COVID-19 Is Costing Americans Thousands. Here's How Your HSA Can Cover the Costs

Here comes yet another COVID-19 winter -- are you prepared? I just got the latest booster shot, and my supply of KN-95 masks is still robust, so I think I'm as ready as I can be. Thankfully, my personal finances are in a good place these days, because COVID-19 can be expensive in a few different ways.

The Ascent's research team found earlier this year that Americans changed financial priorities as a result of the pandemic, with 40% of those surveyed opting to spend more on goods and services rather than saving money.

Given the extreme impact COVID-19 had (and continues to have) on our daily lives, this isn't so surprising. But if you're concerned about medical expenses and you qualify for a health savings account (HSA), I have some good news for you: Your HSA can help you cover costs.

What can an HSA do for you?

Not all health insurance plans will give you access to an HSA. In 2023, your health insurance plan must have a deductible of at least $1,500 ($3,000 for family coverage) and an out-of-pocket maximum of $7,500 ($15,000 for family coverage). With these qualifications, you can open a health savings account and contribute up to $3,850 ($7,750 for a family) for the year. This money is pre-tax, so it can reduce your taxable income. You won't have to pay taxes if you make withdrawals for qualified medical expenses, and your money can even be invested and grow tax-free.

HSA funds can be used to pay for more medical expenses than you may realize, and thankfully, that extends to bills you may incur as a result of COVID-19. Your insurance policy should cover COVID-19 vaccines without any out-of-pocket contributions from you, but since the public health emergency has ended, you'll need to pay for costs relating to testing and treatment, including prescription medication.

This is where your HSA comes in, as it can be used to cover those expenses. Once you meet your deductible and other cost-sharing obligations, your insurance should pick up the rest of the tab. And if your case of COVID-19 is mild, you can even use HSA funds to pay for over-the-counter medication to help you feel better.

Make these moves to be ready for another COVID-19 winter

Whether you have an HSA or not, there are other things you can do to ensure smooth sailing this winter.

• Pad your savings: Having a solid emergency fund is always a personal finance best practice. If your HSA balance isn't sufficient to fully cover the cost of getting sick (or if you don't have access to an HSA), an emergency fund can come to the rescue. Save in a high-yield savings account or money market account, so your cash is ready and accessible when you need it.
• Check your supply of sick days: If you're lucky enough to work for an employer that grants you paid sick leave, have a look at your balance of days to get an idea of where you stand. If you're a freelancer like I am and don't get paid sick leave, it's worth padding that emergency fund even more to help you cover the bills if you can't work for a few days while you're battling COVID-19.
• Review your health insurance coverage: If you have a high-deductible plan, check just how much of that deductible you have left to cover before additional medical treatment is covered by your insurer. The time to find out is now, before you find yourself facing illness.

COVID-19 is expensive -- there's no way to get around it. USC found that our costs from this virus will reach $14 trillion by the end of this year. Your personal costs will be less than that, of course, but getting sick still has the potential to throw a serious wrench into your finances. Rely on your HSA if you have one, and pad your savings if possible. And don't forget to check your health insurance coverage to see where you stand as far as your deductible is concerned.