What Is a Health Savings Account (HSA)?

A Health Savings Account (HSA) is a tax-advantaged account you can use to pay for current or future healthcare expenses. When paired with a Bronze plan (new for 2026) or a High-Deductible Health Plan (HDHP), an HSA offers savings and tax benefits that traditional health plans cannot match.

What’s New for 2026

Bronze plans are now automatically HSA-qualified.
New Rule: Any Bronze or Catastrophic plan offered through a state insurance exchange under the Affordable Care Act will be considered HSA-qualified coverage.
These plans typically feature:
  • Lower monthly premiums
  • Higher deductibles before coverage begins
  • Greater potential for out-of-pocket expenses
Effective January 1, 2026 an HSA allows individuals enrolled in these plans to save and pay for medical costs using tax-free dollars.

Eligible Medical Expenses You Can Pay with an HSA

HSA funds can be used for a wide range of qualified healthcare costs, including:
  • Copays and deductibles under your Bronze or HDHP plan
  • Prescription medications (not vitamins or supplements)
  • Dental, vision, and hearing expenses
  • Long-term care insurance premiums
    (Note: HSA funds cannot be used for regular health insurance premiums.)
 For a full list of eligible expenses, see IRS Publication 502: https://www.irs.gov/pub/irs-pdf/p502.pdf

HSA Contribution Limits (2026)

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Maximum Contribution: Single Plan: $4,400, Family Plan: $8,750
Catch-Up Contribution (Age 55+): $1,000
Catch-up contributions apply per eligible individual age 55 or older.
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NOTE: If you and your spouse are 55 now or will be in 2026, consider setting up TWO Health Savings Accounts. That way, you both may increase your contribution by $1,000, giving you a total of $2,000, to manage your MAGI - (modified adjusted gross income) for premium subsidies.

How This Can Work in REAL LIFE

Example Scenario 1 - Family of Four

Alice (41), Tom (39), Susie (11), and Sam (8) estimate their 2026 household income at $95,000. Based on this amount, they qualify for a monthly premium subsidy of $1,506.
During the year, the family contributes $7,000 to their Health Savings Account (HSA) to cover medical expenses, including:
  • Treatment for Tom’s chainsaw injury
  • New glasses for Alice
  • Dental work for Susie
  • Additional copays for routine care
With their HSA contribution, their taxable income is reduced to $88,000. As a result, their monthly subsidy increases to $1,622 — an additional $116 per month, or $1,272 more for the year.
In addition, at an effective tax rate of 9.5%, they save another $665 by paying medical and dental expenses with tax-free HSA dollars. Total Annual Savings: $1,937
Example Scenario 2 - Individual 
Ramos is single, age 62, and a realtor who is three years away from Medicare. He is working to manage his income to remain eligible for a premium subsidy, which phases out at approximately $62,600 (400% of the Federal Poverty Level).

For 2026, Ramos estimates his income at $60,000, qualifying him for a monthly premium subsidy of $1,081. In January 2026, Ramos opens a Health Savings Account (HSA) and contributes $500.

In February 2027, while preparing his taxes, his CPA determines Ramos’s actual taxable income for 2026 is $66,543. This would place him above the 400% threshold, requiring repayment of his entire annual subsidy — $12,972.

However, Ramos still has until the tax filing deadline (April 15) to fund his 2026 HSA. He contributes a total of $5,000 ($4,200 plus an $800 catch-up contribution), reducing his Adjusted Gross Income (Line 11 on Form 1040) to $61,543.

By lowering his income below the 400% threshold, Ramos remains eligible for his premium subsidy and avoids repaying nearly $13,000.
Click to learn about opening an HSA account:

Opening a Health Saving Account

Many banks and credit unions offer Health Savings Accounts (HSAs) to their customers. We are a registered agency with HSA Bank (link here)and can help you with enrollment. ​
Members of BCBS, Blue Cross Blue Shield, qualify for HSAs with their Bronze plans. They are partnered with HealthEquity - click the link to learn more and/or enroll. 

For Tax Time

You’ll need to file Form 8889 with your tax return and include it with your Form 1040. Be sure to consult with your tax preparer.
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AND … as Dave is the “Old Guy", he has been working with clients on HSA’s since they first came out in 2005. He's pretty sure he was within the first five people to ever sell a health insurance plan to include an HSA. Plus- he has an HSA for his own family, so we know how this works.

Contact Trout Insurance today with any questions!
828.279.4681