research use only hsa

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Research Use Only Products

What are Research Use Only (RUO) products? Research Use Only (RUO) products are a distinct category of in vitro diagnostics (IVDs) exclusively tailored for laboratory research. RUOs encompass specialised reagents, equipment, and materials crucial for scientific investigations, contributing significantly to the development of cutting-edge tools and solutions for research applications.

Research Use Only (RUO) products play a crucial role in medical research and innovative management of many patients. These specialised products, which include laboratory reagents and equipment, are exclusively designed for research in controlled laboratory environments. As essential tools for medical and scientific investigations, experimentation, and analysis, RUOs contribute to developing innovative solutions and advancements in medical research.

For example: RUO products can be used for Fundamental Research, in Pharmaceutical Research to find new drug compounds, and for a better identification and quantification of individual chemical substances. In diagnostics research, RUO products are essential to the development of new diagnostic assays and tools.

Unlike in vitro diagnostic medical devices (IVDs), RUOs are dedicated to facilitating research initiatives and are not intended for direct medical procedures with human patients. RUOs are not defined in the EU’s In Vitro Diagnostic Medical Devices Regulation 2017/746 (IVDR); they are regulated by the EU General Product Safety Regulation and other applicable EU legislations. Manufacturers of RUO products clearly label them as “Research Use Only” and use the RUO label.

From a production and specifications general perspective, the knowledge and processes needed to manufacture RUOs are very similar to those needed to manufacture CE marked IVDs. Many companies which operate in the IVD space will have RUO products in their portfolio. RUOs will generally have a similar chemical and physical composition compared to IVDs, but their intended purpose will be different. While RUO or IVDs might seem similar in their appearance and specifications, unambiguous and documented evidence associating the use of devices with in vitro diagnostic examination procedures is required to qualify a device as an IVD.

RUOs provide researchers and scientists – including those operating in medical laboratories – with valuable resources to advance in the understanding of disease, in drug discovery, in the development of new therapies and diagnostic tools. Laboratories or research consortia often collaborate with RUO manufacturers to tailor products to meet specific research needs and requirements, fostering a collaborative environment and contributing to the continuous evolution of research tools and solutions.

One critical application of RUO is to enable medical laboratories to develop in-house assays to e.g. diagnose rare and emerging conditions or to improve the current knowledge and management of specific diseases for which no adequate CE marked IVDs exist. This not only fulfils a critical and imminent healthcare need but is also a key stepping stone in the eventual development of IVDs. A poignant example of this was the development of COVID-19 assays during the early phase of the pandemic – initially, reference laboratories developed in house assays test for the SARS-CoV-2 virus, and shortly afterwards, commercial IVDs began to reach the market in order to fulfil a critical need during the global health crisis. However, it is worth noting that the use of in-house assays is regulated in IVDR and is subject to certain conditions.

In essence, RUO products provide researchers and physicians with the necessary tools to conduct experiments and studies, contributing to the overall progress in medical research.  Their intended use in laboratory settings supports the development of new technologies and innovative solutions for various research applications.

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How Does An HSA Work, And 8 Other HSA Account Questions Answered

• ADELIA CELLINI LINECKER
• 05:07 PM ET 03/15/2019

Opening an HSA account can be one of the most important decisions you make. Health savings accounts are one of the best tax-advantaged vehicles to help cut health care cost s. But how does an HSA work?

If you have a high-deductible health plan (HDHP), you qualify for an HSA. Funds can be used to pay for medical expenses, and you may also invest some or all of the funds in the account.

While 401(k)s are still the most popular investment vehicles for retirement, HSAs are gaining ground. Overall, participation in HSAs among consumers with eligible HDHPs grew to 81% in 2018 from 50% in 2017, according to a recent Society for Human Resource Management survey .

One reason HSAs are becoming more popular : More employers now offer HSAs. More than half (56%) of all employers offer HSAs. And 37% of them make contributions to their employees' HSAs, according to SHRM.

While it's true 401(k) plans often offer more investment options than HSA providers do, that's changing. A growing number of the best HSA providers are offering a variety of HSA investment options . For example, HSA Bank now offers more than 5,000 funds, in addition to stocks and bonds.

• Read Our 2019 Best HSA Accounts Special Report
• See Our List Of The 10 Best HSA Providers And All Their Account Features

Still, many consumers are unsure of details about how an HSA works. If you're wondering whether to jump on the bandwagon, here are answers to eight more of the most frequently asked questions about HSA accounts.

What Can An HSA Account Be Used F or?

Generally, money from an HSA account can be used for qualified medical expenses. What kind of expenses? The IRS lists eligible expenses . They include doctor and dentist visits. Also eligible are certain items purchased without prescriptions, including athletic braces and supports, breast pumps, glucose monitors and first-aid kits. Some items, like acne treatments, eye drops, pain relievers and sleep aids, are covered but require a prescription. In some cases, products such as air filters and anti-snore guards can be eligible if you get a letter of medical necessity.

"In addition to being able to cover doctor co-payments and specialist visits, HSA funds can cover those products you probably pay for out of pocket, such as sunscreen, first-aid supplies, over-the-counter medicines and pain relief products (with a prescription), prescription eyeglasses/contacts and accessories, and a lot more," said HSAstore.com founder Jeremy Miller.

Caution: Don't use HSA account funds to pay for non-eligible medical expenses. Why? You'll incur a 20% tax penalty on the withdrawal in addition to income taxes, Miller adds.

Can I Open A Health Savings Account On My Own?

Yes, you can open an HSA account on your own. You can even have more than one HSA account. That means you can have an HSA account with your employer and another one on your own.

Banks, brokers and other financial companies offer health savings accounts. All of the top HSA providers offer individual and family plans directly to consumers. One caveat: Your annual contribution limit is cumulative. That means, you can't exceed the $3,500 limit for individuals and $7,000 for families for 2019.

If you're evaluating HSA administrators, check out Investor's Business Daily's list of 10 Best HSAs  based on fees, account features, investment options and other account criteria. HSA providers on the list include  Health Equity ( HQY ), HSA Bank and Fidelity Investments, the brokerage powerhouse that  earns high marks each year in IBD's Best Online Brokers investor survey .

What Happens If You Put Too Much Money Into An HSA?

Be careful not to put in more money than you're allowed in all of your HSAs combined. You will have to pay a penalty for any extra money that's not supposed to be in the HSA account.

Joseph Messiha, a Los Angeles-based CPA, says contributions that go beyond what's allowed annually are not deductible if made by or for an individual. The extra HSA contributions are included in the employee's taxable gross income if it's an employer-administered plan. You are also "subject to a 6% excise tax imposed on the account beneficiary unless withdrawn (with earnings) by the (tax) return due date (including extensions)," Messiha said.

Can I Use HSA Money To Pay Off Old Medical Bills?

Yes, you can use HSA account funds to pay off old medical bills or reimburse yourself for money you spent on HSA eligible expenses in prior years.

"There's no time limit on getting reimbursed for an HSA-eligible expense," Miller said. "As long as you had the HSA open when you accrued a medical bill, you can be reimbursed for the cost — even years after the fact." But remember to save those receipts.

Can I Use My HSA To Pay For Someone Else?

HSA account funds can be used to cover medical expenses for the account holder, spouses and dependents. "They are structured to help you cover medical expenses for your immediate family," Miller said. "So a good rule of thumb to keep in mind is if they are listed on your tax return, your HSA will probably cover them."

The IRS explains  who is covered by an HSA . HSA funds can be used for your spouse and eligible dependents even if they are not covered by the HSA-compatible health plan.

For example, your 20-year-old son has a non-HDHP health insurance plan through his college. If you claim your son as a dependent on your federal tax return, you can use HSA funds to pay for his medical bills. You can do this as long as he is a student and until he's 24.

For HSA purposes, you can also claim an adult child who is out of school as a dependent if the child is on your HDHP insurance.

Unless you have other family members on your high-deductible health plan, you can still only contribute the 2019 maximum for individuals to your HSA ($3,500), since you have self-only HDHP coverage.

Can FSA Funds Be Transferred To An HSA?

Many consumers are uncertain about the rules about using an HSA vs. FSA , or flexible spending account. "The quickest answer is, you can't move FSA funds into any other account once you've elected your contribution for the year," Miller said.

Why? While you contribute money to an FSA in a similar way to an HSA, FSAs are employer-owned and managed by a benefits administrator, he says.

"This money can only be used for qualifying medical expenses," he said. "And you can't withdraw FSA funds in the same way as you could with an HSA."

Can I Move My HSA From One Bank To Another?

Yes, you can transfer your HSA from one provider to another as many times as you want in a given year. Transfers are not the same as rollovers, though.

Here's the difference: The IRS lets you roll over funds to a new HSA provider every 12 months without losing tax advantages. When you request a rollover, you will get a check or money transfer to your personal bank account. You then have 60 days from receipt to deposit those funds to a new HSA. Miss that deadline and you pay ordinary taxes and a 20% penalty.

It's less complicated if you transfer from one HSA provider directly to another provider without ever touching the money. How do you do this? Go to your provider and ask to fill out the form for a trustee-to-trustee transfer. This way you avoid any kind of tax and penalty.

Can I Use My HSA After Age 65?

You can't contribute to an HSA account if you're enrolled in Medicare or if you're a dependent on anyone's tax returns. But you can contribute to an account if you decline Medicare when you turn 65.

Also, once you reach Medicare eligibility at 65, HSA account funds can be withdrawn for nonmedical expenses. The funds are simply taxed as income, says Miller.

"And qualifying health expenses are still covered in retirement," he added. In fact, that's a prime benefit of an HSA account.

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What is an HSA, and how does it work?

Key takeaways

• A health savings account (HSA) is a tax-advantaged way to save for qualified medical expenses.
• HSAs pair with an HSA-eligible health plan.
• Because it offers potential tax advantages and money within the account can be invested, an HSA can be used to pay for both near-term medical expenses and expenses in retirement.

A health savings account (HSA) has potential financial benefits for now and later. Not only can you save pre-tax dollars in this account to pay for qualified medical expenses, but HSAs can also provide valuable retirement benefits.

Here's how to take full advantage of HSAs.

What is an HSA?

An HSA is a tax-advantaged account that can be used to pay for qualified medical expenses, including copays, prescriptions, dental care, contacts and eyeglasses, bandages, X-rays, and a lot more. It’s "tax-advantaged" because your contributions reduce your taxable income, and the money isn't taxed while it’s in the account—even if it earns interest or investment returns. Bonus: As long as you use your HSA funds for qualified medical expenses, you won't owe taxes when you take money out of the account. These 3 reasons are why HSAs are considered "triple" tax advantaged. 1 This means they provide more tax advantages than retirement accounts, such as 401(k)s or individual retirement accounts (IRAs).

Feed your brain. Fund your future.

How does an HSA work?

HSAs work together with an HSA-eligible health plan. If you're enrolled in this type of health plan, you can make pre-tax contributions to an HSA, allowing you to pay for qualified medical expenses tax-free. This can help create a cash cushion to offset the higher deductibles that HSA-eligible health plans typically have.

If you don't need the money in your HSA for immediate medical expenses, you can save and invest it until you do. This sets HSAs apart from another popular account, the health care flexible spending account (FSA). Unlike an HSA, money held in a health care FSA typically must be spent by the end of the plan year in which it's contributed, can't be invested, and can't be carried with you when you leave an employer.

Who can contribute to an HSA?

Not everyone is eligible to contribute to an HSA, even if they are enrolled in an HSA-eligible health plan. You can contribute to an HSA only if:

• You aren't enrolled in a health plan sponsored by your spouse or parent that is not an HSA-eligible health plan.
• You're not enrolled in Medicare.
• You can't be claimed as a dependent on someone else's tax return.

Read more: 6 benefits of an HSA in your 20s and 30s

More on HSA benefits

Here's more about what you need to know about the financial advantages of HSAs.

You can deduct your contributions from your taxes HSA contributions are typically made with pre-tax income from your paychecks, similar to the way 401(k) contributions are set up. If you fund your HSA with after-tax dollars instead, you may be able to take a tax deduction on your personal taxes when you file.

HSA tax deductions can have powerful benefits: For instance, someone in the 22% federal income tax bracket could potentially save nearly 30% in taxes (federal income + FICA + potentially state income) on every dollar contributed to the HSA. That helps increase the amount of money you have for medical spending. But it's important to keep in mind, contributing via payroll deductions will lead to the most tax savings. Only contributions made with payroll deduction avoid Medicare and Social Security taxes.

Your employer may make contributions to your HSA Almost 80% of employers help employees pay for medical expenses through contributions to their HSAs. 2  Think of it as a 401(k) match for your health. You won't get a tax deduction on what your employer contributes, but you will get extra money that has the potential to grow over time if invested.

You can invest funds held in your HSA By investing at least a portion of your HSA funds, you can potentially build up your medical spending nest egg, which can be especially valuable later in life. According to the Fidelity Retiree Health Care Cost Estimate, an average retired couple age 65 in 2023 may need approximately $315,000 saved (after-tax) to cover health care expenses in retirement. 3

HSAs are not subject to "use-it-or-lose-it" rules This means you don't forfeit any money you don't use in a given year, and you can carry it forward until you reach a time that you want or need to use the money in your HSA. Combined with the ability to invest funds, this allows your health savings to benefit from compounding returns. Over 30 years of contributing and investing the 2023 HSA family maximum contribution , you could end up with over $650,000, assuming a 6% rate of return. 4

Your HSA is your account, not your employer's Unlike health care FSAs, which your employer technically owns, your HSA belongs to you. So when you leave a job, you keep all of the money you've saved up in your HSA and can transfer into a new HSA or employer-sponsored HSA at your next job. You can even open an HSA if you're in an HSA-eligible health plan and your employer does not provide one—or if they do but you prefer a third-party option. It's also possible to have multiple HSAs. Some people have one for investing and another for cash to pay medical expenses. 

You can still have an FSA to address certain immediate qualified medical expenses People often think the issue of FSA vs. HSA is either/or. The truth: HSA holders can have a limited-purpose FSA to pay for qualified expenses associated with dental and vision care. That can help you have the best of both worlds: using an HSA to save for future medical expenses while you finance some current ones with an FSA. You can only open a limited-purpose FSA if your employer allows for it, however.

Starting at age 65, there is no penalty if you use HSA money for non-qualified medical expenses You will have to pay income tax, though, similar to making withdrawals from other retirement savings vehicles, like traditional 401(k)s or IRAs. It's important to note that before you turn 65, you'll face a 20% penalty—plus any applicable taxes—on withdrawals not used for qualified medical expenses.

HSAs are not subject to required minimum distributions ( RMDs ) Unlike 401(k)s and traditional IRAs, which require you start minimum withdrawals called RMDs when you turn 73, 5  you'll never be required to take any funds out of your HSA. This can provide versatility in retirement income planning.

HSA contribution limits

Contributing to your HSA early and often and investing those savings can help you better afford medical care later. The contribution limit for 2023 is $3,850 for individual coverage and $7,750 for family coverage.

You and your employer may both contribute to your HSA, though the contribution limit remains the same, regardless of how much your employer puts in. For example, if your employer deposits $1,000 into your HSA, then you'd only be able to contribute $2,850 if you are enrolled in individual coverage in 2023.

In addition, depending on when you enroll in an HSA-eligible health plan and how long you stay enrolled, your total contribution limit may be reduced. Also you typically have until the federal tax filing deadline (usually April 15) to contribute to an HSA for the prior tax year.

How to open an HSA

Step 1: Make sure you're eligible to open an HSA To open and contribute to an HSA, you'll need to be enrolled in an HSA-eligible health plan. This health plan does not have to be provided by your employer, but it must meet the requirements outlined above. If you aren't sure whether your plan qualifies, check with your benefits administrator or plan provider.

Step 2: Pick an HSA provider While HSAs are all similar in the tax advantages they offer, the specific features available at different providers vary. If you're interested in investing your HSA, for instance, you may want to go with a provider that requires no—or a low—amount of your HSA to remain uninvested in cash. You may want to research if potential HSA providers offer low-cost funds or automated investing options, like robo-advisors, that meet your needs. You may also want to compare fees across different providers. Remember, too, you can have the flexibility to change your HSA provider even if you're no longer covered by an HSA-eligible health plan. 

Step 3: Don't forget to invest your HSA If you intend to use your HSA to save for long-term medical expenses, don't forget to set up your investments. Nearly 80% of participants do not invest their HSA assets, 6 suggesting the vast majority of Americans aren't using this valuable wealth-building tool as well as they could.

Read more: How to invest your HSA

Consider a health savings account (HSA)

With an HSA, you can pay for qualified medical expenses in a tax-advantaged way.

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Oh, hello again, thanks for subscribing to looking for more ideas and insights you might like these too:, looking for more ideas and insights you might like these too:, fidelity viewpoints ® timely news and insights from our pros on markets, investing, and personal finance. (debug tcm:2 ... decode crypto clarity on crypto every month. build your knowledge with education for all levels. fidelity smart money ℠ what the news means for your money, plus tips to help you spend, save, and invest. active investor our most advanced investment insights, strategies, and tools. insights from fidelity wealth management ℠ timely news, events, and wealth strategies from top fidelity thought leaders. women talk money real talk and helpful tips about money, investing, and careers. educational webinars and events free financial education from fidelity and other leading industry professionals. fidelity viewpoints ® timely news and insights from our pros on markets, investing, and personal finance. (debug tcm:2 ... decode crypto clarity on crypto every month. build your knowledge with education for all levels. fidelity smart money ℠ what the news means for your money, plus tips to help you spend, save, and invest. active investor our most advanced investment insights, strategies, and tools. insights from fidelity wealth management ℠ timely news, events, and wealth strategies from top fidelity thought leaders. women talk money real talk and helpful tips about money, investing, and careers. educational webinars and events free financial education from fidelity and other leading industry professionals. done add subscriptions no, thanks. managing health care cost preparing for retirement living in retirement finding stock and sector ideas investing for beginners managing taxes changing jobs investing for income saving for retirement 1. with respect to federal taxation only. contributions, investment earnings, and distributions may or may not be subject to state taxation. please consult with your tax advisor regarding your specific situation. 2. "2022 health savings account survey," plan sponsor council of america, october 25, 2022 3. estimate based on a single person retiring in 2023, 65-years-old, with life expectancies that align with society of actuaries' rp-2014 healthy annuitant rates projected with mortality improvements scale mp-2020 as of 2022. actual assets needed may be more or less depending on actual health status, area of residence, and longevity. estimate is net of taxes. the fidelity retiree health care cost estimate assumes individuals do not have employer-provided retiree health care coverage, but do qualify for the federal government’s insurance program, original medicare. the calculation takes into account medicare part b base premiums and cost-sharing provisions (such as deductibles and coinsurance) associated with medicare part a and part b (inpatient and outpatient medical insurance). it also considers medicare part d (prescription drug coverage) premiums and out-of-pocket costs, as well as certain services excluded by original medicare. the estimate does not include other health-related expenses, such as over-the-counter medications, most dental services, and long-term care. 4. this calculation assumes you begin your contributions at the age of 30 and annually contribute up to the 2023 hsa contribution limit for family coverage of $7,750 over the entire period. this example also assumes a 6% rate of return, the absence of withdrawals over this 30-year period, and annual hsa catch-up contributions of an additional $1,000 starting at the age of 55 until the end of the 30-year time horizon. 5. the change in the rmds age requirement from 72 to 73 applies only to individuals who turn 73 on or after january 1, 2023. after you reach age 73, the irs generally requires you to withdraw an rmd annually from your tax-advantaged retirement accounts (excluding roth iras, and roth accounts in employer retirement plans accounts after december 31, 2023). please speak with your tax advisor regarding the impact of this change on future rmds. 6. plan sponsor, october 25, 2022 this information is intended to be educational and is not tailored to the investment needs of any specific investor. recently enacted legislation made a number of changes to the rules regarding defined contribution, defined benefit, and/or individual retirement plans and 529 plans. information herein may refer to or be based on certain rules in effect prior to this legislation and current rules may differ. as always, before making any decisions about your retirement planning or withdrawals, you should consult with your personal tax advisor. fidelity does not provide legal or tax advice. the information herein is general and educational in nature and should not be considered legal or tax advice. tax laws and regulations are complex and subject to change, which can materially impact investment results. fidelity cannot guarantee that the information herein is accurate, complete, or timely. fidelity makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. consult an attorney or tax professional regarding your specific situation. keep in mind that investing involves risk. the value of your investment will fluctuate over time, and you may gain or lose money. the information provided herein is general in nature. it is not intended, nor should it be construed, as legal or tax advice. because the administration of an hsa is a taxpayer responsibility, you are strongly encouraged to consult your tax advisor before opening an hsa. you are also encouraged to review information available from the internal revenue service (irs) for taxpayers, which can be found on the irs website at irs.gov . you can find irs publication 969, health savings accounts and other tax-favored health plans , and irs publication 502, medical and dental expenses , online, or you can call the irs to request a copy of each at 800-829-3676. fidelity brokerage services llc, member nyse, sipc , 900 salem street, smithfield, ri 02917 1036027.2.1 mutual funds etfs fixed income bonds cds options active trader pro investor centers stocks online trading annuities life insurance & long term care small business retirement plans 529 plans iras retirement products retirement planning charitable giving fidsafe , (opens in a new window) finra's brokercheck , (opens in a new window) health savings account stay connected.

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Regulatory overview of clinical trials

Understand the regulatory framework of clinical trials, clinical research materials and active ingredients used in its manufacturing, under the Health Products Act and the Medicines Act. 

What is a clinical trial

A clinical trial is a research study of a health product to investigate any of the following in humans:

• Discover or verify its clinical, pharmacological or pharmacodynamic effects
• Identify any adverse effect that may arise from its use
• Study its absorption, distribution, metabolism and excretion
• Ascertain its safety or efficacy

Regulation of clinical trials

All clinical trials of therapeutic products ,  Class 2 cell, tissue and gene therapy products (CTGTPs) and medicinal products (e.g. Chinese Proprietary Medicines, health supplements that are being investigated for the treatment or prevention of disease), are regulated by us except for observational clinical trials. Medical device clinical trials, observational clinical trials and Class 1 CTGTP trials are required to comply with the requirements of the  Human Biomedical Research Act , regulated under the Ministry of Health.

More information on medical device clinical trials could be found here .

Regardless of whether HSA regulates the clinical trial, the manufacture, import and supply of therapeutic products, CTGTPs, medicinal products or medical devices used as a clinical research material (CRM) in Singapore must comply with the regulatory controls for clinical research materials .

The table below summarises the key regulations and submission routes:

Refer to our guide on how to submit an application for CTA, CTN or CTC  for more information.

To determine whether a clinical trial is regulated by us, please refer to our  Guidance on Determination of Whether a Clinical Trial Requires CTA, CTN or CTC 498 KB . If still unsure, the sponsor may send an enquiry to  [email protected] .

Regulation of Clinical Research Materials

What are clinical research materials.

Clinical Research Materials (CRM) refer to any registered or unregistered therapeutic product, medicinal product, medical device, applicable cell, tissue and gene therapy product (CTGTP)* or placebo, that is manufactured, imported or supplied for the purpose of being used in clinical research, by way of administration to a trial participant in accordance with the research protocol or for a clinical purpose.

Regardless of whether we regulate the clinical trial, the manufacture, import and supply of CRM in Singapore must comply with the respective regulatory controls for CRM, which are described in the table below:

CRM notification

To facilitate access to CRM, dealers' licences for the manufacture, import and wholesale supply of CRM, and product registration for the supply of CRM are not required. This is provided a CRM notification is made before:

• Import of CRM for local clinical research use
• Supply by the local manufacturer of CRM for local clinical research use, including CRM compounded at the local trial site

You do not need a CRM notification for the following scenarios:

• Locally registered CRM obtained from local commercial sources
• Import of locally registered CRM for local clinical research use if the importer already has a valid importer’s licence for the import of CRM
• Supply of a locally registered CRM by its local manufacturer for local clinical research use if the manufacturer has a valid manufacturer's licence
• Supply of CRM by a local manufacturer if the manufacture of the CRM being supplied comprises solely of the packaging or labelling of the CRM
• Import of a minimally manipulated CTGTP CRM for local clinical research use by a known importer
• Supply of a minimally manipulated CTGTP CRM by its known manufacturer for local clinical research use

For products imported solely for export to overseas trial sites, CRM notification is not applicable. You would need to apply for an approval to import these products accordingly:

• Therapeutic products: Importer's licence for therapeutic products  
• Medical devices: Import for re-export approval for medical device
• CTGTP:   Import for re-export for CTGTP

The table below summarises various routes for importing therapeutic products (TP), CTGTP and medical devices (MD) for local research use versus overseas research use.

For import of unused therapeutic products from overseas trial sites for local disposal, CRM notification is not applicable. You will need to apply for  an importer's licence for therapeutic products  for restricted activity, and comply with duties and obligations outlined in the Health Products (Therapeutic Products) Regulations (e.g., record-keeping and ensuring that the product is not supplied to the public). You may also wish to check with the  National Environment Agency (NEA)  for any other applicable requirements.

Additional requirements

If a CRM comprises any of the following substances, there will be additional requirements as indicated in the table below.

In addition, import of telecommunication devices (e.g. tablets or mobile phones) into Singapore is regulated by the Infocomm Media Development Authority (IMDA). Importers will need to provide information regarding proposed use of devices via the TradeNet's online declaration form or email to IMDA. Please refer to our letter 713 KB  and IMDA's presentation slides 619 KB  for more details.

Dealer's duties and obligations

The CRM regulations are intended to ensure supply chain integrity, and prevent the inadvertent or deliberate release of unregistered CRM into the market for use other than in clinical research.

It is critical for all local manufacturers, importers and suppliers of CRM (including local sponsors and investigators) to maintain the integrity of the CRM supply chain through proper record keeping, labelling and disposal.

All local manufacturers, importers or suppliers of CRM must only supply the CRM for use in a clinical research, unless the CRM is locally registered and is manufactured, imported or supplied with a valid dealer's licence. The local sponsor of the clinical research must also ensure that the CRM is only used in a research study approved by an Institutional Review Board (IRB), and in accordance with the research protocol, and must ensure that any unused CRM is disposed or exported within 6 months of study conclusion.

If the local sponsor wishes instead to put such unused CRM to other uses after the clinical research is completed, the sponsor must obtain written permission from us via email to  [email protected] .

Refer to the following for more information:

• Duties and obligations of CRM dealers 783 KB
• How to submit a CRM notification  
• How to report adverse events in clinical trials
• Report a CRM non-compliance

Regulation of Active Ingredients Used in the Manufacture of Clinical Research Materials

The import and supply of active ingredients for use in the manufacture of clinical research materials (CRM) for use in local clinical research / clinical trial is regulated by us.

Under the Health Products (Active Ingredients) Regulations, dealer licences are not required for the manufacture, import and wholesale supply of active ingredients for use in the manufacture of CRM for use in local clinical research / clinical trial. This is provided an active ingredients notification is made to HSA prior to the import or supply of active ingredients, as summarised in the table below:

You do not need to make an active ingredients notification if you are an importer or manufacturer who already holds a valid licence that allows you to import or supply the active ingredients for use in the manufacture of a health product.

You do not need an active ingredients notification for the following scenarios:

• Import of active ingredient(s) for use in the manufacture of CRM for use in local clinical research / clinical trial, if the importer already has a valid importer's licence for active ingredients
• Import of active ingredient(s) by the local manufacturer of CRM for use in local clinical research / clinical trial, if the manufacturer has a valid manufacturing licence for the relevant health product
• Supply of active ingredient(s) by its local manufacturer for use in the manufacture of CRM for use in local clinical research / clinical trial, if the manufacturer has a valid manufacturing licence for the active ingredients
• The local manufacturer of the active ingredients is also the local manufacturer of the CRM, and the active ingredients is used for the manufacture of CRM for use in local clinical research / clinical trial

Click here to find out more information on the application process and documents required for active ingredients notification. 

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Do You Really Know What Your HSA Can Do for You?

Not only do HSAs offer triple tax benefits — pre-tax contributions, tax-free growth and tax-free withdrawals — but they can be used for health care expenses in retirement.

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Over the past several years, health savings accounts ( HSAs ) have grown in both interest and popularity — so much so that there were $104 billion in HSA assets held among 35.5 million accounts at the end of 2022, according to Devenir Research . It’s easy to understand why this interest is on the rise, as HSAs can be a great solution to help cover eligible out-of-pocket medical costs. However, while the interest is high, the reality is that many individuals may not fully understand all that HSAs have to offer — especially when it comes to saving for their future, too.

With employers increasingly offering high-deductible health plans with an HSA option to their employees, you may already have an HSA or perhaps are considering opening one. So, as we enter open enrollment season, now presents a great time to make sure you really understand how your HSA can benefit you both today and in the future. Here are a few things to keep in mind.

HSAs can be used to pay for health care expenses in retirement

An HSA is a savings account that eligible individuals can open and contribute to on a pre-tax basis, effectively reducing their taxable income. As long as there are funds in the account, it can be used to pay qualified medical expenses today, tomorrow and throughout retirement years.

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However, according to Voya research , while the general understanding that HSAs can be used to pay for health care expenses in retirement has increased noticeably (from 43% in 2020 to 55% in 2023), just over half of Americans know that HSAs can be used for health care expenses in retirement.(1)

Due to the trend of rising health care costs and the fact that health care needs generally increase as one ages, a big contributor to the potential retirement savings gap is the ever-increasing cost of health care. Consider the dynamic of retirees who depend on their savings for a portion of their retirement income . As they age, their savings balances are drawn down.

Additionally, the longer retirement lasts, the greater the likelihood that health care needs will increase. So, when it comes down to it in retirement, many individuals simply don’t have enough savings to cover health care expenses and daily living expenses. Enter HSAs, which are uniquely positioned to potentially help lessen the retirement health care savings gap. Not only can HSAs offer flexibility on how the accounts are funded, what the funds can be used for and when, they offer triple tax benefits, including pre-tax contributions — and the potential for both tax-free growth and tax-free withdrawals.

As employees work toward their retirement, they’ll be able to make pre-tax contributions and tax-free withdrawals as needed for HSA-qualified expenses. If funds are used for non-eligible expenses, they are taxed and penalized an additional 20%.

However, what many people may not realize is that once you reach retirement age at 65, HSA funds can be used for non-medical expenses without being assessed a 20% penalty. Therefore, you can use your HSA to pay for general living expenses — like housing, food or travel, for example. However, these distributions will be taxed much like any normal distribution from a retirement account, like an IRA or 401(k) .

And even in retirement, if you decide to spend your HSA dollars on qualifying medical expenses, you will still enjoy tax-free distributions — providing flexibility to spend your money how you want. Just keep in mind once you turn 65 and are enrolled in Medicare , you are no longer eligible to contribute.

HSA funds can be an investment opportunity

According to Voya research, only 26% of working Americans know that HSAs can be used as an investment vehicle — a powerful benefit of these savings solutions. Similar to lineups available in typical workplace retirement accounts, like a 401(k), once you reach a certain threshold in your account, your HSA funds can be invested. While the threshold varies by HSA plan, some plans may require only an HSA balance of $1,000 to begin investing your funds.

So, HSAs can serve as an important vehicle with a potential to grow over the long term. Unless you plan to use your HSA money for planned expenses in the near future, investing can give your money an opportunity to grow over time, but as with any investment, there are risks; make sure to fully explore those risks before choosing to invest your balance.

HSAs can be used for emergency health care savings

According to Voya data, we know that a lack of emergency savings can put one’s retirement at risk, as employees without adequate emergency savings are 13 times more likely to take a hardship withdrawal from their retirement account.(2) And, when faced with a short-term, unexpected need — such as an emergency trip to the hospital — some people may choose to dip into this account to cover the expense.

It’s important to understand that removing funds from a retirement plan may not be an option, and if it is, it should not be done lightly. The interest in growing an emergency fund is becoming more and more critical for individuals today — so much so that recent Voya data has found more than half (55%) of working Americans are more likely to stay with their current employer if they offer a workplace emergency savings plan.(3)

Fortunately, the dollars in your HSA can be used for unplanned or emergency medical expenses as long as they are eligible. All HSA withdrawals used to pay for qualified medical expenses (even if unplanned) are tax-free. Plus, if you are able to, you can choose to cover a medical bill out of pocket and then be reimbursed tax-free for that expense in the future when you then need those funds. This strategy is another way funds in an HSA can serve as emergency savings. Just make sure to hold on to your receipts to verify all distributions.

Your employer may have more to offer than you think

In today’s world, individuals are often faced with competing priorities when it comes to divvying up their paychecks and making decisions about where to save. The important considerations of retirement, health care, paying off debt and the desire to build an emergency fund are all factors to consider when thinking about one’s future. As a result, resources such as health savings accounts, which help offset the burden of medical costs, or student loan debt support and tools for building emergency savings continue to grow in popularity as employers’ “wellness benefits.”

So, as we approach open enrollment season, now presents an opportune time to not only ensure you understand the benefits of your workplace benefits and savings but to also ensure you understand the other optimal resources that might be available to you from your employer.

1) Results of a Voya Financial Consumer Insights & Research survey conducted with Morning Consult between March 9-15, 2023, among n=500 working Americans age 18+ who have both an employer-sponsored retirement plan and a medical/health plan, featuring n=188 health savings account owners.

2) Voya Financial internal data (Oct. 2020).

3) Based on the results of a Voya Financial Consumer Insights & Research survey conducted June 12-13, 2023, among 1,004 adults aged 18+ in the U.S., featuring 483 Americans working full time or part time.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA .

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Nate Black is vice president (VP) of Health Solutions Product for Voya Financial, Inc. (NYSE: VOYA), a leading health, wealth and investment company. In this role, Black leads Voya’s Health Solutions Product teams, including Supplemental Health, Life/Absence/Disability, and Health Account Solutions. In his role, Black is responsible for guiding the management of existing products and bringing new offerings to the market.

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• What Is a Health Savings Account?

How an HSA Works

• Special Considerations
• Advantages and Disadvantages
• Withdrawals
• Contribution Rules

HSA vs. Flexible Spending Account

The bottom line.

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• Definitions A - M

Health Savings Account (HSA): How HSAs Work, Contribution Rules

Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia.

Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas' experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.

• Health Savings vs. Flexible Spending Account: What's the Difference?
• Flexible Spending Account (FSA)
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• Health Reimbursement Arrangement (HRA)
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• Best Health Savings Account (HSA) Providers
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• Transfer IRA Money to an HSA

Investopedia / Paige McLaughlin

What Is a Health Savings Account (HSA)?

A Health Savings Account (HSA) is a tax-advantaged account created for or by individuals covered under  high-deductible health plans (HDHPs) to save for qualified medical expenses. Contributions are made into the account by the individual or their employer and are limited to a maximum amount each year.

The contributions to an HSA are invested over time and can be used to pay for qualified medical expenses, such as medical, dental, and vision care and prescription drugs.

Key Takeaways

• A Health Savings Account (HSA) is a tax-advantaged account to help you save for medical expenses that are not reimbursed by high-deductible health plans (HDHPs).
• No tax is levied on contributions to an HSA, the HSA’s earnings, or distributions used to pay for qualified medical expenses.
• An HSA, owned by an employee, can be funded by the employee and the employer.
• Contributions are vested, and unused account balances at year-end can be carried forward.

As mentioned above, people with HDHPs can open HSAs. Individuals with HDHPs may qualify for HSAs, and the two are usually paired together. To qualify for a Health Savings Account (HSA) , you must meet eligibility standards established by the Internal Revenue Service (IRS). To be eligible, you must:

• Have a qualified HDHP
• Have no other health coverage
• Not be enrolled in Medicare
• Not be claimed as a dependent on someone else’s tax return

The maximum contribution for an HSA in 2024 is $4,150 for an individual ($3,850 for 2023) and $8,300 for a family ($7,750 in 2023). The annual limits on contributions apply to the total amounts contributed by both the employer and the employee. Individuals age 55 or older by the end of the tax year can make catch-up contributions of an additional $1,000 to their HSAs.

An HSA can also be opened at certain financial institutions. Contributions can only be made in cash , while employer-sponsored plans can be funded by the employee and their employer. Any other person, such as a family member, can also contribute to the HSA of an eligible individual. Self-employed  or unemployed individuals may also contribute to an HSA, provided that they meet the eligibility requirements.

Individuals who enroll in Medicare can no longer contribute to an HSA as of the first month of enrollment. However, they can receive tax-free distributions for qualified medical expenses.

HSA Special Considerations

HDHPs have higher annual deductibles (the plan pays nothing until you reach these amounts in out-of-pocket expenses) but lower premiums than other health plans. The financial benefit of an HDHP’s low-premium and high-deductible structure depends on your personal situation.

The minimum deductible required to open an HSA is $1,600 for an individual or $3,200 for a family for the 2024 tax year ($1,500 and $3,000, respectively, for 2023). The plan must also have an annual out-of-pocket maximum of $8,050 for self-coverage for the 2024 tax year ($7,500 for 2023) and $16,100 for families for the 2024 tax year ($15,000 for 2023).

When you pay qualified medical expenses equal to a plan’s deductible amount, additional qualified expenses are divided between you and the plan.

Example of HDHP

For example, the insurer may cover a percentage of the qualified expenses per the contract (usually 80% to 90%), while you may pay the remaining 10% to 20% or a specified co-pay.

So, if you had an annual deductible of $1,600 (in 2023) and a medical claim of $3,500 pays the first $1,600 to cover the annual deductible. You would pay 10% to 20% of the remaining $1,900, and the insurance company would cover the rest.

Once the annual deductible is met in a given plan year, the plan typically covers any additional medical expenses, except for any uncovered costs under the contract, such as co-pays. The insured can withdraw money accumulated in an HSA to cover these out-of-pocket expenses.

Health savings accounts should not be confused with health spending accounts, which employers use in Canada to provide health and dental benefits for their Canadian employees.

Advantages and Disadvantages of an HSA

HSAs have  advantages and drawbacks . The effect of these accounts depends on your personal and financial situations.

Contribution tax advantages

Distribution tax advantages

Investment options

Deductible requirements

Requires extra cash

Filing requirements

Pros Explained

Contribution tax advantages : Employer and individual contributions by payroll deduction to an HSA are excluded from the employee’s taxable income. An individual’s direct contributions to an HSA are 100%  tax deductible from the employee’s income. Earnings in the account are also tax free. However, excess contributions to an HSA incur a 6% tax and are not tax deductible.

Distribution tax advantages : Distributions from an HSA are tax-free, provided that the funds are used for qualified medical expenses as outlined by the IRS. Distributions used for medical expenses covered under the HDHP plan are included in determining if the HDHP’s deductible has been met.

Investment options : You can also use the money in your HSA to invest in stocks and other securities, potentially allowing for higher returns over time.

Cons Explained

Deductible requirements : The most obvious key drawback is that you need to be a good candidate for an HDHP. In addition, you must have a high-deductible plan, lower insurance premiums, or be affluent enough to afford the high deductibles and benefit from the tax advantages.

Requires extra cash : Individuals who fund their own HSAs, whether through payroll deductions or directly, should be financially capable of setting aside an amount that would cover a substantial portion of their HDHPs’ deductibles. Individuals without enough spare cash to set aside in an HSA may find the high deductible amount burdensome.

Filing requirements : HSAs also come with filing requirements regarding contributions, specific rules on withdrawals, distribution reporting, and a record-keeping burden that may be difficult to maintain.

Withdrawals Permitted Under an HSA

Amounts withdrawn from an HSA aren’t taxed as long as they are used to pay for services that the IRS treats as qualified medical expenses. The plan's manager will issue an IRS Form 1099-SA for distributions from the HSA. Here are some basics you need to know:

• Qualified medical expenses include deductibles, dental services, vision care, prescription drugs, co-pays, psychiatric treatments, and other qualified medical expenses not covered by a health insurance plan.
• Insurance premiums  don’t count as a qualified medical expense unless the premiums are for Medicare or other healthcare coverage (provided you are age 65 or older) for health insurance when receiving healthcare continuation coverage (COBRA) , for coverage when receiving unemployment compensation, or for  long-term care insurance , subject to annually adjusted limits. Premiums for Medicare supplemental or Medigap policies are not treated as qualified medical expenses.

If distributions are made from an HSA to pay for anything other than a qualified medical expense, that amount is subject to both income tax and an additional 20% tax penalty. However, once an individual turns 65, the 20% tax penalty is eliminated, and only income tax would apply for non-qualified withdrawals.

HSA Contribution Rules

Contributions made to an HSA do not have to be used or withdrawn during the tax year. Instead, they are vested, and any unused contributions can be rolled over to the following year. Also, an HSA is portable, meaning that if employees change jobs, they can still keep their HSAs.

An HSA plan can also be transferred to a surviving spouse tax-free upon the account holder’s death.

However, if the designated beneficiary is not the account holder’s spouse, then the account is no longer treated as an HSA, and the beneficiary is taxed on the account’s fair market value , adjusted for any qualified medical expenses of the decedent paid from the account within a year of the date of death.

The HSA is often compared with the  Flexible Spending Account (FSA) . While both accounts can be used for medical expenses,  some key differences exist between them:

• FSAs are employer-sponsored plans.
• Only employed individuals can sign up for FSAs.
• Unused funds in the FSA during a given tax year can’t be rolled over and are forfeited once the year ends.
• Your elected contribution amount for an FSA is fixed, unlike HSA contributions.

The maximum contribution for an FSA for the 2024 tax year is $3,200 ($3,050 for 2023).

Can I Open a Health Savings Account (HSA) If I’m Self-Employed?

You can open a Health Savings Account (HSA) if you have a high-deductible health plan. If you are self-employed, you can look into HSAs offered by brokerages or banks like Fidelity, HealthEquity, or Lively. Research your options carefully to ensure you get the best HSA to suit your needs.

Do I Have to Use All of the Money in My HSA Every Year?

Unlike a Flexible Spending Account (FSA), contributions to your Health Savings Account (HSA) can roll over yearly. Since the funds can also be invested, you can build capital for more significant medical needs or use it as an investment fund after retirement.

Can I Pay My Insurance Premiums with My HSA Funds?

In most cases, you cannot pay for premiums with Health Savings Account (HSA) funds. HSAs can be used for most medical expenses, like doctor’s appointments, prescriptions, or over-the-counter medications, but not your monthly premium. The only exception to this rule is when the funds are used to pay Medicare premiums or other healthcare continuation coverage, such as COBRA, while you’re on unemployment compensation. You may also pay for long-term care insurance using your HSA.

HSAs are one of the best tax-advantaged savings and investment tools available under the U.S. tax code. They are often referred to as triple tax-advantaged because:

• Contributions are not subject to tax.
• The money can be invested and grown tax free.
• Withdrawals are not taxed as long as you use them for qualified medical expenses.

As a person ages, medical expenses tend to increase, particularly when reaching retirement age and beyond. Therefore, starting an HSA early if you qualify —and allowing it to accumulate over a long period—can benefit your financial future.

Internal Revenue Service. “ Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans ,” Pages 2 and 3.

Internal Revenue Service. “ Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans ,” Page 6.

Internal Revenue Service. “ Rev. Proc. 2023-23 .”

Internal Revenue Service. “ Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans ,” Page 5.

Internal Revenue Service. “ Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans ,” Page 7.

Internal Revenue Service. “ Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans ,” Pages 3–4.

Internal Revenue Service. “ Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans ,” Page 4.

Internal Revenue Service. “ Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans ,” Page 8.

Government of Canada. “ Warning: Buyer Beware When It Comes to Health Spending Accounts .”

Internal Revenue Service. “ Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans ,” Pages 3 and 8.

Internal Revenue Service. “ Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans ,” Pages 8–9.

U.S. Securities and Exchange Commission. “ Investor Bulletin: Health Savings Accounts (HSAs) .”

Internal Revenue Service. “ Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans ,” Pages 8–10.

Internal Revenue Service. “ Topic No. 502 Medical and Dental Expenses .”

Internal Revenue Service. “ IRS Outlines Changes to Health Care Spending Available Under CARES Act .”

Internal Revenue Service. “ Publication 502: Medical and Dental Expenses (Including the Health Coverage Tax Credit) ,” Pages 8–10.

Internal Revenue Service. “ Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans ,” Pages 8 and 10.

Internal Revenue Service. “ Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans ,” Page 10.

Internal Revenue Service. “ Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans ,” Pages 16–17.

Internal Revenue Service. " 2024 Flexible Spending Arrangement Contribution Limit Rises in 2024 ."

Internal Revenue Service. “ IRS Provides Tax Inflation Adjustments for Tax Year 2023 .”

Internal Revenue Service. “ Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans ,” Page 9.

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Home > FAQs > How does a health savings account (HSA) work?

How does a health savings account (HSA) work?

In this article

• An HSA allows you to pay lower federal income taxes by making tax-free deposits each year.
• You can enroll in an HSA-qualified high-deductible health plan during open enrollment or a special enrollment period.
• See HSA contribution limits for 2024 and 2025
• Deposits to your HSA are yours to withdraw at any time to pay for medical expenses not paid by your HDHP.
• You can also use the account to pay for the medical expenses of a spouse or other family members – even if they aren’t covered by your HDHP.
• When you reach age 65 , there’s no longer a penalty for withdrawing HSA funds to use for non-medical expenses, but you will owe income tax on the withdrawals.
• What happens if you switch to a health plan that’s not HSA-qualified?
• How do you report HSA contribution and withdrawal details to the IRS?

Would you like the ability to pay for medical expenses with pre-tax money? What about the option to build retirement savings that can be used at any time – without taxes or penalties – to pay medical expenses that arise along the way? Do you prefer health insurance coverage that comes with a higher deductible and lower premiums?

A health savings account ( HSA ) could be just what the doctor ordered. Used wisely, this innovative approach to health coverage may provide major advantages that could keep both your personal and financial life healthy.

What is a health savings account?

A health savings account is a tax-advantaged personal savings account that works in combination with an HSA-qualified high-deductible health insurance policy (HDHP) to provide both an investment and health coverage.

The savings account provides the funds you use to pay medical expenses that aren’t paid by your HDHP, or — if you don’t need to use it — is an interest-bearing nest egg that grows over time. Unlike FSAs , there is no “use it or lose it” rule with HSAs; the money remains in the account and can be used at any time in the future; and it can grow with interest or investment returns, depending on the type of account you set up.

The HDHP, meanwhile, is your safety net should you need coverage for major medical expenses that exceed the amount of your deductible. And as long as your HDHP isn’t grandfathered , it’s also required to pay for certain preventive care , regardless of whether you’ve met your deductible.

Sounds too good to be true? Well, remember that you’re paying a lower premium for your insurance coverage because it’s a high-deductible plan that doesn’t cover anything other than preventive care before the deductible. If you need to see the doctor for anything else, you’ll pay the entire bill (reduced according to the negotiated rates your health plan has with the doctor) if you haven’t yet met your deductible.

Can ACA Marketplace health plans be paired with HSAs?

Yes. In nearly every area of the country, there are HSA-qualified high-deductible health plans available through the exchange/Marketplace or directly from insurers that sell ACA-compliant coverage. Here’s more about how ACA regulations mesh with HSA compliance rules .

How can I enroll in an HDHP?

If you don’t have access to an employer-sponsored plan, Medicare, or Medicaid, you’ll be purchasing your coverage in the individual/family market.

Nearly everywhere in the country, HSA-qualified HDHPs are for sale in the Marketplace/exchange, and are also available for purchase directly from health insurers (but if you’re eligible for a subsidy , make sure you shop in the Marketplace; you’ll forfeit your subsidy if you buy your plan outside the exchange ).

The open enrollment window for self-purchased health coverage runs from November 1 to January 15 in most states, although some states have different deadlines . Outside of open enrollment, you’ll need a special enrollment period to sign up for any major medical health plan, including HDHPs.

If you’re shopping for health coverage in the marketplace or on an insurer’s website, the HSA-qualified plans will have a label indicating that they can be paired with an HSA. In most cases, the name of the plan will have “HSA” in it. But exchanges and insurer websites also have filtering tools that will let you narrow down the plans to show only those that are HSA-compatible.

If your employer offers an HDHP, you can enroll in that option during your employer’s open enrollment period, or during a special enrollment period triggered by a qualifying life event.

What is the HSA contribution limit for 2024?

Opening an HSA allows you to pay lower federal income taxes by making tax-free deposits into your account each year. For 2024, the HSA contribution limit is $4,150 if your HDHP covers just yourself, and $8,300 if you have family HDHP coverage. 1 If you’re covered under an HDHP in 2024 ( even if it’s just in December ), you’ll have until April 15, 2025 to make HSA contributions for 2024.

If you’re 55 or older, you can contribute an extra $1,000 a year (this is officially called an “additional contribution” and often referred to as a catch-up contribution). This amount isn’t indexed; it stays steady at $1,000 per year. And it’s important to understand that if two spouses are each 55+, they each need their own HSA in order to be able to make a catch-up contribution for each spouse. 2

Most states — all but California and New Jersey — also offer tax breaks on funds deposited in these accounts (some states have no income tax, so HSA contributions would only affect federal taxes in those states, and some states do tax HSA earnings, but not contributions).

Contributions can be made by the individual who owns the account or by an employer, or by anyone else who wants to contribute on behalf of the account owner. When people contribute their own funds to an HSA, they don’t have to pay income tax on those funds. The money is either payroll deducted pre-tax (which means it’s free from income tax and FICA taxes), or deducted from your income tax on your tax return (you can deduct your contributions even if you take the standard deduction and don’t itemize). And if an employer contributes, the money is not taxed as income for the employee.

HSAs are individually owned, rather than jointly owned (they’re like IRAs in that regard). So although a couple might have family HDHP coverage and make the full family HSA contribution to one HSA each year, the HSA is actually in the name of just one spouse. So the catch-up contribution for that spouse can be made to the existing HSA (bringing the 2024 maximum contribution amount to a total of $9,300 for the couple, for example). But the other spouse will need to open their own HSA to deposit the other $1,000 catch-up contribution. This is explained in IRS Publication 969 .

What is the HSA contribution limit for 2025?

The 2025 contribution limit is $4,300 if you have individual coverage under your HDHP, and $8,550 if your HDHP also covers at least one other family member. 3 The catch-up contributions described above (for people 55 or older) are not indexed for inflation, so they will be $1,000 in 2025 as well.

When can I withdraw money from my HSA?

The money you deposit into your HSA is yours to withdraw at any time to pay for medical expenses that aren’t paid by your high-deductible health insurance policy or reimbursed by anyone else (so if you have a dental policy that pays part of your dental costs, for example, you can only use your HSA funds to pay the portion of your dental bill that you have to pay out-of-pocket). HSAs are considered part of consumer-driven health care (CDHC). This means you control the plan, deciding how to spend and invest those dollars, within the parameters of the rules set by the IRS.

You can withdraw the funds when you incur the medical expense, or at any point in the future, as long as you had already established the HSA when the expense was incurred. You need to keep careful records either way, but if you’re planning to wait ten years to reimburse yourself for a medical expense, the onus is on you to prove that you had the expense and paid for it out-of-pocket, with non-HSA funds, and saved the receipts.

Although HSAs provide an excellent way to pay for medical expenses with tax-free funds (and to allow those funds to grow tax-free over many years or decades), withdrawals used for anything other than medical expenses are subject to income tax and a 20% penalty. But that penalty is no longer applicable once you reach age 65. At that point, there is no longer a penalty for withdrawing HSA funds and using them on non-medical expenses. You will, however, pay income tax on those funds . But as discussed below, you can use tax-free HSA funds to pay Medicare premiums, medical expenses, or long-term care costs.

Which medical expenses can be paid from my HSA funds?

HSA-eligible expenses may include deductibles , copayments , coinsurance , vision and dental care, and other out-of-pocket medical costs. And the range of services that qualify is broad: You can use your HSA to pay for COVID tests (at-home tests no longer have to be covered by most health plans, but they can be purchased with HSA funds), over-the-counter medications , acupuncture, chiropractor services, and various other complementary medicine (the services you can use it for are outlined in IRS Publication 502 ).

From 2011 through 2019, individuals were not able to use tax-advantaged money from an HSA for over-the-counter drugs that were not prescribed by a doctor. But that changed in 2020 due to the  CARES Act , which also changed the rules to allow HSA funds to be used to purchase menstrual products.

Can I use my health savings account to pay for my spouse’s medical expenses?

Yes, you use the account to pay for the medical expenses of a spouse or other family members even if they aren’t covered by your HDHP. Family members include dependent children or qualifying relatives. In other words, it’s anyone who is a part of your tax household – even if they aren’t covered by your HDHP.

What happens to my HSA if I switch to coverage that’s not a high-deductible health plan?

Your HSA belongs to you, regardless of what happens with your health insurance. But if you switch to a non-HDHP (or if you gain coverage under a second health plan in addition to your HDHP), you have to stop making contributions to your HSA at that point. You can still withdraw tax-free funds from the HSA to pay medical expenses, including out-of-pocket costs under your new non-HDHP health plan.

You can no longer contribute to an HSA once you’re enrolled in Medicare — even if you continue to work and have HDHP coverage from an employer, in addition to Medicare. But you can continue to withdraw tax-free funds from your HSA after you’re enrolled in Medicare, as long as you use the money to cover out-of-pocket medical expenses, including Medicare premiums (this is discussed in more detail below).

How do I report HSA information to the IRS?

As of the 2018 tax year, the IRS shortened the main 1040 and moved things that used to be on the main form onto a series of schedules instead . So while you’ll still use Form 8889 to report your HSA contributions and withdrawals, the HSA contribution deduction (if you’re eligible for it) on Form 1040 now shows up on Schedule 1 .

But nothing has changed about eligibility for the deduction itself. Assuming you make after-tax HSA contributions (ie, not through a payroll deduction, since those are already pre-tax), you’ll get to deduct them on your 1040 and avoid paying income taxes on the amount you contributed.

If I don’t use my HSA funds now, can I use them to pay for Medicare or long-term care?

Yes. This is a popular financial strategy among people who have many years to invest in an HSA and are able to pay for routine medical bills with non-HSA funds.

You cannot continue to contribute to an HSA once you’re enrolled in Medicare (for most people, this happens at age 65). But you can continue to use your HSA funds entirely tax-free after age 65, as long as you only withdraw money to cover qualified out-of-pocket medical expenses. And once you’re 65 and enrolled in Medicare, you can use your HSA funds to pay Medicare premiums for Part B , Part D , and Part C (Medicare Advantage) .

( Medigap premiums are not considered an HSA-eligible expense, so tax-free HSA funds cannot be used to pay them. And non-Medicare premiums are generally never an expense that can be covered with tax-free HSA funds, unless you’re receiving unemployment benefits or covered under COBRA . All of this is clarified in IRS Publication 969 .)

Long-term care costs can also be paid with tax-free HSA funds. Long-term care is not covered by Medicare , and long-term care insurance tends to be quite expensive. If you’re able to consistently save money in an HSA over several decades, you could end up with a sizeable chunk of money that can be used, tax-free, to cover the cost of long-term care.

Health savings accounts get mixed reviews

The country is largely split over the question of whether health savings accounts are a wise coverage solution on a large scale – and whether HSAs help or hurt the nation’s health care system.

Proponents of HSAs argue that people tend to be more careful with their own health care costs when they’re paying part of the bills themselves. So instead of going to a doctor for every cough, cut, or cramp, HSA users would have an incentive to be less wasteful with their health care spending, and maybe even take the time to shop around.

They say that the cumulative effect will be a nation of health consumers whose behavior would lower health care costs, while injecting price and quality competition into the medical marketplace. And tax advantages, they say, could lure the uninsured into lower-cost, high-deductible plans, reducing the ranks of the uninsured and possibly even nudging them into healthier lifestyles.

Critics of HSAs argue that health savings accounts benefit the young and healthy, while those with regular medical problems or who are older may end up paying more if they select an HDHP/HSA combination, because they tend to drain their savings with more frequent up-front medical expenses.

But this would be true of any comparison between higher-deductible plans (generally favored by healthier people) and lower-deductible plans. And it’s also worth noting that people with very high-cost medical needs sometimes end up better off with an HDHP/HSA combination, because the tax savings from the HSA and the lower premiums for the HDHP are enough to more than offset the higher deductible (and “high deductible” is becoming a bit of a misnomer, since overall deductibles have been rising fairly rapidly, resulting in HDHPs with deductibles that are often comparable to or even lower than the deductibles on non-HDHPs).

Another argument is that the tax-advantaged option constitutes a tax shelter for the rich, and that low-income families don’t earn enough to benefit from the tax breaks. Further, skeptics warn that many people with HSAs — and especially the poor — might be reluctant to spend money from their savings account, even on necessary healthcare expenses. Although a reduction in spending on unnecessary care would be beneficial, it’s often hard for a consumer to know what care is necessary and what’s unnecessary, and skimping on the former could lead to higher-cost problems later.

But it’s worth noting that the ACA requires all plans — including HSA-qualified plans — to cover certain preventive care with no cost-sharing . And the IRS issued guidance in 2013 to bring HDHP rules income compliance with the ACA’s requirements. So all HSA-qualified plans (effective January 2014 or later) cover the full range of recommended preventive care before the deductible.

How do I set up a health savings account?

Enrollees can choose from a long list of banks, credit unions, and brokerage firms that offer accounts for saving and growing HSA funds. To establish and contribute to an HSA, you’ll need to have health coverage under an HDHP.

Many businesses, large and small, offer HDHP coverage to their employees, but you can also purchase an HDHP on your own through the exchange in your state or directly from a health insurance carrier. For people who buy their own insurance, HDHPs are available in nearly every county in the US. If you’re shopping on HealthCare.gov or a state-run marketplace, the HSA-eligible plans will be designated with an icon or a small notification. And you’ll be able to use a search filter to narrow the plan selections to only show HSA-eligible plans.

HSAs became available at the beginning of 2004. 4 The number of HSAs in the U.S. had soared to 30 million people by the end of 2020, covering 63 million Americans. And more than half of people with employer-sponsored coverage were enrolled in HDHPs as of 2022 (although there was a slight drop from 2021, and not everyone with an HDHP chooses to open an HSA). 5

Where should I keep my HSA funds?

Health insurance companies and employers will generally recommend a bank that insureds can use to establish an HSA once they’re enrolled in an HDHP, but enrollees are free to select any HSA custodian they like.

If you’re enrolling in an HSA through your employer, you’ll likely need to use the HSA custodian that your employer selects in order to have your pre-tax contributions payroll deducted and in order to receive any contributions that your employer makes on your behalf. But once the funds are in your account, you’re free to transfer them to another HSA custodian if you choose to do so.

A long list of banks, credit unions, and brokerage firms offer accounts for saving and growing HSA funds over time, so shop around before you select an HSA custodian. The saving accounts include a dizzying array of options. And brokerages offer countless stocks, bonds, and funds to invest in with low trading fees, while others may have limited choices, are more expensive, and have hidden fees ( HSA Search is a useful tool showing fees charged by hundreds of HSA custodians, but it is by no means an exhaustive list of all the available HSA custodians; check with your bank, credit union, or brokerage firm to see what they offer as far as HSAs, and what fees they charge).

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org.

• ” Revenue Procedure 2023-23 ” Internal Revenue Service. Accessed May 21, 2024   ⤶
• ” Publication 969 (2023), Health Savings Accounts and Other Tax-Favored Health Plans ” Internal Revenue Service. Accessed May 21, 2024   ⤶
• ” Revenue Procedure 2024-25 ” Internal Revenue Service. Accessed May 21, 2024   ⤶
• ” Fact Sheet: Guidance Released on Health Savings Accounts (HSAs) ” The White House, President George W. Bush. Dec. 22, 2003   ⤶
• ” High-Deductible Health Plan Enrollment Falls for First Time Since 2013 ” ValuePenguin. Jan. 22, 2024   ⤶

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• v.45(4); 2010 Aug

Health Savings Accounts and Health Care Spending

Anthony t lo sasso.

1 Division of Health Policy and Administration, School of Public Health, University of Illinois, 1603 W. Taylor Street, Chicago, IL 60612

2 UnitedHealthCare Group, Edina, MN

Bianca K Frogner

3 Health Services Management and Leadership Department, School of Public Health and Heatlh Services, The George Washington University, Washington, DC

Associated Data

The impact of consumer-driven health plans (CDHPs) has primarily been studied in a small number of large, self-insured employers, but this work may not generalize to the wide array of firms that make up the overall economy. The goal of our research is to examine effects of health savings accounts (HSAs) on total, medical, and pharmacy spending for a large number of small and midsized firms.

Data Sources

Health plan administrative data from a national insurer were used to measure spending for 76,310 enrollees over 3 years in 709 employers. All employers began offering a HSA-eligible plan either on a full-replacement basis or alongside traditional plans in 2006 and 2007 after previously offering only traditional plans in 2005.

Study Design

We employ difference-in-differences generalized linear regression models to examine the impact of switching to HSAs.

Data Extraction Methods

Claims data were aggregated to enrollee-years.

Principal Findings

For total spending, HSA enrollees spent roughly 5–7 percent less than non-HSA enrollees. For pharmacy spending, HSA enrollees spent 6–9 percent less than traditional plan enrollees. More of the spending decrease was observed in the first year of enrollment.

Conclusions

Our findings are consistent with the notion that CDHP benefit designs affect decisions that are at the discretion of the consumer, such as whether to fill or refill a prescription, but have less effect on care decisions that are more at the discretion of the provider.

Consumer-driven health plans (CDHPs) or high-deductible health plans with saving accounts remain controversial in the ongoing health care reform debate; nonetheless, CDHPs have attracted considerable attention from employers, individuals, and policy makers because of their perceived potential to reduce health care costs. Broadly speaking, CDHPs feature higher deductible levels—generally in the range of U.S.$2,000—than traditional preferred provider organization (PPO) or health maintenance organization (HMO) plans, and they are typically combined with an account for first-dollar coverage under the deductible; in general the spending account will be less than the deductible leaving a period during which the enrollee is responsible for the full cost of health care, sometimes referred to as the “doughnut hole.” By exposing enrollees to the full price of treatment options more than PPO or HMO plans, CDHPs aim for enrollees to scrutinize more carefully the cost of services relative to their (perceived) benefits.

The prevalence of CDHPs has grown markedly over the past few years in the employer-sponsored health insurance market. The most recent Kaiser Family Foundation/HRET employer health benefit survey found that 13 percent of employers offered a CDHP in 2008, up from just 7 percent in 2006; 8 percent of employees were enrolled in such plans in 2008, up from 4 percent in 2006 ( Claxton et al. 2008 ). Recent anecdotal reports suggest that the economic downturn is causing more families to turn to high-deductible CDHPs as a means of cutting their premium expenditures ( Alderman 2009 ). Despite the interest, there remains surprisingly little known about the effects of high-deductible health plans with spending accounts for first dollar coverage on health care use and spending, and health outcomes.

While some research exists on how CDHPs affect health care spending and utilization, traditionally the work has been focused on small samples of large, self-insured, national employers; comparatively little is known about the effect of CDHP designs across a wide spectrum of firms of varying sizes and with varying degrees of take-up. For example, there are reasons to suspect firm-specific factors such as overall benefit generosity, human resources and benefits practices, and employee communications might have a strong influence on take-up. These and other factors could have a strong influence on the findings from studies that focus on only a handful of firms. Concern over the influence of firm-specific idiosyncratic factors on estimates is reduced when the sample includes a large number of firms. The goal of our research is to examine effects of CDHP enrollment on spending using a unique administrative dataset with enrollees from over 700 small and large employers from a large national insurer. We follow two cohorts of individuals before and after employers offered a CDHP: those that switch to a CDHP and those who stay in traditional plans. The findings from our study have important implications to policy makers, health insurance purchasers such as private employers and state governments, and consumers.

BACKGROUND AND PREVIOUS LITERATURE

The 2003 Medicare Modernization Act created health savings accounts (HSAs), now the most common type of CDHP. HSAs involve the pairing of a high-deductible health insurance plan with the establishment of an account that can be funded with pretax dollars and used to pay for eligible health care expenditures. The contributions to the account may earn interest and are owned by the individual akin to a bank account and thus are portable even after workers leave their job. The Internal Revenue Service (IRS) defined HSAs as having a minimum annual deductible of U.S.$1,050 for single enrollees and U.S.$2,100 for families (in 2006), though the deductible may be higher. The total annual tax-preferred contributions to the account cannot exceed the lesser of the deductible or U.S.$2,700 for singles or U.S.$5,450 for families. HSAs should be distinguished from health reimbursement arrangements (HRAs), which were formally established by an IRS administrative ruling in the summer of 2002. The key features of HRAs are the employer's contribution of pretax dollars to an account that can be used by the enrollee, but the enrollee does not own the account and thus HRAs are not portable. Our study focuses on HSAs.

The prior studies of CDHPs have several notable gaps and weaknesses. Past work commonly is based on case studies of a handful of employers or surveys of employer and employee attitudes and experiences with regard to CDHPs (see Buntin et al. 2006 ; Feldman, Parente, and Christianson 2007; Wharam et al. 2007 ). External validity is a challenge when only examining a few employers' experiences. Another concern is the potential for favorable selection into CDHPs, which could bias findings from earlier studies. Specifically, individuals who choose to switch to a relatively new health insurance product design over familiar alternatives such as HMOs or PPOs are likely to differ on unobservable factors related to their anticipated health care utilization leading to biased inference about the effect of CDHPs. Below we discuss the conditions under which bias from such selection will and will not occur.

There remains considerable controversy about the extent to which CDHP designs affect use of health care services. Much of the literature has focused on overall spending levels. A study by Parente, Feldman, and Christianson (2004b) did a pre/post comparison of “switchers” into CDHP relative to “stayers” remaining in traditional plans within a single large employer. While the authors found that baseline year spending for CDHP enrollees was 16 percent lower than that of HMO and PPO enrollees, their results suggested that spending increased more for the CDHP group than the controls in the postyear. Follow-up work revealed that 3 years after CDHP was offered, CDHP enrollees continued to have higher spending than point of service (POS) enrollees ( Feldman et al. 2007 ); additionally, prescription drug spending did not differ between switchers and stayers ( Parente, Feldman, and Chen 2008 ) beyond the first year. While these findings tend to be at odds with the notion that CDHPs serve to limit spending, how much one can conclude from single employer settings is not clear. Other recent employer-specific studies by Greene et al. (2008a , 2008b) found similar results to previous analyses. Interestingly, this work also found CDHPs were not as effective for drug adherence; CDHP enrollees were more likely to discontinue antihypertensive and lipid-lowering pharmacotherapy after implementation of the CDHP ( Greene et al. 2008a ).

Research has also found evidence of favorable selection into CDHPs. As stated earlier, Parente, Feldman, and Christianson (2004a) found that CHDP enrollees had lower initial health spending than HMO and PPO enrollees; however, a comparison of case-mix indicators supported the notion that the CDHP enrollees were also healthier than stayers. Another study of enrollees in a Humana CDHP indicated that individuals that switched into a CDHP were significantly less likely to have a chronic condition and were more likely to self-report their health as excellent ( Fowles et al. 2004 ). For each of the five services studied, prior year utilization by people who subsequently enrolled in the CDHP was below 60 percent of the average for the whole group. Related research at Humana revealed that, based on demographic data alone, there was a minimal difference in the risk profiles of those choosing to enroll in the CDHP versus those remaining in traditional plans ( Tollen, Ross, and Poor 2004 ). However, when examining prior year claims data the authors found that persons choosing the CDHP were healthier than stayers. Selection issues seem clearly critical in the study of CDHPs, as they have been historically for all forms of health insurance.

DATA AND METHODS

All data were extracted from the data repository of a large national insurer that provides a full complement of traditional plan designs in addition to being the leading provider of CDHPs in the country. The repository contains linkable datasets of member, employer, medical and pharmacy claims, and plan design information. Because a critical aspect of our approach involves selecting and subdividing cohorts of individuals based on the plans that are offered to them by their employers, data extraction began with the identification of employers. We included employers that did not offer a CDHP in 2005 that then offered HSA plans on either a full-replacement basis or as an option alongside traditional plans in 2006 and 2007. Employers included commercial groups with 2–5,000 employees offering both fully insured and administrative services only (ASO) products. The benefit of including employer sizes up to 5,000 is the ability to introduce variation in benefits that we seek to study. HSAs were chosen because they were the predominant CDHP offered by employers. Study inclusion criteria required employers to offer medical and pharmacy coverage to their employees for three consecutive years (2005, 2006, and 2007) with the same plan start date, January 1 (the most common), in each year. We identified 709 employers meeting our inclusion criteria. The employers included 457 HSA full-replacement employers (all of which were fully insured), 229 fully insured HSA option firms, and 23 (large) ASO option firms.

Our goal is to estimate the relative change in total health care spending (the sum of medical and pharmacy spending by both employers and employees) associated with a switch to HSAs. We use multivariate estimators to compare the difference in spending over time between individuals who enroll in an HSA (switchers) to those who remain in a traditional plan (stayers). All employees were continuously enrolled for 3 years. Employees were excluded if aged older than 65 years, had coordination of benefits (indicating other health insurance coverage), and total allowed spending exceeded U.S.$200,000 in any calendar year.

Figures 1 and 2 demonstrate the essential nature of the change in health insurance plan design that occurred coincident with enrollment in HSAs. Figure 1 indicates the substantial increase in the deductible among those who switch to the HSA: the mean deductible increases from U.S.$361 in 2005 to U.S.$1,689 in 2007. By contrast a relatively modest increase in deductibles is evident among the stayers, from U.S.$278 in 2005 to U.S.$447 in 2007. Of course it should be noted that a tax-advantaged savings account is available for HSA enrollees for first dollar coverage of health care needs. The out-of-pocket (OOP) maximum amounts ( Figure 2 ) highlight that HSA enrollment is not necessarily synonymous with substantially higher OOP spending. HSA enrollees experience an increase in OOP maximum from U.S.$1,428 in 2005 to U.S.$2,050 in 2007, while traditional plan enrollees experience an increase from U.S.$1,420 to U.S.$1,710.

Out-of-Pocket Maximum Pre- and Post-HSA by Cohort, 2005–2007

Deductible Pre- and Post-HSA by Cohort, 2005–2007

Based on the differences in plan characteristics, we might expect to see pronounced effects of HSAs on spending relative to traditional plans. However, we lack two important details that limit our ability to predict the effect of a switch to HSAs: (1) we do not have information on the size of the savings account that is used for first dollar coverage and (2) we do not have information on whether or how much the employer contributes to the account. Both the account size and the employer contribution to it could mitigate the negative effect of HSA enrollment on spending. Moreover, we do not have information on how employers structured premium cost sharing for the plans offered and how it might have changed over time. Prior work has established that enrollees are quite sensitive to premium levels ( Buchmueller and Feldstein 1996 , 1997 ; Cutler and Reber 1998 ). Consequently, the effect of HSA enrollment on health care spending remains an empirical question.

In order to measure the overall effect of the switch to an HSA on health care spending, we employ a generalized linear model (GLM) with a log-link. This model is frequently applied to health care data because of its tractability and, given advances in personal computing, ease of estimation ( Manning 1998 ; Mullahy 1998 ; Manning and Mullahy 2001 ;). The basic model with a log-link is

where Y is annual spending for person i in year t, Post is an indicator variable representing the years 2006 and 2007 (versus 2005), HSA is an indicator for whether the person is in the group that is enrolled or will enroll in an HSA, and the coefficient on the interaction term between HSA and Post reveals the difference-in-differences (DD) estimate of the effect of HSA enrollment on health care spending. 1 Conveniently, with the log-link function, the coefficient estimate of interest ( β 3 ) can be interpreted directly as a multiplicative effect on total costs. The model also controls for enrollee characteristics (age, gender, region, and the type of plan in which the enrollee was enrolled in 2005—HMO, PPO, POS, exclusive provider organization (EPO), or indemnity) as well as 1-digit industry code dummies, size of the employer, the employer insurance type (full replacement, option—fully insured, option—ASO), and a year trend. The ɛ term is an idiosyncratic error.

Because there is the potential of the HSA effect to evolve with subsequent years enrolled in the plan, we also estimate a variant on equation (1) that allows for the effect of HSA enrollment to differ based on the year enrolled in the plan. For example, there could be a learning curve associated with individuals gaining comfort with a plan design they are experiencing potentially for the first time.

By, in effect, conditioning on pre-HSA enrollment spending we aim to minimize the potential selection problem that could exist if healthier employees opt to enroll in the HSA versus remaining in a traditional plan. The basic presumption of the DD model is that while the levels of spending might differ between switchers and stayers, the change in spending in the switcher group would have been the same as the stayers had the switcher group not enrolled in an HSA (the counterfactual). Counterfactual assumptions are inherently untestable, but given the rich data in our study it is possible to learn something about the validity of the quasi-experimental design by testing whether we observe different HSA effects between full-replacement enrollees, who presumably face a less voluntary switch to an HSA, and option enrollees, for whom selection is presumably most acute. Specifically we will specify a triple-difference (DDD) model to test whether the effect of HSAs differs between full-replacement enrollees and option enrollees:

where Full represents full replacement and now the coefficient we are primarily interested in is the three-way interactions between Post, HSA , and Full ( β 6 ): it tells us whether there is a difference in the DD estimate (in equation [1] ) between full-replacement HSA enrollees and option HSA enrollees. In addition, another specification check involves estimating stratified regressions based on whether enrollees have chronic conditions in 2005. This allows us to test whether the effects of HSA enrollment are symmetric across different health statuses of enrollees.

While we lack a control group that is not exposed to CDHP, we have a group that receives only CDHP and another group that receives only a partial “dose” of CDHP, thus allowing us to estimate a true, if somewhat unconventional, intent-to-treat model. In this case, the group receiving HSAs on a full-replacement basis serves the function that a control group receiving no CDHP would serve. Specifically, we are able to estimate the treatment effect on the treated by estimating a model of the following model: spend= a + b Post + c Full + d Post × Full , where Full is an indicator for whether the person is a member of a full-replacement employer, and then scaling the d coefficient with 1−the take-up of HSA in the option group. This approach allows us to completely bypass individual-level selection as a potential source of bias because actual HSA enrollment (on an individual basis) never enters the estimation.

Descriptive Findings

Table 1 presents the baseline (2005) demographics of the 76,310 enrollees in employers that provided HSAs either on a full-replacement basis or as an option alongside traditional plans in 2006 and 2007 after not being offered a CDHP in 2005. Approximately one-third of the sample enrolled in an HSA in the postperiod. HSA enrollees had nearly equal gender composition and were slightly older, which is atypical relative to what is commonly seen in CDHP studies. Firm size is smaller in the HSA group primarily because a majority (56 percent) of the HSA group is comprised of full-replacement enrollees, and full replacement is far more common in small firms. Note that ASO group enrollees represent roughly half the sample overall but only 10 percent of HSA enrollees, implying that take-up was very low in the large, ASO firms (roughly 6 percent). A majority of the sample resides in the central region of the United States followed by about a quarter to a third of the sample in the southeast region. The most common industry in the sample is the service sector followed closely by finance, real estate, and insurance.

Baseline Demographics of HSA Switchers and Traditional Plan Stayers, 2005

ASO, administrative services only; HSA, health savings accounts.

The seeming similarity of the two groups (at least on demographics) is the result of two somewhat different samples being combined: the full-replacement group tends to be somewhat older (and less healthy) than voluntary HSA enrollees, who tend to be younger (and healthier). Table 2 presents measures of health status in the baseline (2005) year. Displayed are retrospective health risk scores that are calculated by Ingenix Episode Risk Group software. The software uses claims data grouped into episodes of care (based on ICD-9 diagnosis codes) and then calculates a risk score based on the mix of episodes. Another health status measure is an indicator for the presence of a chronic disease condition as measured by a person having select episodes (based on Ingenix software). It should be noted that half of individuals have some chronic illness and half of HSA enrollees have a chronic illness as well. Based on the measures of health risk, full-replacement enrollees were clearly less healthy than voluntary switchers. Voluntary switchers were also clearly healthier than the traditional plan stayers. This result is consistent with most of the prior literature examining the characteristics of enrollment in HSAs. Our regression models will include the type of insurance setting to control for these baseline health differences.

Baseline Health Status Measures of HSA Switchers and Traditional Plan Stayers, by Firm Type, 2005

Table 3 displays mean spending figures over time for the HSA enrollees and traditional plan stayers. Total health care spending is defined as the sum of medical (inpatient and outpatient) and pharmaceutical drug payments made by the plan and the member (employer and employee). The table also displays means of medical and pharmaceutical spending broken out separately. On average, total health care payments increased by just over 20 percent between 2005 and 2007. Medical expenditures increased over the period by 24 percent while pharmacy spending grew by roughly 10 percent. At baseline HSA enrollees were similar to traditional plan stayers in terms of overall spending: HSA enrollees spent 1.4 percent less in 2005 on average (before their enrollment in the HSA). However, total spending grew at a faster rate for traditional plan stayers relative to HSA enrollees (22 percent versus 18 percent). Medical spending was 3 percent lower for HSA enrollees and pharmacy spending was about 4 percent higher for HSA enrollees in 2005. Spending for medical services and pharmacy services grew at faster rates for traditional plan enrollees relative to HSA enrollees: 25 percent versus 22 percent for medical spending and 12.5 percent versus 7 percent for pharmacy spending over the period.

Descriptive Statistics of Health Care Spending by HSA Enrollment/Nonenrollment, 2005–2007

Notes . Total health care payment includes medical (inpatient and outpatient) and prescription drug payments by the member (employee/employer) and the plan. Standard deviations in parentheses.

Table 4 displays regression results for the DD models presented in equation (1) above for total spending, medical spending, and pharmacy spending. Estimates show the log-link coefficient estimates from the GLM regressions. For total spending we observe that HSA enrollment is associated with annual spending levels that are 4.6 percent lower over the postperiod compared with those staying in traditional plans. When we break out medical (inpatient/outpatient) spending from pharmaceutical spending, we observe a negative effect of HSA enrollment on medical spending, though the estimate is not statistically significant at conventional levels. For pharmacy spending we observe that HSA enrollment is associated with annual spending levels that are 6.3 percent lower than traditional plan enrollees.

Difference-in-Differences Generalized Linear Model (GLM) Estimates of Health Care Spending between HSA and Traditional Plan Enrollees

Notes. N =228,930. Log-link used in GLM specification. Regressions also controls for 2005 plan type dummies (EPO, HMO, indemnity, POS, PPO) and 1-digit SIC dummies. Robust standard errors (clustered at firm level) in parentheses.

ASO, administrative services only; HSA, health savings account; HMO, health maintenance organization; POS, point of service; PPO, preferred provider organization.

Several other coefficient estimates are worthy of note. The coefficient on HSA is always negative (though only statistically significant for pharmacy spending), indicating that HSA enrollees are lower spending individuals on average. Likewise, full-replacement enrollees are generally higher spending than the two types of add-on (option) firms. Firm size has no significant effect on spending.

Table 5 displays key coefficients from GLM regressions examining the effect of separating the postperiod dummy into 2006 and 2007 to allow for a differential effect of HSA enrollment in each of the two postyears. In all cases effect sizes are not statistically different between the two follow-up years, though the general pattern of coefficient estimates suggests larger effects in 2006 than 2007.

Difference-in-Differences Generalized Linear Model (GLM) Estimates of Health Care Spending between HSA and Traditional Plan Enrollees, with Differential Postperiod Years

Notes. N =228,930. Log-link used in GLM specification. Regressions also control for region dummies, gender, age, gender × age interaction, firm size, setting (full replacement [fully insured only], fully insured add-on, ASO add-on), 2005 plan type dummies (EPO, HMO, indemnity, POS, PPO), and 1-digit SIC dummies. Robust standard errors (clustered at firm-level) in parentheses.

** p <.05

Sensitivity Analyses

Table 6 displays summary results from a number of alternative specifications to test the robustness of the results estimated above. Panel A presents DDD models that identify the difference in HSA enrollment spending effects between full-replacement enrollees and enrollees opting into HSA in option settings. The three-way interaction term (HSA × Post × Full Replace) is in no case statistically significant, though it is relatively large in magnitude, making it difficult to rule out economically meaningful differences in the effect of HSA enrollment on spending categories between those being switched involuntarily to HSAs and those opting to switch into an HSA.

Specification Tests

Notes. N =228,930 except where indicated. Implied treatment-on-the-treated (TOT) estimates represent scale Post × Full Replace coefficient where the scaling factor equal 1−HSA take-up in the option group (16.4%). GLM regressions with log-link also controls for region dummies, gender, age, gender × age interaction, firm size, setting (full replacement [fully insured only], fully insured add-on, ASO add-on), 2005 plan type dummies (EPO, HMO, indemnity, POS, PPO), and 1-digit SIC dummies. Robust standard errors (clustered at firm level) in parentheses.

ASO, administrative services only; GLM, generalized linear model; HMO, health maintenance organization; HSA, health savings account; POS, point of service; PPO, preferred provider organization.

In panel B we estimate the intent-to-treat model wherein we do not explicitly control for HSA enrollment. As noted above, we compare the “fully treated” group (full replacement) to the “partial dose” group (the option groups). After scaling the coefficient estimates from the regressions by 1−the HSA take-up rate in the option groups (16.4 percent) to generate the treatment-on-the-treated estimate, we observe strikingly similar estimates from the traditional approach that is potentially afflicted by individual-level selection bias and the intent-to-treat approach. The results point to roughly 7 percent reductions in total health care expenditures associated with enrollment in an HSA.

Panels C and D show results that stratify by the presence of a chronic condition in 2005. The sample size for each stratified group is roughly half the full sample. Effect sizes for those with chronic conditions are generally half those observed for individuals without chronic conditions. The Post variable estimates are much larger for those without chronic conditions, which suggests greater stability of health care utilization for persons with chronic illness.

A final set of robustness checks (not displayed) involved examining how sensitive our DD estimates are to the inclusion/exclusion of important observables. We estimated separate regressions that include the baseline (2005) retrospective risk and the chronic disease variables seen in Table 2 . Both variables are highly significant predictors of any use and spending conditional on any use, but the coefficients associated with the HSA enrollment effects remained nearly unchanged (full results available upon request). It could be argued that the retrospective risk and chronic disease measures are important omitted variables and that they belong in the model (their t -statistics range from 50 to 100). We choose not to include them in our main specifications because the measures are constructed using the same claims data that are used to calculate spending, the dependent variable; hence, we are concerned about potential endogeneity biases associated with these measures.

We used data from a large national health insurance company on enrollees who beginning in 2006 are presented by their employers with either a full-replacement HSA benefit or the option of an HSA alongside traditional plan designs. The data contain enrollees in 709 employers ranging in size from 2 to 5,000, and enrollees are tracked for 3 years of continuous enrollment in order to establish the effect of switching plans beyond the first year of enrollment and still have access to pre-HSA enrollment data (2005).

Using a variety of robustness checks and alternative methodologies, our results point to three key findings. First we find that HSAs are associated with a statistically significant and economically meaningful relative decrease in spending when compared with individuals who remained in traditional plans. Overall, enrollees in HSAs spent roughly 5–7 percent less when compared with traditional health plan enrollees. There is evidence that more of the relative reduction in spending occurred in the first year of enrollment. Such a pattern could be consistent with a “benefit rush” in the year before HSA enrollment, but we do not observe that switchers spent significantly more than stayers in the year before the HSAs being offered. The relative reduction in the first year of enrollment could also be consistent with enrollees learning about their benefit design in the first year and therefore holding back on spending; alternatively, enrollees may use the first year to accumulate a substantial balance in their spending accounts in order to afford more costly procedures in subsequent years.

Second, the pattern of our results suggests that HSAs had larger relative effects on pharmacy spending than outpatient and inpatient spending. For pharmacy spending, HSA enrollees spent 6–9 percent less than traditional plan enrollees. Our findings are consistent with the notion that CDHP benefit designs affect decisions that are at the discretion of the consumer, such as whether to fill or refill a prescription, but have less effect on care decisions that are (more) at the discretion of the provider. This finding is broadly consistent with the results of the RAND Health Insurance Experiment ( Newhouse 1994 ). In estimates that stratified by the presence of a chronic condition in the pre-HSA period, we found that HSA effects were twice as large in magnitude for those without chronic conditions. This suggests at a minimum that HSAs did not result in large, indiscriminate decreases in health care spending for those who may need it more.

Third, while there is some evidence consistent with the potential presence of favorable selection into HSAs based on the levels of spending, we provide compelling evidence to suggest that there is not selection on changes (or trends) in spending. The distinction is critical because we have longitudinal data spanning 1 year before the HSA being offered to 2 years post-HSA introduction. We believe the combination of estimates provided here represents the strongest evidence presented to date regarding the importance (or lack thereof) of selection when controlling for baseline spending. Therefore, we are comfortable concluding that our estimates represent the most convincing estimates of the effects of HSAs on health care spending. Our results diverge from earlier findings from Feldman et al. (2007) who did not find spending reductions associated with CDHP. This divergence could highlight the importance of looking at a broad array of different employers rather than a single large employer as in the previous studies.

There remain a number of noteworthy limitations of our work. First, we do not have the data to study drop out of employees from the offered benefits: all the individuals in our data are present for all 3 years of the analysis period. Hence, there may be a bias toward a healthier group of workers because of the requirement that they stay with the same firm for 3 consecutive years. Second, it remains a possibility that selection bias is present based on changes over time—our longitudinal methods cannot control for this type of selection, if it is present. In an effort to at least partly deal with this concern, in a sensitivity analysis we conducted nearest neighbor propensity score match to better balance the observable characteristics of HSA enrollees and nonenrollees in the preperiod. The point estimates for overall spending are robust to propensity score matching (details of our analysis are available by request of the authors), but the precision of our estimates worsened; point estimates suggested that propensity score matching revealed a larger estimated effect of HSA enrollment on medical spending and smaller effect on pharmacy spending, but we could not reject that the estimates differed from our nonmatched findings. Third, we do not have information on some important aspects of the benefit design, most notably the spending account and the amount contributed by the employer. Work by Lo Sasso, Helmehen, and Kaestner (2010) has shown that health care spending can be quite sensitive to employer contributions to the account. It should be noted that the fact that our study takes place within a naturalistic context using a control group comprised of non-CDHP benefit designs will tend to bias us toward finding smaller effects than are actually present if CDHP designs were compared against a static control benefit design. This is because the comparison group plan designs are getting less generous over time, the effect of which is to attenuate the estimated CDHP effect; this change was evident in Figures 1 and 2 as deductible levels and OOP maximums were increasing for stayers in non-CDHP designs. Fourth, there is the possibility of employer-level selection in the decision to offer HSAs (particularly on a full-replacement basis) in the first place. Indeed the question of what prompts an employer to consider a CDHP remains largely unknown. It is possible, for example, that prior health spending trends may motivate the decision to consider alternative benefit designs. The present study design is unable to control for such factors. Lastly, it is worth noting that our work does not claim to look at the health effects of HSA enrollment or at what type of care is reduced when individuals are enrolled in HSAs, though such outcomes represent fruitful future areas of research.

Acknowledgments

Joint Acknowledgment/Disclosure Statement: The authors would like to gratefully acknowledge comments received at the 2009 AcademyHealth Annual Research Meeting. The findings and conclusions in this document are those of the authors, who are responsible for its content, and do not necessarily represent the views of any third parties.

Disclosures : None.

Disclaimers : None.

1 It might be tempting given the nonlinear models to use Ai and Norton's (2003) correction for interaction effects in nonlinear models. However, it should be noted that Puhani (2008) has observed that Ai and Norton's work on interaction effects in nonlinear models does not apply to difference-in-differences estimates of the type we are estimating.

SUPPORTING INFORMATION

Additional supporting information may be found in the online version of this article:

Appendix SA1: Author Matrix.

Please note: Wiley-Blackwell is not responsible for the content or functionality of any supporting materials supplied by the authors. Any queries (other than missing material) should be directed to the corresponding author for the article.

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HSA & FSA: What to Know

Health savings account .

A Health Savings Account is a type of savings account that helps pay for all types of qualified medical expenses. 

How HSAs Work HSAs can help people save money on health care costs and get tax benefits. You must be enrolled in a high-deductible health plan to open one. The money put into an HSA is not taxed and can be taken out tax-free, but only if it is used for qualified medical expenses. If there is money left in the HSA at the end of the year, it stays there for future use. 

Benefits of HSA

• Tax-free Contributions

When you contribute money to your HSA, the funds are deducted from your pre-tax income, which means you don't pay any income tax on that money. Also, any interest or investment earnings on your HSA funds are tax-free.

• Tax-free Withdrawals

When you withdraw money from your HSA to pay for qualified medical expenses, you also don't have to pay taxes on those withdrawals.

• Unused Funds Accumulate Year Over Year

There is no "use it or lose it" rule for HSAs, and funds can accumulate year over year.

• Funds for Qualified Medical Expenses 

You can use HSA funds to pay for qualified medical expenses. Examples include prescriptions, medical supplies, copays, etc. To see the full list of approved items, check out the IRS Publication 969 .

Eligibility Criteria

According to the Internal Revenue Service (IRS) , to qualify for an HSA contribution, you must meet specific eligibility criteria:

• You must be covered under a high-deductible health plan.
• You can’t be covered under other health coverage.
• You can’t be enrolled in Medicare.
• You cannot be claimed as a dependent on someone else's tax return. 

Limitations

• Contribution Limits

According to the IRS , for 2024, individuals can contribute up to $4,150 to their HSA accounts, and families can contribute up to $8,300.

• Plan Requirements

You must be enrolled in an HSA-eligible high-deductible health plan. For calendar year 2024, the IRS defines a " high-deductible health plan” as a plan with an annual deductible of more than $1,600 for self-only coverage or $3,200 for family coverage.

• Penalty for Non-Medical Withdrawals

If you withdraw funds from your HSA for non-medical expenses before age 65, you will be subject to a penalty. The penalty is equal to 20% of the amount withdrawn, and you will also have to pay income tax on the withdrawal.

After age 65, you can withdraw funds from your HSA for any reason without penalty, although you will still have to pay income tax on non-medical withdrawals.

If you'd like to learn more about HSAs, check out our podcast episode  5 Advantages of Health Savings Accounts .

Flexible Spending Account 

How FSAs Work

With an FSA, you can contribute a portion of your pre-tax salary into the account, reducing your taxable income. 

Benefits of FSA

• Pre-tax Contributions

When you contribute money to your FSA, the funds are deducted from your pre-tax income, which means you don't pay any income tax on that money.

Funds used from your FSA to pay for qualified medical expenses are not taxed.

• Eligible Expenses

Generally speaking, anything that your doctor prescribes can be covered by FSA funds. This includes hearing aids, eyeglasses, and chiropractors. To see the full list of approved items, check out the IRS Publication 502.

Generally, employees must be enrolled in their employer's health insurance plan to be eligible to participate in the FSA. FSAs cannot be attained by those who are self-employed. 

• Use it or lose it

FSAs typically have a use it or lose it rule, meaning any funds left at the end of the plan year may be forfeited.

According to the IRS , the contribution limit through payroll deductions for 2024 for an FSA is up to $3,200.

The plan requirements for an FSA may vary depending on the employer and the specific plan.

• Portability 

FSA is not portable so you can’t take it with you if you change jobs.

Comparison of HSA and FSA

Key Differences

Both HSA and FSA accounts are used for saving money for qualified health care expenses, but they do have a few key differences:

• Different tax benefits

HSAs can be invested, and earnings grow tax-free, whereas, with an FSA, funds are not typically invested.

• Eligibility

HSAs are only available to those who are enrolled in a High Deductible Health Plan, whereas FSAs are available for different types of health insurance plans.

FSAs are offered through the workplace; thus, you can’t get an FSA unless your employer provides one.

• Accumulation of funds

Unused funds can be accumulated over years in HSAs, whereas FSAs have a “use it or lose it” rule.

• Portability

Unlike an HSA, an FSA is not portable so you can’t take it with you if you change jobs.

3541065  04/24

Health Savings Account Balances, Contributions, Distributions, and Other Vital Statistics, 2021: Evidence From the EBRI HSA Database

Health savings account (HSA)-eligible health plans are an important part of the health benefits landscape, yet there is little empirical research on how HSAs are used by employees. Based on its unique database of more than 13 million HSAs, the Employee Benefit Research Institute (EBRI) seeks to shed light on the ways HSA accountholders contribute to, withdraw from, and invest in their HSAs. Such analyses can help not only plan sponsors but also providers and policymakers better understand strategies that can help improve utilization of HSAs and, ultimately, overall employee financial wellness.

Key findings for 2021 include:

• Despite a rebound in out-of-pocket health care spending in 2021, HSA balances increased on average over the course of the year. Patients sought health care services more frequently in 2021 — and spent more out of pocket, as well — than they did in 2020, yet the average end-of-year balance was higher than the average beginning-of-year balance. And the average balance increase was even larger when analyzing only accounts that had received a contribution in 2021.
• Accounts that received an employer contribution saw higher total contributions and were more likely to invest . This may be a sign that employer contributions can play a pivotal role in fostering accountholder engagement with their HSAs. Our analysis also indicates, however, that these accountholders were more likely to take more frequent and larger distributions.
• Most accountholders took a distribution in 2021. More than half of HSAs in EBRI’s database saw a distribution in 2021, and the average distribution was $1,786.
• Still relatively few HSAs are invested. One of the largest advantages HSAs offer is the ability to invest assets within the account. However, our analysis reveals that only 12 percent of accountholders invested their HSAs in assets other than cash.
• Age and tenure play a major role in HSA utilization. As accountholders age, we find systematic differences in how they use their HSAs. Older accountholders tended to have higher average contributions and higher average balances than younger accountholders. Similarly, accountholders who have had their HSAs for a longer period of time tended to have higher average contributions, higher average balances, and invested their balances in assets other than cash more frequently.

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Use of Health Savings Accounts to Save for Health Care Expenses

One in three Americans with a high-deductible health plan lack a health savings account. This brief outlines policy options that could increase their uptake and help Americans navigate rising health care costs.

Health savings accounts (HSAs) can be used by Americans who are enrolled in a high-deductible health plan (HDHP) to save tax-free for health care expenses, with the policy goals of lessening patients’ cost burdens and encouraging health care choices that are based on value. Nearly half of Americans with private health insurance are now enrolled in an HDHP.

As the uptake of HDHPs continues to rise and health care expenses grow, expanding the use of HSAs continues to be a frequent focus of health reform proposals. Yet, little is known about who is more likely to have an HSA and how individuals who have HSAs are using them to save for future health care expenses. A research team at the University of Michigan conducted a national survey of adults enrolled in an HDHP to help address this gap in knowledge. i

What is a high-deductible health plan (HDHP)?  An HDHP has a higher deductible than a traditional insurance plan and generally covers only certain preventive services before the deductible is met. For 2020, an HDHP is defined as a plan with a deductible of at least $1,400 for an individual or $2,800 for a family.

What is a health savings account (HSA)?  An HDHP can be combined with a health savings account, allowing consumers to contribute money on a pre-tax basis to pay for future qualified medical expenses. These include services such as doctor visits for sick care, dental care, glasses and contacts, and prescription co-pays. Any unused funds carry over year to year and never expire.

i A total of 1,637 adults under the age of 65 were surveyed in late 2016. The researchers used the National Health Interview Survey definition of an HSA as “a special account or fund that can be used to pay for medical expenses” that are “sometimes referred to as Health Savings Accounts (HSAs), Health Reimbursement Accounts (HRAs), Personal Care accounts, Personal Medical funds, or Choice funds, and are different from Flexible Spending Accounts.”

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Takeaways from our survey*

1. 33% of individuals enrolled in an HDHP did not have an HSA

• Obtained their health plan through a health insurance exchange, compared to those with employer-sponsored coverage.
• Had lower levels of health insurance literacy or financial literacy. ii
• Individuals with at least one chronic health condition were as likely to not have an HSA as others, despite potential cost-related barriers to accessing health care.

2. 55% of individuals with an HSA had not contributed any money into it  

Of the 45% who did make a contribution, 21% reported also using a bank account or Flexible Spending Account to save for health care. For individuals who did not reach their annual contribution limit, this may be financially inferior to the tax advantage of saving using an HSA.

3. Top reasons for not contributing to an HSA in the last 12 months  

ii Levels of health insurance literacy and financial literacy were assessed using validated scales. 1,2 These factors may play a role in an individual’s choice to save for health care expenses.

What does this mean for health policy discussions?

Findings suggest that few Americans are using HSAs to save for health care expenses. Targeted interventions could encourage the uptake and use of HSAs as a strategy to help more Americans save and navigate the rising costs of health care.

Encourage enrollment in an HSA among those who are eligible for one

Employers: When employers offer HDHPs that are eligible for an HSA, these accounts could be more consistently linked to their health plan at the time of enrollment.

Health plans: Messaging could be targeted to encourage those with an HSA-eligible HDHP to take up an HSA as a strategy to help manage high cost-sharing for health care in an HDHP. These efforts could focus on enrollees who are especially vulnerable to cost-related access barriers and financial burdens, such as people with lower incomes or chronic conditions.

Health insurance exchanges:

• Although the average deductible for a federal Health Insurance Marketplace individual plan was $5,316 during the 2020 Open Enrollment Period, just 7% of Marketplace plans chosen were HSA-eligible.3 This is likely because some Marketplace HDHPs decided to expand the covered pre-deductible services in ways that are not currently allowed in HSA-eligible plans.4
• Extending HSA eligibility to HDHPs that cover specified clinical services on a pre-deductible basis has been implemented in recent IRS regulations for some chronic disease care and for COVID-19 testing and treatment. This HSA eligibility could be further expanded by Congress in proposed legislation.
• The benefits of enrolling in an HSA could be more directly highlighted when someone chooses an HSA-eligible HDHP. Alternatively, HDHPs offered on an exchange could be required to be linked to an HSA

Encourage saving in an HSA

• About 1 in 5 individuals with an HSA who saved for health care expenses reported saving in a non-HSA vehicle along with their HSA, while another 1 in 5 reported saving only in a non-HSA vehicle. These patterns suggest that employers, health plans, financial planners, and banks could use targeted educational messaging campaigns to help individuals with HSAs better understand these accounts and make financially advantageous decisions about saving for health care.
• Employers, perhaps in partnership with financial planners or banks, could facilitate more HSA savings through interventions that have been successful at increasing retirement savings in workplaces.5 These include default contributions to HSAs, employer matching of employee contributions, or committing future wage increases to savings.

REFERENCED STUDY

*Use of Health Savings Accounts Among Americans Enrolled in High-Deductible Health Plans. Kullgren JT, Cliff EQ, Krez C, West BT, Levy H, Fendrick M, Fagerlin A. JAMA Network Open . 2020;3(7):e2011014. doi:10.1001/jamanetworkopen.2020.11014.

OUR PUBLISHED RESEARCH

A Survey of Americans with High-Deductible Health Plans Identifies Opportunities to Enhance Consumer Behaviors. Kullgren JT, Cliff BQ, Krenz CD, Levy H, West BT, Fendrick AM, So J, Fagerlin A. Health Affairs . 2019 Mar. PMID: 30830816. doi:10.1377/hlthaff.2018.05018.

Consumer Behaviors Among Individuals Enrolled in High-Deductible Health Plans in the United States. Kullgren JT, Cliff BQ, Krenz CD, West BT, Levy H, Fendrick AM, So J, Fagerlin A. JAMA Internal Medicine . 2018 Mar 1. PMID: 29181512. doi:10.1001/jamainternmed.2017.6622.

Attitudes About Consumer Strategies Among Americans in High-Deductible Health Plans. Cliff BQ, Krenz C, West BT, Levy H, Fendrick AM, Winkelman TNA, So J, Fagerlin A, Kullgren JT. Medical Care . 2019 Mar. PMID: 30664610. doi:10.1097/MLR.0000000000001056.

ADDITIONAL REFERENCES

1. The Economic Importance of Financial Literacy: Theory and Evidence. NBER Working Paper No. 18952. Lusardi A, Mitchell OS. National Bureau of Economic Research . 2013. http://www.nber.org/papers/w18952.

2. Development of the Health Insurance Literacy Measure (HILM): Conceptualizing and Measuring Consumer Ability to Choose and Use Private Health Insurance. Paez KA, Mallery CJ, Noel H, et al. Journal of Health Communication . 2014;19(sup2):225-239. PMID: 25315595. doi:10.1080/10810730.2014.936568.

3. Health Insurance Exchanges 2020 Open Enrollment Report. Centers for Medicare and Medicaid Services . 2020. https://www.cms.gov/files/document/4120-health-insurance-exchanges-2020-open-enrollment-report-final.pdf. Accessed May 12, 2020.

4. Why 80% of Obamacare plans are ineligible for this tax break. O’Brien E. MarketWatch . 2016. https://www.marketwatch.com/story/why-80-of-obamacare-plans-are-ineligible-for-this-tax-break-2016-03-29. Accessed May 1, 2020.

5. Save More Tomorrow: Using Behavioral Economics to Increase Employee Saving. Thaler RH, Benartzi S. Journal of Political Economy . 2004. doi:10.1086/380085.

AUTHOR Jeffrey T. Kullgren, MD, MPH, MS VA Ann Arbor Healthcare System University of Michigan

CONTRIBUTORS Elizabeth Q. Cliff, MS Brady T. West, PhD Helen Levy, PhD Mark Fendrick, MD Angela Fagerlin, PhD  

ACKNOWLEDGMENTS This policy brief was supported by the  IHPI Policy Sprint program , which provides funding and staff assistance to IHPI member-led teams in undertaking rapid analyses to address important health policy questions and develop products that inform decision-making at the local, state, or national level.

FOR MORE INFORMATION Please contact Eileen Kostanecki, IHPI’s Director of Policy Engagement & External Relations, at [email protected] .

• Industry News

HSA enrollees use health care services differently than those with PPOs, research shows

Ebri research also looks at spending for the two types of plan..

• April 18, 2024
• By Steve Randall

Employees who invest in health savings accounts use health care services differently than those with a preferred provider plan, according to new research.

The Employee Benefit Research Institute looked at the usage and cost of health services accessed by the two cohorts and found that HSA enrollees typically make less use of emergency departments, specialists, outpatient services, and prescription drugs (for those with no health conditions) but higher use of inpatient services and primary care (for those with two or more conditions) relative to PPO enrollees.

“The purpose of our research was to closely examine the impact of plan type on the use of health care services and spending . The analysis focused on enrollees in HSA plans and preferred provider organization (PPO) enrollees who are in health plans with deductibles large enough to be HSA eligible as a way of isolating the impact of the HSA on use of health care services,” Paul Fronstin, director of health benefits research at EBRI, said in a statement.

Looking at the costs of health care for each plan type, HSA plans spent $61.30 per member per year more on inpatient care relative to PPOs, and an additional $4.20 on primary care visits. However, emergency department visit costs were $19.10 lower per member per year for HSAs and spending on specialist visits was $4.60 lower. There was no statistically significant difference in the two groups in spending on prescription drugs.

For those with no health conditions, spending on HSA enrollees was $60.30 lower per member per year than for PPOs overall, but $2,490 higher for those with two or more health conditions.

The research , with funding support from Aon, Blue Cross Blue Shield Association, Independent Colleges and Universities Benefits Association, JPMorgan Chase and PhRMA, revealed no statistically significant differences between the overall costs of the two types of plan.

“The research concluded that HSA plans have mixed effects on use of health care services. Inpatient admissions and days were higher in HSA plans than in PPOs. The additional inpatient admissions do not appear to be coming from emergency department visits, as HSA plans enrollees used emergency departments less than PPO enrollees,” Fronstin said. “Interestingly, there is a shift from specialist visits to primary care visits among HSA plans enrollees. The HSA plan enrollees also filled fewer prescriptions as compared with PPO enrollees. Overall, HSA plan enrollment had no impact on total spending and there was no statistically significant difference in overall spending between HSA plan and PPO enrollees.”

Previous research from EBRI found that few people are taking full advantage of the “triple tax benefits” of health savings accounts.

Related Topics: employee benefits , Employee Benefits Research Institute , health care , Health Savings Accounts

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How to Invest With an HSA

Understanding how to invest with a health savings account (HSA) can provide an opportunity for individuals looking to save for medical expenses, while also building wealth. HSAs provide a triple tax advantage: your contributions are tax-deductible, your earnings grow tax-free and your withdrawals for qualified medical expenses are tax-free. When considering HSA investment options, you have a variety of choices, such as stocks, bonds, mutual funds and more. Some HSA providers may also offer pre-built investment portfolios that you can choose based on your risk tolerance and financial goals.

Do you need help with financial planning via an HSA or other retirement accounts? Speak with a financial advisor today .

What Are HSAs?

The funds in an HSA are versatile and can generally be used for a wide range of medical expenses. These include doctor’s visits, prescription medications, certain types of dental and vision care and even some over-the-counter medications. This flexibility allows account holders to use their HSA for both routine healthcare needs and unexpected medical costs. Additionally, HSA funds can be used for long-term care expenses and certain health insurance premiums, further enhancing their utility.

HSAs are not just for current medical expenses, as they can also be a strategic component of a larger retirement plan. After age 65, HSA funds can be withdrawn for non-medical expenses without penalty, though such withdrawals will be subject to income taxes, similar to pre-tax retirement accounts like a 401(k) or IRA . This feature makes HSAs a valuable supplemental savings tool, allowing individuals to save for both healthcare and general retirement needs at once.

However, the primary allure of HSAs lies in their tax efficiency. When you contribute to an HSA, you can deduct those contributions from your taxable income, reducing your overall tax liability in the current tax year. Then, the funds within the account grow via their investments tax-free, allowing your savings to compound over time without the intervention of Uncle Sam. Lastly, when you withdraw funds to cover qualified medical expenses, these withdrawals are not subject to taxation. This “triple tax advantage” is the hallmark of HSAs.

How to Start Investing With Your HSA

To open an HSA, you must be enrolled in a high-deductible health plan (HDHP). Most banks, credit unions and financial institutions offer HSA accounts, and many health plans are also partnered with specific institutions where you can open one.

The process for opening and HSA is straightforward: you’ll need personal identification, proof of HDHP enrollment and possibly a minimum opening deposit. Once your account is active, you can start contributing funds immediately.

Funding an HSA can be done in several ways. Contributions can come directly from your paycheck, your employer or personal deposits. The annual contribution limit for 2024 is $4,150 for individuals and $8,300 for families, with an additional catch-up contribution of $1,000 allowed for those 55 and older. Any unused funds roll over each year, building your savings over time.

Once you’ve funded your HSA, it’s time to start investing your money. Many HSA providers offer various investment choices, including mutual funds, index funds and individual stocks. Before investing, ensure you have sufficient liquid cash in your HSA to cover any immediate medical expenses. Most experts recommend keeping at least one year’s worth of medical expenses in cash before investing the rest. Remember, the primary purpose of your HSA is to cover medical expenses, so it’s essential to balance investment growth with you and your family’s liquidity needs.

Investment Strategies for HSAs

HSA investing typically starts with a basic cash account, similar to a traditional savings account, that offers often minimal interest-earning potential. However, the other half of your HSA is called an investment account, and it’s where you’ll actually invest the rest of your funds.

Common HSA investment options include mutual funds, exchange-traded funds (ETFs) and individual stocks and bonds. Generally speaking, mutual funds and ETFs are popular choices due to their inherent diversification, which can reduce risk while providing potential for growth. Individual stocks, while riskier, allow for greater control and the possibility of higher returns. Bonds, on the other hand, are extremely safe, but often come with weaker return potential.

Customizing your HSA investments starts with assessing your risk tolerance and financial goals. If you’re risk-averse and prefer stability, you might lean towards bond funds or cash accounts. These options tend to be less volatile and can offer more reliable, albeit lower, returns. On the other hand, if you’re comfortable with more risk and are aiming for higher returns, you might opt for equity funds or individual stocks. This approach can lead to significant growth, but comes with the possibility of greater fluctuations as the stock market moves with more volatility.

A balanced approach can be effective for many HSA investors. Combining a mix of safe and growth-oriented investments can provide balance. For example, you might allocate a portion of your HSA to a stable bond fund, while investing the remainder in a diversified stock index fund. This strategy helps in managing risk, while taking advantage of some of the market’s riskier opportunities.

Regularly monitoring and adjusting your HSA investment portfolio is always important. Financial markets change, and so do your personal circumstances and healthcare needs. Periodically reviewing your investments ensures they remain aligned with your goals. Consider rebalancing your portfolio annually or when there are significant changes in the market or your personal life as well.

Drawbacks of Investing With an HSA

One major drawback of an HSA is that to qualify for one, you must be enrolled in a HDHP. These plans typically have lower premiums, but higher out-of-pocket costs. This might not be suitable for everyone, especially those with regular medical expenses, so this requirement can be a barrier for some consumers.

Beyond that, investing HSA funds will also carry the same risks as other investment accounts. Market fluctuations can affect the value of investments, and there is no guarantee of returns. Additionally, some HSA providers charge maintenance fees, which can eat into the account’s balance and returns. It’s important to understand these costs and choose an HSA provider that aligns with your needs.

Investing With HSAs vs. 401(k)s and IRAs

When comparing HSA investment options to those of 401(k)s and IRAs , several key differences emerge. HSAs often allow a range of investments similar to IRAs, including stocks, bonds and mutual funds. However, the primary goal of an HSA is to cover medical expenses, so they offer the ability to save for both healthcare and retirement. Their triple tax advantage also includes withdrawing for qualified expenses before retirement, which is something IRAs and 401(k)s can’t provide.

In addition, 401(k)s, while typically having fewer investment choices, benefit from employer matching contributions, which HSAs often don’t have. IRAs offer the broadest range of investment options, giving individuals more control over their retirement strategy, but again, IRAs lack the healthcare-specific perks.

Strategically using HSAs alongside 401(k)s and IRAs can be a beneficial route to look towards. For instance, you could contribute enough to your 401(k) to get employer matching, utilize an IRA for their investment flexibility and have an HSA for their unique tax benefits.

Bottom Line

For those considering HSA investment options, you’ll want to think about the account’s potential and downsides as part of your broader financial strategy. HSAs provide tax advantages such as tax-deductible contributions, tax-free growth and tax-free withdrawals for qualified medical expenses, which is hard to beat with any other tax-advantaged accounts. These also not only cover immediate healthcare costs, but also serve as a strategic investment option for long-term growth.

Tips for Managing Your Retirement Money

• A financial advisor can help you with managing many types of investments, even they’re in an HSA. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now .
• There are a number of different ways you can manage your money before and during retirement. Here are a wide range of different retirement strategies you can check out.

Photo credit: ©iStock.com/Panuwat Dangsungnoen, ©iStock.com/FatCamera, ©iStock.com/FatCamera

Human Subjects Office

Medical terms in lay language.

Please use these descriptions in place of medical jargon in consent documents, recruitment materials and other study documents. Note: These terms are not the only acceptable plain language alternatives for these vocabulary words.

This glossary of terms is derived from a list copyrighted by the University of Kentucky, Office of Research Integrity (1990).

For clinical research-specific definitions, see also the Clinical Research Glossary developed by the Multi-Regional Clinical Trials (MRCT) Center of Brigham and Women’s Hospital and Harvard  and the Clinical Data Interchange Standards Consortium (CDISC) .

Alternative Lay Language for Medical Terms for use in Informed Consent Documents

A   B   C   D   E   F   G   H   I  J  K   L   M   N   O   P   Q   R   S   T   U   V   W  X  Y  Z

ABDOMEN/ABDOMINAL body cavity below diaphragm that contains stomach, intestines, liver and other organs ABSORB take up fluids, take in ACIDOSIS condition when blood contains more acid than normal ACUITY clearness, keenness, esp. of vision and airways ACUTE new, recent, sudden, urgent ADENOPATHY swollen lymph nodes (glands) ADJUVANT helpful, assisting, aiding, supportive ADJUVANT TREATMENT added treatment (usually to a standard treatment) ANTIBIOTIC drug that kills bacteria and other germs ANTIMICROBIAL drug that kills bacteria and other germs ANTIRETROVIRAL drug that works against the growth of certain viruses ADVERSE EFFECT side effect, bad reaction, unwanted response ALLERGIC REACTION rash, hives, swelling, trouble breathing AMBULATE/AMBULATION/AMBULATORY walk, able to walk ANAPHYLAXIS serious, potentially life-threatening allergic reaction ANEMIA decreased red blood cells; low red cell blood count ANESTHETIC a drug or agent used to decrease the feeling of pain, or eliminate the feeling of pain by putting you to sleep ANGINA pain resulting from not enough blood flowing to the heart ANGINA PECTORIS pain resulting from not enough blood flowing to the heart ANOREXIA disorder in which person will not eat; lack of appetite ANTECUBITAL related to the inner side of the forearm ANTIBODY protein made in the body in response to foreign substance ANTICONVULSANT drug used to prevent seizures ANTILIPEMIC a drug that lowers fat levels in the blood ANTITUSSIVE a drug used to relieve coughing ARRHYTHMIA abnormal heartbeat; any change from the normal heartbeat ASPIRATION fluid entering the lungs, such as after vomiting ASSAY lab test ASSESS to learn about, measure, evaluate, look at ASTHMA lung disease associated with tightening of air passages, making breathing difficult ASYMPTOMATIC without symptoms AXILLA armpit

BENIGN not malignant, without serious consequences BID twice a day BINDING/BOUND carried by, to make stick together, transported BIOAVAILABILITY the extent to which a drug or other substance becomes available to the body BLOOD PROFILE series of blood tests BOLUS a large amount given all at once BONE MASS the amount of calcium and other minerals in a given amount of bone BRADYARRHYTHMIAS slow, irregular heartbeats BRADYCARDIA slow heartbeat BRONCHOSPASM breathing distress caused by narrowing of the airways

CARCINOGENIC cancer-causing CARCINOMA type of cancer CARDIAC related to the heart CARDIOVERSION return to normal heartbeat by electric shock CATHETER a tube for withdrawing or giving fluids CATHETER a tube placed near the spinal cord and used for anesthesia (indwelling epidural) during surgery CENTRAL NERVOUS SYSTEM (CNS) brain and spinal cord CEREBRAL TRAUMA damage to the brain CESSATION stopping CHD coronary heart disease CHEMOTHERAPY treatment of disease, usually cancer, by chemical agents CHRONIC continuing for a long time, ongoing CLINICAL pertaining to medical care CLINICAL TRIAL an experiment involving human subjects COMA unconscious state COMPLETE RESPONSE total disappearance of disease CONGENITAL present before birth CONJUNCTIVITIS redness and irritation of the thin membrane that covers the eye CONSOLIDATION PHASE treatment phase intended to make a remission permanent (follows induction phase) CONTROLLED TRIAL research study in which the experimental treatment or procedure is compared to a standard (control) treatment or procedure COOPERATIVE GROUP association of multiple institutions to perform clinical trials CORONARY related to the blood vessels that supply the heart, or to the heart itself CT SCAN (CAT) computerized series of x-rays (computerized tomography) CULTURE test for infection, or for organisms that could cause infection CUMULATIVE added together from the beginning CUTANEOUS relating to the skin CVA stroke (cerebrovascular accident)

DERMATOLOGIC pertaining to the skin DIASTOLIC lower number in a blood pressure reading DISTAL toward the end, away from the center of the body DIURETIC "water pill" or drug that causes increase in urination DOPPLER device using sound waves to diagnose or test DOUBLE BLIND study in which neither investigators nor subjects know what drug or treatment the subject is receiving DYSFUNCTION state of improper function DYSPLASIA abnormal cells

ECHOCARDIOGRAM sound wave test of the heart EDEMA excess fluid collecting in tissue EEG electric brain wave tracing (electroencephalogram) EFFICACY effectiveness ELECTROCARDIOGRAM electrical tracing of the heartbeat (ECG or EKG) ELECTROLYTE IMBALANCE an imbalance of minerals in the blood EMESIS vomiting EMPIRIC based on experience ENDOSCOPIC EXAMINATION viewing an  internal part of the body with a lighted tube  ENTERAL by way of the intestines EPIDURAL outside the spinal cord ERADICATE get rid of (such as disease) Page 2 of 7 EVALUATED, ASSESSED examined for a medical condition EXPEDITED REVIEW rapid review of a protocol by the IRB Chair without full committee approval, permitted with certain low-risk research studies EXTERNAL outside the body EXTRAVASATE to leak outside of a planned area, such as out of a blood vessel

FDA U.S. Food and Drug Administration, the branch of federal government that approves new drugs FIBROUS having many fibers, such as scar tissue FIBRILLATION irregular beat of the heart or other muscle

GENERAL ANESTHESIA pain prevention by giving drugs to cause loss of consciousness, as during surgery GESTATIONAL pertaining to pregnancy

HEMATOCRIT amount of red blood cells in the blood HEMATOMA a bruise, a black and blue mark HEMODYNAMIC MEASURING blood flow HEMOLYSIS breakdown in red blood cells HEPARIN LOCK needle placed in the arm with blood thinner to keep the blood from clotting HEPATOMA cancer or tumor of the liver HERITABLE DISEASE can be transmitted to one’s offspring, resulting in damage to future children HISTOPATHOLOGIC pertaining to the disease status of body tissues or cells HOLTER MONITOR a portable machine for recording heart beats HYPERCALCEMIA high blood calcium level HYPERKALEMIA high blood potassium level HYPERNATREMIA high blood sodium level HYPERTENSION high blood pressure HYPOCALCEMIA low blood calcium level HYPOKALEMIA low blood potassium level HYPONATREMIA low blood sodium level HYPOTENSION low blood pressure HYPOXEMIA a decrease of oxygen in the blood HYPOXIA a decrease of oxygen reaching body tissues HYSTERECTOMY surgical removal of the uterus, ovaries (female sex glands), or both uterus and ovaries

IATROGENIC caused by a physician or by treatment IDE investigational device exemption, the license to test an unapproved new medical device IDIOPATHIC of unknown cause IMMUNITY defense against, protection from IMMUNOGLOBIN a protein that makes antibodies IMMUNOSUPPRESSIVE drug which works against the body's immune (protective) response, often used in transplantation and diseases caused by immune system malfunction IMMUNOTHERAPY giving of drugs to help the body's immune (protective) system; usually used to destroy cancer cells IMPAIRED FUNCTION abnormal function IMPLANTED placed in the body IND investigational new drug, the license to test an unapproved new drug INDUCTION PHASE beginning phase or stage of a treatment INDURATION hardening INDWELLING remaining in a given location, such as a catheter INFARCT death of tissue due to lack of blood supply INFECTIOUS DISEASE transmitted from one person to the next INFLAMMATION swelling that is generally painful, red, and warm INFUSION slow injection of a substance into the body, usually into the blood by means of a catheter INGESTION eating; taking by mouth INTERFERON drug which acts against viruses; antiviral agent INTERMITTENT occurring (regularly or irregularly) between two time points; repeatedly stopping, then starting again INTERNAL within the body INTERIOR inside of the body INTRAMUSCULAR into the muscle; within the muscle INTRAPERITONEAL into the abdominal cavity INTRATHECAL into the spinal fluid INTRAVENOUS (IV) through the vein INTRAVESICAL in the bladder INTUBATE the placement of a tube into the airway INVASIVE PROCEDURE puncturing, opening, or cutting the skin INVESTIGATIONAL NEW DRUG (IND) a new drug that has not been approved by the FDA INVESTIGATIONAL METHOD a treatment method which has not been proven to be beneficial or has not been accepted as standard care ISCHEMIA decreased oxygen in a tissue (usually because of decreased blood flow)

LAPAROTOMY surgical procedure in which an incision is made in the abdominal wall to enable a doctor to look at the organs inside LESION wound or injury; a diseased patch of skin LETHARGY sleepiness, tiredness LEUKOPENIA low white blood cell count LIPID fat LIPID CONTENT fat content in the blood LIPID PROFILE (PANEL) fat and cholesterol levels in the blood LOCAL ANESTHESIA creation of insensitivity to pain in a small, local area of the body, usually by injection of numbing drugs LOCALIZED restricted to one area, limited to one area LUMEN the cavity of an organ or tube (e.g., blood vessel) LYMPHANGIOGRAPHY an x-ray of the lymph nodes or tissues after injecting dye into lymph vessels (e.g., in feet) LYMPHOCYTE a type of white blood cell important in immunity (protection) against infection LYMPHOMA a cancer of the lymph nodes (or tissues)

MALAISE a vague feeling of bodily discomfort, feeling badly MALFUNCTION condition in which something is not functioning properly MALIGNANCY cancer or other progressively enlarging and spreading tumor, usually fatal if not successfully treated MEDULLABLASTOMA a type of brain tumor MEGALOBLASTOSIS change in red blood cells METABOLIZE process of breaking down substances in the cells to obtain energy METASTASIS spread of cancer cells from one part of the body to another METRONIDAZOLE drug used to treat infections caused by parasites (invading organisms that take up living in the body) or other causes of anaerobic infection (not requiring oxygen to survive) MI myocardial infarction, heart attack MINIMAL slight MINIMIZE reduce as much as possible Page 4 of 7 MONITOR check on; keep track of; watch carefully MOBILITY ease of movement MORBIDITY undesired result or complication MORTALITY death MOTILITY the ability to move MRI magnetic resonance imaging, diagnostic pictures of the inside of the body, created using magnetic rather than x-ray energy MUCOSA, MUCOUS MEMBRANE moist lining of digestive, respiratory, reproductive, and urinary tracts MYALGIA muscle aches MYOCARDIAL pertaining to the heart muscle MYOCARDIAL INFARCTION heart attack

NASOGASTRIC TUBE placed in the nose, reaching to the stomach NCI the National Cancer Institute NECROSIS death of tissue NEOPLASIA/NEOPLASM tumor, may be benign or malignant NEUROBLASTOMA a cancer of nerve tissue NEUROLOGICAL pertaining to the nervous system NEUTROPENIA decrease in the main part of the white blood cells NIH the National Institutes of Health NONINVASIVE not breaking, cutting, or entering the skin NOSOCOMIAL acquired in the hospital

OCCLUSION closing; blockage; obstruction ONCOLOGY the study of tumors or cancer OPHTHALMIC pertaining to the eye OPTIMAL best, most favorable or desirable ORAL ADMINISTRATION by mouth ORTHOPEDIC pertaining to the bones OSTEOPETROSIS rare bone disorder characterized by dense bone OSTEOPOROSIS softening of the bones OVARIES female sex glands

PARENTERAL given by injection PATENCY condition of being open PATHOGENESIS development of a disease or unhealthy condition PERCUTANEOUS through the skin PERIPHERAL not central PER OS (PO) by mouth PHARMACOKINETICS the study of the way the body absorbs, distributes, and gets rid of a drug PHASE I first phase of study of a new drug in humans to determine action, safety, and proper dosing PHASE II second phase of study of a new drug in humans, intended to gather information about safety and effectiveness of the drug for certain uses PHASE III large-scale studies to confirm and expand information on safety and effectiveness of new drug for certain uses, and to study common side effects PHASE IV studies done after the drug is approved by the FDA, especially to compare it to standard care or to try it for new uses PHLEBITIS irritation or inflammation of the vein PLACEBO an inactive substance; a pill/liquid that contains no medicine PLACEBO EFFECT improvement seen with giving subjects a placebo, though it contains no active drug/treatment PLATELETS small particles in the blood that help with clotting POTENTIAL possible POTENTIATE increase or multiply the effect of a drug or toxin (poison) by giving another drug or toxin at the same time (sometimes an unintentional result) POTENTIATOR an agent that helps another agent work better PRENATAL before birth PROPHYLAXIS a drug given to prevent disease or infection PER OS (PO) by mouth PRN as needed PROGNOSIS outlook, probable outcomes PRONE lying on the stomach PROSPECTIVE STUDY following patients forward in time PROSTHESIS artificial part, most often limbs, such as arms or legs PROTOCOL plan of study PROXIMAL closer to the center of the body, away from the end PULMONARY pertaining to the lungs

QD every day; daily QID four times a day

RADIATION THERAPY x-ray or cobalt treatment RANDOM by chance (like the flip of a coin) RANDOMIZATION chance selection RBC red blood cell RECOMBINANT formation of new combinations of genes RECONSTITUTION putting back together the original parts or elements RECUR happen again REFRACTORY not responding to treatment REGENERATION re-growth of a structure or of lost tissue REGIMEN pattern of giving treatment RELAPSE the return of a disease REMISSION disappearance of evidence of cancer or other disease RENAL pertaining to the kidneys REPLICABLE possible to duplicate RESECT remove or cut out surgically RETROSPECTIVE STUDY looking back over past experience

SARCOMA a type of cancer SEDATIVE a drug to calm or make less anxious SEMINOMA a type of testicular cancer (found in the male sex glands) SEQUENTIALLY in a row, in order SOMNOLENCE sleepiness SPIROMETER an instrument to measure the amount of air taken into and exhaled from the lungs STAGING an evaluation of the extent of the disease STANDARD OF CARE a treatment plan that the majority of the medical community would accept as appropriate STENOSIS narrowing of a duct, tube, or one of the blood vessels in the heart STOMATITIS mouth sores, inflammation of the mouth STRATIFY arrange in groups for analysis of results (e.g., stratify by age, sex, etc.) STUPOR stunned state in which it is difficult to get a response or the attention of the subject SUBCLAVIAN under the collarbone SUBCUTANEOUS under the skin SUPINE lying on the back SUPPORTIVE CARE general medical care aimed at symptoms, not intended to improve or cure underlying disease SYMPTOMATIC having symptoms SYNDROME a condition characterized by a set of symptoms SYSTOLIC top number in blood pressure; pressure during active contraction of the heart

TERATOGENIC capable of causing malformations in a fetus (developing baby still inside the mother’s body) TESTES/TESTICLES male sex glands THROMBOSIS clotting THROMBUS blood clot TID three times a day TITRATION a method for deciding on the strength of a drug or solution; gradually increasing the dose T-LYMPHOCYTES type of white blood cells TOPICAL on the surface TOPICAL ANESTHETIC applied to a certain area of the skin and reducing pain only in the area to which applied TOXICITY side effects or undesirable effects of a drug or treatment TRANSDERMAL through the skin TRANSIENTLY temporarily TRAUMA injury; wound TREADMILL walking machine used to test heart function

UPTAKE absorbing and taking in of a substance by living tissue

VALVULOPLASTY plastic repair of a valve, especially a heart valve VARICES enlarged veins VASOSPASM narrowing of the blood vessels VECTOR a carrier that can transmit disease-causing microorganisms (germs and viruses) VENIPUNCTURE needle stick, blood draw, entering the skin with a needle VERTICAL TRANSMISSION spread of disease

WBC white blood cell

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regreSSHion: Remote Unauthenticated Code Execution Vulnerability in OpenSSH server

Last updated on: July 3, 2024

Table of Contents

About openssh: securing enterprise communications and infrastructure, affected openssh versions:, potential impact of regresshion, immediate steps to mitigate risk, technical details, qualys qid coverage, discover vulnerable assets using qualys cybersecurity asset management (csam), enhance your security posture with qualys vulnerability management, detection, and response (vmdr).

• Gain exposure visibility and remediation tracking with the regreSSHion Unified Dashboard
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Detect and remediate CVE-2024-6387 with Qualys TotalCloud Container Security

Qualys products and customer responsibilities, frequently asked questions (faqs).

The  Qualys Threat Research Unit (TRU)  has discovered a Remote Unauthenticated Code Execution (RCE) vulnerability in OpenSSH’s server (sshd) in glibc-based Linux systems. CVE assigned to this vulnerability is CVE-2024-6387.

The vulnerability, which is a signal handler race condition in OpenSSH’s server (sshd), allows unauthenticated remote code execution (RCE) as root on glibc-based Linux systems; that presents a significant security risk. This race condition affects sshd in its default configuration.

Based on searches using Censys and Shodan, we have identified over 14 million potentially vulnerable OpenSSH server instances exposed to the Internet. Anonymized data from Qualys CSAM 3.0 with External Attack Surface Management data reveals that approximately 700,000 external internet-facing instances are vulnerable. This accounts for 31% of all internet-facing instances with OpenSSH in our global customer base. Interestingly, over 0.14% of vulnerable internet-facing instances with OpenSSH service have an End-Of-Life/End-Of-Support version of OpenSSH running.

In our security analysis, we identified that this vulnerability is a regression of the previously patched vulnerability CVE-2006-5051, which was reported in 2006. A regression in this context means that a flaw, once fixed, has reappeared in a subsequent software release, typically due to changes or updates that inadvertently reintroduce the issue. This incident highlights the crucial role of thorough regression testing to prevent the reintroduction of known vulnerabilities into the environment. This regression was introduced in October 2020 (OpenSSH 8.5p1).

Qualys has developed a working exploit for the regreSSHion vulnerability. As part of the disclosure process, we successfully demonstrated the exploit to the OpenSSH team to assist with their understanding and remediation efforts. We do not release our exploits, as we must allow time for patches to be applied. However, even though the exploit is complex, we believe that other independent researchers will be able to replicate our results.

OpenSSH (Open Secure Shell) is a suite of secure networking utilities based on the Secure Shell (SSH) protocol, which is vital for secure communication over unsecured networks. It provides robust encryption to ensure privacy and secure file transfers, making it an essential tool for remote server management and secure data communication. Known for its extensive security and authentication features, OpenSSH supports various encryption technologies and is standard on multiple Unix-like systems, including macOS and Linux.

OpenSSH’s implementation serves as a critical tool for secure communication. Its enterprise value lies in its scalability and the ability to enforce robust access controls and secure automated processes across various environments. This includes everything from automated backups and batch processing to complex DevOps practices, which involve the secure handling of sensitive data across multiple systems and locations. Its continued development and widespread adoption highlight its importance in maintaining the confidentiality and integrity of network communications worldwide.

OpenSSH stands as a benchmark in software security, exemplifying a robust defense-in-depth approach. Despite the recent vulnerability, its overall track record remains exceptionally strong, serving as both a model and an inspiration in the field.

• OpenSSH versions earlier than 4.4p1 are vulnerable to this signal handler race condition unless they are patched for CVE-2006-5051 and CVE-2008-4109.
• Versions from 4.4p1 up to, but not including, 8.5p1 are not vulnerable due to a transformative patch for CVE-2006-5051, which made a previously unsafe function secure.
• The vulnerability resurfaces in versions from 8.5p1 up to, but not including, 9.8p1 due to the accidental removal of a critical component in a function.

OpenBSD systems are unaffected by this bug, as OpenBSD developed a secure mechanism in 2001 that prevents this vulnerability.

This vulnerability, if exploited, could lead to full system compromise where an attacker can execute arbitrary code with the highest privileges, resulting in a complete system takeover, installation of malware, data manipulation, and the creation of backdoors for persistent access. It could facilitate network propagation, allowing attackers to use a compromised system as a foothold to traverse and exploit other vulnerable systems within the organization.

Moreover, gaining root access would enable attackers to bypass critical security mechanisms such as firewalls, intrusion detection systems, and logging mechanisms, further obscuring their activities. This could also result in significant data breaches and leakage, giving attackers access to all data stored on the system, including sensitive or proprietary information that could be stolen or publicly disclosed.

This vulnerability is challenging to exploit due to its remote race condition nature, requiring multiple attempts for a successful attack. This can cause memory corruption and necessitate overcoming Address Space Layout Randomization (ASLR). Advancements in deep learning may significantly increase the exploitation rate, potentially providing attackers with a substantial advantage in leveraging such security flaws.

Addressing the regreSSHion vulnerability in OpenSSH, which enables remote code execution on Linux systems, demands a focused and layered security approach. Here are concise steps and strategic recommendations for enterprises to safeguard against this significant threat:

• Patch Management : Quickly apply available patches for OpenSSH and prioritize ongoing update processes.
• Enhanced Access Control : Limit SSH access through network-based controls to minimize the attack risks.
• Network Segmentation and Intrusion Detection : Divide networks to restrict unauthorized access and lateral movements within critical environments and deploy systems to monitor and alert on unusual activities indicative of exploitation attempts.
• Custom Assessment and Remediation: Quickly execute mitigation script on required assets. To find out more, check out the FAQ section ‘Are there any mitigations for this vulnerability?’

You can find the technical details of this vulnerability at:  

https://www.qualys.com/2024/07/01/cve-2024-6387/regresshion.txt

Qualys is releasing the QIDs in the table below as they become available, starting with vulnsigs version VULNSIGS-2.6.83-4 and in Linux Cloud Agent manifest version LX_MANIFEST-2.6.83.4-5

It is recommended that Qualys customers use OS-specific QIDs to scan for backported packages on supported Linux distributions.

Please check the Qualys Vulnerability Knowledgebase for the full list of coverage for this vulnerability.

The initial and crucial step in managing this critical vulnerability and mitigating associated risks involves pinpointing all assets susceptible to this specific issue. Use CSAM 3.0 with External Attack Surface Management to identify your organization’s internet-facing instances that have vulnerable versions of OpenSSH or are at their End of Life (EOL) or End of Support (EOS).

Identify internet-facing instances with vulnerable versions of OpenSSH

In the following example, we aim to identify all assets running the OpenSSH:

Qualys VMDR  offers comprehensive coverage and visibility into vulnerabilities, empowering organizations to rapidly respond to, prioritize, and mitigate the associated risks. Additionally, Qualys customers can leverage Qualys Patch Management to remediate these vulnerabilities effectively.

Leverage the power of Qualys VMDR alongside TruRisk and the Qualys Query Language (QQL) to efficiently identify and prioritize vulnerable assets, effectively addressing the vulnerabilities highlighted above.

Try Qualys VMDR at no cost for 30 days

Use this QQL statement:

Gain exposure visibility and remediation tracking with the “regreSSHion” Unified Dashboard

With the Qualys Unified Dashboard, you can track the vulnerability exposure within your organization and view your impacted hosts, their status, distribution across environments, and overall management in real time, allowing you to see your mean time to remediation (MTTR).

To make it easier for customers to track and manage regreSSHion vulnerability in their subscriptions, we have created the Manage regreSSHion dashboard , which you can download and import into your subscription.

Automatically Patch “regreSSHion” vulnerability With Qualys Patch Management

We expect vendors to release patches for this vulnerability shortly. Qualys Patch Management can  automatically deploy those patches to vulnerable assets, when available.

Customers can use the “patch now” button found to the right of the vulnerability to add regreSSHion to a patch job. Once patches are released, Qualys will find the relevant patches for this vulnerability and automatically add those patches to a patch job. This will allow customers to deploy those patches to vulnerable devices, all from the Qualys Cloud Platform.

Qualys Patch Management No-Cost 45-Day Trial

Qualys TotalCloud Container Security offers comprehensive coverage and visibility into vulnerabilities across all your container environments, including managed Kubernetes and on-premises Kubernetes. This empowers organizations to rapidly respond to, prioritize, and mitigate associated risks effectively.

Leverage the power of Qualys TotalCloud Container Security and the Qualys Query Language (QQL) to efficiently identify and prioritize vulnerable assets, ensuring prompt and effective remediation of the vulnerabilities highlighted by CVE-2024-6387.

Qualys is cutting the release cycle short for certain products that are deployed on customer premises. At least one of those products depends on a supplier that will publish a fix release shortly. We intend to release fixes for this Severity HIGH CVE in the coming days to ensure that customers are safe from regreSSHion. Once builds have cleared Quality Assurance, we will provide updates to help customers patch.

Will the Qualys Research Team publish exploit code or include proof-of-concept code for this vulnerability?

No, as part of our commitment to responsible disclosure and maintaining high-security standards, we will not publish exploit codes. Given the complexity of this vulnerability, it is crucial to allow organizations to apply patches effectively without the immediate pressure of public exploits.

Are there any mitigations for this vulnerability?

If sshd can’t be updated or recompiled, set LoginGraceTime to 0 in the config file. This exposes sshd to a denial of service by using up all MaxStartups connections, but it prevents the remote code execution risk.

Using Qualys Custom Assessment and Remediation (CAR), you can easily apply this mitigation across affected assets in one go. Just follow these easy steps:

1. Go to CAR Library, look for Zero Day Utilities, and import the mitigation script.

2. You can approve while importing or later on.

3. Execute it across required assets/asset tags.

To execute this mitigation, enable your free trial of CAR – https://www.qualys.com/forms/custom-assessment-remediation/

Is this vulnerability remotely exploitable?

Yes, this vulnerability can be exploited remotely and allows unauthenticated remote code execution (RCE) as root, posing a significant security risk.

Why is the vulnerability named “regreSSHion”?

This is a pun/reference to this being a regression bug affecting OpenSSH.

Should organizations patch these vulnerabilities urgently?

Yes, we would encourage organizations to patch this vulnerability urgently, especially on their internet-facing assets.

How will the new security fix be implemented for different versions?

This fix is part of a major update, making it challenging to backport. Consequently, users will have two update options: upgrading to the latest version released on Monday, July 1st (9.8p1) or applying a fix to older versions as outlined in the advisory, which is the approach most vendors will take.

Does this vulnerability affect macOS or Windows?

While it is likely that the vulnerability exists in both macOS and Windows, its exploitability on these platforms remains uncertain. Further analysis is required to determine the specific impact.

How can users identify exploitation attempts of this vulnerability?

Exploitation attempts for this vulnerability can be identified by seeing many many lines of “Timeout before authentication” in the logs.

What is the exposure to Qualys infrastructure?

The Qualys security team has taken immediate steps to protect our corporate infrastructure and products from any impact regarding the exploitation of this vulnerability. At this time, we have not experienced any negative impacts or detected any exploitation attempts. In addition, the Qualys security team has implemented enhanced monitoring and response plans to detect and respond to future exploit attempts. Emergency patching procedures have been initiated to fully remediate the vulnerability. To further help the broader security community, we are sharing our detection logic (see FAQ: “How to identify exploitation attempts of this vulnerability?”) to help customers respond should attacks occur before patching and mitigation efforts are completed.

How can users identify systems vulnerable to the OpenSSH regreSSHion vulnerability?

Users can determine if their systems are vulnerable by verifying the version of the OpenSSH server installed. Systems running affected versions should be considered at risk and prioritized for updates.

Under what circumstances might QID 42046 fail to report accurately?

Accurate detection with QID 42046 requires root privileges, as the command used only runs with root access.

Why is a QID categorized as a confirmed or potential vulnerability?

A QID is reported as confirmed in authenticated scan results because these scans can access detailed information that verifies the vulnerability more reliably. On the other hand, remote unauthenticated scans categorize a QID as potential because they primarily depend on the information presented by the OpenSSH service banner. This banner might display a partial version of details, leading to less definitive conclusions about the presence of a vulnerability.

When will the Qualys Detection Score (QDS) be updated?

As the vulnerability begins to trend across various threat intelligence sources, our QDS will utilize these intelligent feeds for dynamic updates. We expect its effectiveness to reach a score of 90 or above.

Has the threat feed been updated to include the regreSSHion vulnerability?

Yes, the Qualys threat feed is updated when emerging threats are tracked and reported from the dark web and other sources. The update activates as soon as a vulnerability trends across various threat intelligence platforms.

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No record found for this QID or CVE in Qualys KB. Great job on reporting however the data set is not published.

“Immediate Steps to Mitigate Risk” there’s a config-based mitigation, this section is just marketing nonsense and it’s irresponsible of you to hide the actual immediate mitigation in the “technical details”

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Research: Using AI at Work Makes Us Lonelier and Less Healthy

• David De Cremer
• Joel Koopman

Employees who use AI as a core part of their jobs report feeling more isolated, drinking more, and sleeping less than employees who don’t.

The promise of AI is alluring — optimized productivity, lightning-fast data analysis, and freedom from mundane tasks — and both companies and workers alike are fascinated (and more than a little dumbfounded) by how these tools allow them to do more and better work faster than ever before. Yet in fervor to keep pace with competitors and reap the efficiency gains associated with deploying AI, many organizations have lost sight of their most important asset: the humans whose jobs are being fragmented into tasks that are increasingly becoming automated. Across four studies, employees who use it as a core part of their jobs reported feeling lonelier, drinking more, and suffering from insomnia more than employees who don’t.

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• David De Cremer is a professor of management and technology at Northeastern University and the Dunton Family Dean of its D’Amore-McKim School of Business. His website is daviddecremer.com .
• JK Joel Koopman is the TJ Barlow Professor of Business Administration at the Mays Business School of Texas A&M University. His research interests include prosocial behavior, organizational justice, motivational processes, and research methodology. He has won multiple awards from Academy of Management’s HR Division (Early Career Achievement Award and David P. Lepak Service Award) along with the 2022 SIOP Distinguished Early Career Contributions award, and currently serves on the Leadership Committee for the HR Division of the Academy of Management .

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