As healthcare costs continue to rise, Health Savings Accounts (HSAs) remain a tool for employees seeking to manage their medical expenses efficiently. The Congressional Research Service (CRS) recently released its 2025 report on HSAs, outlining important updates and trends that HR professionals should be aware of when advising employees on healthcare benefits.
What is an HSA?
An HSA is a tax-advantaged savings account that individuals can use to pay for unreimbursed medical expenses, such as deductibles, co-payments, and non-covered services. HSAs are paired with High-Deductible Health Plans (HDHPs), but they are not health insurance themselves. Instead, they function as custodial accounts where funds can be saved and used tax-free for qualified medical expenses.
Eligibility & Contributions
To contribute to an HSA, individuals must be enrolled in an HSA-qualified HDHP and must not have other disqualifying coverage or be claimed as a dependent. Contributions can be made by employees, employers, or both, and the funds belong to the individual, meaning they remain available even if the employee changes jobs or health plans.
For 2025, the contribution limits are:
- $4,300for individuals with self-only coverage.
- $8,550for individuals with family coverage.
- An additional $1,000 catch-up contribution for those aged 55 or older.
HSA-Qualified HDHP Requirements in 2025
To be considered HSA-eligible, an HDHP must meet the following criteria:
- Minimum deductible: $1,650 for self-only coverage and $3,300 for family coverage.
- Maximum out-of-pocket limit: $8,300 for self-only coverage and $16,600 for family coverage.
Preventive care and certain insulin products may be covered before the deductible is met.
Tax Benefits of HSAs
HSAs provide significant tax advantages:
- Employee contributions (when made through payroll deductions in a cafeteria plan) and employer contributions areexcluded from taxable income and are not subject to Social Security, Medicare, or unemployment taxes.
- Individual contributions (outside of payroll deductions) are tax-deductible.
- Account earnings grow tax-free.
- Withdrawals for qualified medical expenses are not taxed.
- Funds roll over year to year and are portable if the individual changes employers or insurance plans.
Use of HSA Funds
HSA funds can be used tax-free for qualified medical expenses, including:
- Medical, dental, and vision care.
- Prescription medications.
- Certain transportation costs for medical care.
- Long-term care services.
Withdrawals for non-qualified expenses are subject to income tax and a 20% penalty (unless the individual is 65 or older, in which case only income tax applies).
HSA Adoption and Employer Trends
The CRS report highlights that HSA-qualified HDHP adoption has increased significantly since the mid-2000s. In 2024:
- 50% of large employers (200+ workers) offered an HSA-qualified HDHP, compared to 21% of small employers (3-199 workers).
- 39% of private-sector and government employees had access to an HSA through their employer.
- Access varied by occupation, with service workers having the least access (20%) and registered nurses having the highest (60%).
Important Learning
HR teams should continue to educate employees about the benefits and rules surrounding HSAs, particularly for those considering enrollment in an HDHP. Encouraging employees to maximize contributions and use HSAs as long-term savings vehicles can enhance their financial wellness while helping manage healthcare costs effectively.
Employers looking to attract and retain talent may also want to consider offering HSA contributions as part of their benefits package to support employees in managing rising medical expenses.
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