HSA Strategy (Part 2)

Today I continue with my discussion of Health Savings Accounts (HSA) before moving on to decide how I will invest mine.

This is for educational purposes only. Please see the full disclaimer in the second paragraph here.

As previously mentioned, HSA eligibility requirements start with high-deductible health [insurance] plan (HDHPs). These are characterized by lower monthly premiums and higher annual deductibles than traditional plans. For 2026, the IRS defines HDHPs as plans with a minimum deductible of $1,700 for individuals and $3,400 for families (more on this below). With HDHPs, one usually pays the full cost of most medical services out of pocket until the annual deductible is reached at which point copays or coinsurance apply. Monthly premiums are often less than standard PPOs or HMOs. In-network preventive services (e.g. annual physicals or vaccines) are usually covered 100% even before meeting the deductible.

HDHPs must also adhere to maximum out-of-pocket limits. For 2026, this is $8,500 ($17,000) for individuals (families). Anything higher is viewed by IRS as “too expensive” for the consumer and does not qualify for tax advantages of an HSA.

Some people are better suited to HDHPs. Mostly healthy individuals with few doctor visits aiming to save on monthly costs are ideal. HDHPs are not such a good fit for those with chronic conditions or people requiring frequent specialist visits and prescriptions since upfront costs can be high. HDHPs attract savers who want to use HSAs as long-term, tax-advantaged investment tools for future healthcare needs in addition to those with a financial cushion who can afford to pay greater deductibles in cases of emergency.

Perhaps because I’ve grown accustomed, I did not think $1,700 (individual) to be “high deductible.” It actually is. Employer-sponsored plans average $1,400 for an individual PPO deductible while many zero-deductible HMOs and high-tier PPOs also exist (copay-only for most services from day one). For individual Marketplace insurance, gold plan deductibles average ~$1,500 while platinum plans have zero or very low deductibles often averaging < $100.

Aside from the HDHP, other eligibility criteria for HSA contribution include:

• No other medical coverage (e.g. traditional PPO or a spouse’s non-HDHP) though dental and vision plans are allowed.
• Not enrolled in Medicare Part A or B.
• Not a dependent claimed on someone else’s tax return.

HSA parameters vary by year. For 2026 (2025), individual contribution limit is $4,400 ($4,300) and minimum HDHP deductible is $1,700 ($1,650). “Catch-up” contribution allowed for ages 55+ (on or before Dec 31) is additional $1,000 for both years.

I will continue next time.