What's Better For Me? A Traditional Health Plan Or A Plan That Permits Funding A Health Savings Account (HSA)?

What's An HSA?

Health Savings Accounts (HSAs) can be used in conjunction with High Deductible Health Plans (HDHPs) that have out-of-pocket maximums at or below $8,500 for individuals or $17,000 for families in 2026 and that pay 100% of all covered expenses after the out-of-pocket maximum is reached. However, the recently enacted One Big, Beautiful Bill Act (OBBBA) automatically treats ALL bronze and catastrophic level plans that are available through exchanges or marketplaces as HDHPs for 2026.

The maximum out-of-pocket limits for ACA plans are $10,150 for individuals and $20,300 for families in 2026, BUT HSAs cannot be established for any High Deductible Health Plan that has out-of-pocket maximums that exceed the thresholds mentioned in the first paragraph, above (except for bronze or catastrophic plans bought through the marketplace).

Per Affordable Care Act requirements, these plans must cover 100% of preventive care benefits without a deductible. In accordance with IRS guidelines issued in 2019, carriers can cover certain chronic condition treatments as preventive care. For example, some carriers consider generic ACE inhibitors, beta blockers, statins and certain insulins or other glucose-lowering agents as preventive treatments under these guidelines.

The OBBBA now provides permanent relief allowing HDHPs to provide first-dollar telehealth and other remote care services. This change is effective retroactively to plan years beginning after December 31, 2024.

People who establish an HSA account can fund that account with a bank or other financial institution and use that account (usually through use of a debit card) to pay for any qualified medical expense (generally any health, dental or vision care expense excluding cosmetic procedures). Annual contribution limits for an HSA are $4,400 for an individual and $8,750 for a family in 2026. In addition, individuals 55 or over can make yearly "catch-up" contributions of $1,000, but only one catch up contribution can be made per HSA account (each adult family member can have a separate account).

The OBBBA changes the law as of 2026 to specifically exclude direct primary care (DPC) arrangements from being a form of disqualifying coverage, thereby allowing the DPC to be HSA-compatible. DPC fees cannot exceed $150/month (indexed) for an individual or $300/month (indexed) for family coverage to qualify for the exemption. The OBBBA also provides that such DPC fees are a qualified medical expense that can be paid tax-free from the HSA. This change will likely boost DPC interest and enrollment nationwide.

Amounts contributed to a Health Savings Account are tax deductible. This means that someone who pays for an expense from his or her Health Savings Account saves the equivalent of that person's federal marginal tax rate (and state marginal tax rate in almost all states with state income taxes), including taxes for Social Security and Medicare. For example, an individual who has a $1,000 expense to pay and who has a 32% federal marginal tax rate and no state income tax will only be paying $680 for the service if s/he pays that from his or her Health Savings Account.

How Does A Traditional Office Visit Co Pay Plan Work?

Traditional office visit copay plans have a copay for items like doctors' visits and a deductible (possibly with coinsurance thereafter) for major expenses like hospitalization. Some ACA plans have copays for primary care office visits (or copays for a limited number of primary care office visits), and specialist (and, if applicable additional primary care) visits are covered after the deductible. With other copay plans all primary and specialist visits have copays.

These plans include drug coverage. Drug plans may have separate deductibles for the hospital/medical portion of the plan, BUT covered expenses for drugs count against the plan’s maximum out-of-pocket limit. (NOTE: some office visit copay plans have no deductibles at all, others have a deductible only for hospital/medical, and others may have separate deductibles for both hospital/medical AND drug coverage).

The ACA permits only two individual deductibles and one family deductible. Hospital/medical deductibles, copays and coinsurance AND drug deductibles, copays, and coinsurance, as applicable, count against the maximum out-of-pocket limit.

What Does This Mean For Me?

Any individual or family purchasing a bronze or catastrophic Affordable Care Act plan through an exchange or marketplace will now be able to establish and contribute to a health savings account. Otherwise, an individual or family purchasing an ACA plan will have the choice to select EITHER a High Deductible Health Plan (with or without a separate HSA account) OR a traditional office visit copay plan. Individuals who have always had traditional office visit copay plans may find that it's more cost effective to purchase a High Deductible Health Plan and fund a Health Savings Account; those who purchase a bronze or catastrophic ACA plan through an exchange or marketplace should now consider establishing a health savings account so they can pay for qualified medical expenses that are not covered by their ACA plan with tax advantaged dollars.