Healthcare costs continue to rise, with the average annual premiums for employer-sponsored family health coverage up by 6% in 2025 compared to 2024. As a result, employers face growing pressure to offer meaningful benefits without stretching already tight budgets. Employees also want more support as they manage everyday medical expenses and prepare for future healthcare needs.
Tax-Advantaged Accounts
A health savings account (HSA), flexible spending account (FSA), and health reimbursement arrangement (HRA) each help reduce healthcare costs through tax advantages. Yet these similarities can make the decision more confusing. Each account follows different rules, ownership varies, funding works differently, and long-term value depends on how employees use their benefits.
An HSA offers one of the strongest tax benefits available through an employer-sponsored health plan. It’s a personal savings account available to employees enrolled in a qualifying high-deductible health plan (HDHP). Employees can contribute pretax dollars, invest their savings over time, and withdraw funds tax-free for eligible healthcare expenses.
HSA Eligibility
HSA eligibility follows strict Internal Revenue Service (IRS) requirements. Employees must meet all requirements before contributing. To qualify, an employee must be enrolled in a qualifying HDHP. A general-purpose FSA typically makes an employee ineligible to contribute to an HSA. However, employees may remain eligible if their employer offers a limited-purpose FSA for qualified dental and vision expenses only.
Eligibility also depends on the health plan itself. For 2026, an HDHP must meet minimum deductible requirements and remain within the annual out-of-pocket maximum limits established by the IRS.
FSA and HRA
An FSA helps employees pay for eligible healthcare expenses using pretax dollars during the plan year. However, the FSA belongs to the employer, rather than the employee. An HRA works differently from both an HSA and an FSA. Instead of employees contributing money to an account, the employer sets aside funds and reimburses employees for eligible healthcare expenses.
Original reporting: KRDO (Colorado Springs metro) — read the source article.
