Health Savings Accounts (HSAs)

For the first time in 2026, Health Savings Accounts (HSAs) can be used with all individual plans on the Health Connector’s Bronze tier and Catastrophic plans. HSAs let you set money aside to help you pay out-of-pocket health care costs through an account that lets you save money at tax time. Most larger banks and personal finance companies offer quick and easy HSA options with information about how to deduct HSA contributions at tax time.

What is an HSA?

An HSA can be used to pay for some health care costs, such as deductibles, co-payments, and co-insurance. HSAs also give you some tax benefits that save you money when you file your taxes.

Who is eligible for HSAs, and how can they be paired with Health Connector plans?

Beginning on January 1, 2026, all Bronze and Catastrophic plans available to individuals enrolling in non-group coverage through the Health Connector can be paired with HSAs, regardless of whether they meet the definition of a High-Deductible Health Plan.

The plan comparison tools can also be used to determine which plans are HSA-compatible during plan shopping.

What are the benefits of an HSA?

• Federal tax advantages. Contributions are tax-deductible, earnings from investment of account funds are tax-free, and withdrawals used for qualified medical expenses are tax-free. Individuals can claim a tax deduction for contributions made to an HSA on their federal taxes, even if they do not itemize their deductions.
• Funds do not expire. HSA account funds do not expire at the end of the year or in the event of a job change or retirement. Funds automatically remain in the account year over year unless withdrawn.
• Possible use for family members. HSA funds may be used to pay for qualified medical expenses for spouses and dependents, even if they are not covered under the individual’s insurance plan.

What are qualified medical expenses?

Qualified medical expenses include deductibles, copayments, and coinsurance used for medical and dental services like prescription drugs, doctor visits, behavioral health services, and telehealth services. More information on qualified medical expenses can be found in IRS Publication 502, Medical and Dental Expenses. Receipts for qualified medical expenses paid or reimbursed using HSA withdrawals should be saved in case of an audit from the IRS.

Generally, Health Connector plan premiums are not considered qualified medical expenses. Premiums are only considered qualified medical expenses if they are for one of the following (more information can be found in IRS Publication 969):

• Long-term care insurance, subject to limits based on age that are adjusted annually;
• Health care coverage continuation, such as coverage under COBRA, including for a spouse or dependent;
• Health care coverage while receiving unemployment compensation under state or federal law, including for a spouse or dependent; and
• Medicare premiums for Part B, Part D, and Medicare Advantage, and other health care coverage for individuals 65 or older (not including premiums for a Medicare supplemental policy, such as Medigap).

When HSA withdrawals are used for non-qualifying expenses, an individual who is under 65 must pay the federal income tax and a 20 percent tax penalty. If the individual is 65 or older, the individual must still pay the federal income tax, but they are not subject to the 20 percent tax penalty.

Who can contribute to an HSA, and what are the limits on contributions?

Anyone can contribute to an HSA, including family members, friends, and employers.

The 2026 annual contribution limits for HSAs are $4,400 for an individual and $8,750 for family coverage. The exact contribution limit depends on the type of HDHP coverage, age, and the date of eligibility or ineligibility. Individuals who are 55 or older can contribute an additional $1,000 each year. More information can be found in Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans under “Limit on Contributions.” The deadline for HSA contributions for a given year is the tax filing deadline (for example, contributions for 2026 can be made through April 15, 2027). This means that individuals can wait to make contributions until after they determine how much they spent on out-of-pocket health care expenses during their health plan year (up until April 15 of the following year). Contributions must be reported on IRS Form 8889.

How do you set up an HSA?

To set up an HSA, individuals should research HSA providers and check with their bank and health insurance company about HSA options. Important considerations when choosing an HSA provider include:

• Some HSAs have fees associated with them, like a charge for opening or closing the account and monthly maintenance fees.
• Contributions to an HSA. The process for depositing money into an HSA may vary. Note, while employers may offer the ability to deposit pre-tax funds into an HSA through payroll deductions, the process for combining an HSA with a Health Connector plan is a bit different. Individuals will have to deposit post-tax dollars into the self-funded HSA and deduct those contributions when filing their federal taxes.
• Banking options. Banking options, like debit cards and online banking, may differ by HSA provider.
• Interest Rate on Cash Deposits. Like other savings accounts, banks offer different interest rates. Look for options with higher interest rates on the non-invested cash.
• Investment Options. Some administrators impose minimum amounts to invest. Look for options that don’t have minimums and offer a variety of funds to invest in.

How do I get the tax benefit of an HSA?

Individuals can contribute post-tax dollars to a self-funded HSA to help pay for medical expenses or invest funds in an HSA to save for future medical expenses. These contributions can later be claimed as a deduction on federal taxes which can reduce overall taxable income. All HSA contributions for the reporting year including those made before April 15^th of the following year and are reported on Form 8889 and filed with the Form 1040,1040-SR, or 1040-NR.