Find an Insurance Plan Today

Need to sign up for a Health Insurance or Medicare plan now? We can help you find one that's perfect for you.
Find Plans