Managing Healthcare Costs with a Health Savings Account (HSA)

Designing a benefits program that supports employees means offering tools that work when real life events happen. A Health Savings Account (HSA) can be one of those tools. In this edition of Benefits Architecture: Learn the framework. Elevate the design., we explore how HSAs help employees take control of healthcare costs today while building financial confidence for the future.

A Health Savings Account (HSA) is a personal, tax-advantaged savings account that employees can use to pay for qualified medical expenses. Both employers and employees can contribute, making it a flexible benefit that supports everyday healthcare needs while helping employees save for future medical costs.

A triple tax advantage

Health Savings Accounts are employee-owned accounts available to those who are enrolled in a High Deductible Health Plan, but what sets them apart from other benefit accounts is their triple tax advantage: contributions are tax-free, earnings are tax-free while they grow, and taxes are not paid on withdrawals for qualified medical expenses. 

While HSAs are subject to annual contribution limits set by the IRS, any money in the account rolls over year after year, meaning it never disappears at the end of the plan year. For 2025, the maximum contribution limit is $4,300 for individuals and $8,550 for families. In 2026, those limits increase slightly to $4,400 for individuals and $8,750 for families. Individuals aged 55 and older can also make an additional $1,000 catch-up contribution each year. Contributions can come from the employee, the employer, or a combination of both. Total contributions cannot exceed the annual limit set by the IRS.

Once the account is funded, employees can use it to pay for qualified medical expenses. This can include doctor visits, hospital services, deductibles, copayments, coinsurance, and prescription medication, as well as physical therapy, medical equipment, and more. Vision and dental care can also be paid from HSA funds.

Over time, HSAs can grow into powerful financial tools. Many accounts allow for investment options, meaning employees can grow their savings tax-free, similar to a retirement account. This makes the HSA not only a short-term resource for medical bills, but also a long-term investment in future healthcare security.

When real life happens: How an HSA can help

In our recent Benefits Architecture: Understanding the Life of a Medical Claim edition, we explored how an emergency appendectomy’s costs flow from treatment to claim processing.

In that same scenario, an HSA can help employees cover their deductible, coinsurance, prescriptions, and follow-up visits. Without an HSA, these costs would need to be paid entirely out-of-pocket. But with an HSA, they can use the tax-free funds they’ve been saving in their HSA account to cover those costs directly.

For example, if the employee’s HDHP has a $3,000 deductible and 20% coinsurance, the HSA funds can be used to pay that deductible and their portion of the remaining costs. Because the contributions to the HSA were made pre-tax, the employee effectively saves on every dollar spent. If their out-of-pocket maximum is $6,000, the HSA can help them manage it comfortably and with less worry.

A smart, flexible tool for the future

HSAs are a flexible bridge between today’s healthcare needs and tomorrow’s financial goals. Employees can use them for everyday costs like prescriptions and copays, or they can invest the funds and let them grow tax-free to prepare for future expenses, including medical costs in retirement.

For employers, offering an HSA-eligible plan can provide affordability, flexibility, and improved employee engagement. Paired with a High Deductible Health Plan (HDHP), HSAs often come with lower premiums than traditional plans. Contributions are tax-deductible, and employee payroll contributions can reduce FICA taxes, providing additional savings. 

Beyond the financial benefits, HSAs empower employees to make smarter healthcare decisions and take ownership of their benefits, and because they support long-term financial wellness, they are also a valuable tool for attracting and retaining top talent.

Learn more about Health Savings Accounts — Reach out today!

Whether it’s covering an unexpected procedure or planning for healthcare decades from now, an HSA can help employees take charge of both their health and their financial well-being.

If you’d like to learn more about how Health Savings Accounts can fit into your benefits program, don’t hesitate to reach out. We’re here to talk with you! 

Cost figures, coverage details, and plan design elements presented in this blog are for illustrative purposes only and do not reflect any specific insurance policy or provider. Actual costs will vary based on your organization’s health plan, the insurance carrier, provider contracts, and the specifics of each medical situation. Employers and employees should refer to their official plan documents or speak with their broker or benefits consultant for guidance if needed.