Health Savings Accounts (HSAs) continue to offer valuable tax advantages and flexibility for managing healthcare costs. Each year, the Internal Revenue Service (IRS) adjusts contribution limits for inflation, while recent legislation has expanded how HSAs can be used and how they fit into long-term financial planning.
Updated 2027 HSA Contribution Limits
- Individual (self-only coverage): $4,500 (+$100 from 2026)
- Family coverage: $9,000 (+$250 from 2026)
- Catch-up contribution (age 55+): +$1,000
These limits are set annually by the IRS and include both employee and employer contributions. Employers set the overall limit for the plan and any employer contributions count toward the employee’s total annual limit.
How to Think About Using an HSA in 2027
HSAs are commonly used by employees enrolled in High-Deductible Health Plans (HDHPs) to pay for qualified medical expenses, such as deductibles, copays, and prescription costs. However, they can also be used more strategically when planning for both short-term and long-term healthcare needs.
Telehealth is now permanently HSA-compatible
As a result of the One Big Beautiful Bill Act (OBBBA), employees can use telehealth services before meeting their deductible without losing HSA eligibility, effective retroactively to January 1, 2025. This allows individuals to access virtual care at any time while continuing to contribute to their HSA.
Direct Primary Care (DPC) is now HSA-eligible
Effective January 1, 2026, DPC memberships no longer disqualify individuals from contributing to an HSA. Employees can use HSA funds to pay for monthly DPC fees within the following limits:
- $150 per month for individuals
- $300 per month for families
This allows HSA funds to be used for routine, predictable primary care expenses while still saving for future healthcare costs.
Using HSAs for Qualified Medicare Expenses
Unused HSA funds roll over each year and can be saved for future use, including after an individual becomes eligible for Medicare, which typically begins at age 65. Once a person enrolls in Medicare, they can no longer make contributions to an HSA, but they can continue to use any existing funds.
HSA funds can be used tax-free for qualified medical expenses, including:
- Medicare Part B premiums
- Medicare Part D prescription drug premiums
- Medicare Advantage (Part C) plan costs
- Other out-of-pocket expenses, such as deductibles, copays, and prescriptions
This makes HSAs a valuable tool for planning future healthcare expenses, including costs in retirement.
Investing HSA Funds for Long-Term Growth
HSAs can also be used as an investment tool. Once your account reaches a certain balance, often around $1,000 to $2,000, depending on the provider, you may be able to invest funds in options like mutual funds or index funds, similar to a retirement account.
Invested HSA funds can grow over time:
- No taxes on investment growth
- No taxes when used for qualified medical expenses
If funds are used for non-medical expenses after age 65, they are taxed as income but not subject to a penalty.
HSAs offer more than short-term savings and can be used to pay for current healthcare expenses, plan for retirement costs, and even grow through investment. Understanding these options can help individuals make more informed decisions about how to maximize the value of their HSA in 2027 and beyond.
Partnering with Pierce Group Benefits
As HSA rules continue to evolve, both employers and employees have more opportunities to make the most of this benefit. For employers, these updates allow for more flexible plan designs, including the ability to pair HSAs with additional benefits to support employee access to care. Employers can also choose to contribute to employee HSAs and increase plan limits with the IRS’s guidelines.
For employees, understanding how HSAs can be used, whether for current medical expenses, retirement healthcare costs, or long-term investment growth, can help maximize the value of their account over time. Employees can use their PGB Microsite to explore resources for purchasing eligible products, as well as locate their HSA provider, check their balance, and adjust contributions.
For more information or guidance on how to implement or optimize your HSA strategy, contact your PGB Account Executive or email partnership@piercegroupbenefits.com.