🌟 Editor's Note
Welcome to another issue of Financial Freedom Insights. This newsletter is full of financial tips, insights, financial news, announcements, a special treat for those who make it to the bottom, and more!
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NONE of this newsletter was written using AI. It was written by humans for humans.
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📰 In the News
AI goes Rogue
An Open AI agent escaped its training environment and hacked two companies all on its own - article here
The SpaceX IPO saga continues
SpaceX recovered slightly from its all time lows, but it is still down nearly 50% from its all time high. Just another reminder to always be careful with IPOs! - article here
📈 Financial Freedom Insight
High-Deductible Healthcare Plans, HSAs, HRAs, and FSAs - What You Need to Know About Your Options
Financial Freedom Insight: Table of Contents
Employers Are Increasingly Turning to High-Deductible Health Plans
What is a Health Savings Account (HSA)?
Should You Get an HSA if Offered by Your Employer?
What is a Health Reimbursement Arrangement (HRA)?
Should You Get an HRA if Offered by Your Employer?
What is a Flexible Spending Account (FSA)?
Should You Get an FSA if Offered by Your Employer?
HSAs, HRAs, and FSAs at a Glance
The cost of healthcare is top of mind for many people. It is an increasingly complex world both for the lawmakers and politicians who decide on the regulations and the receivers of healthcare benefits.
During last Falls government shutdown Health Savings Accounts (HSAs) were affected, but what is an HSA? Should you sign up for one if your employer offers them? Some employers also offer HRAs and FSAs. This Financial Freedom Insight demystifies HSAs, HRAs, and FSAs, and hopefully helps you with your healthcare decisions.
Employers Are Increasingly Turning to High-Deductible Health Plans
In October 2025, the federal government shut down because Congress couldn’t agree on funding. A Democratic-backed spending bill that would have extended health care subsidies under the Affordable Care Act (ACA) and reversed cuts to Medicaid failed. A GOP-backed stopgap funding measure that would have funded the government for seven weeks also failed.
Healthcare is a hot topic because the cost of healthcare keeps going up. Employers are increasingly offering high-deductible health plans (HDHPs) to their workers to lower their employee healthcare costs. According to the Bureau of Labor Statistics, the number of workers participating in high-deductible medical care plans was 38 percent in 2015. In 2024, that percentage had grown to 50 percent.[1]
HDHPs, as the name implies, shift a greater portion of healthcare costs to you, the employee. They do that by charging a lower premium each month, but that requires you to pay a higher deductible.
If you have an HDHP, you will likely pay 100% of your medical costs (except for preventive care) until you’ve met your deductible. The average deductible for a single person was $2,750 in 2024, according to the Bureau of Labor Statistics.[2]
To make these plans more palatable, some employers offer additional healthcare benefits, such as HSAs, HRAs, and FSAs. These are coupled with an HDHP to lower your out-of-pocket healthcare costs through tax benefits and reimbursements (in the case of HRAs and FSAs).
Confused? No worries! Here’s what you need to know.
What Is an HSA?
An HSA is a savings account for medical expenses with tax advantages. It is usually paired with a high-deductible health plan (HDHP) with high deductibles and out-of-pocket costs. An HSA comes with tax advantages, and if you are young and healthy, they might be a good option. For most people, however, the tax benefits may not compensate for the higher deductible and out-of-pocket costs.
What is a high-deductible healthcare plan? The IRS defines high deductibles as a minimum $1,650 per year for individuals, or $3,300 for families.[3]
You can only get an HSA through an employer as part of a benefits package. There are contribution limits for HSAs. For 2025, HSA contribution limits are $4,300 for individuals and $8,550 for families.[4]
Should You Get an HSA if Offered by Your Employer?
The main benefit to an HSA is the tax advantages. HSAs are funded with pre-tax dollars. That lowers your total taxable income for that year, so you pay less tax overall. Also, your account balance grows tax free. Lastly, when you withdraw money at a later date for medical expenses, you will not have to pay tax on the funds you withdraw.
Additional advantages of HSAs are that the funds roll over, and you can take the fund with you when you change jobs or retire.
The funds also do not ever expire! So you can add in tens of thousands of dollars throughout your career and then use those funds on your medical bills during retirement.
What Is a Health Reimbursement Arrangement (HRA)?
An HRA is a health account funded by your employer, not you. It is a benefit, and your employer sets the rules on what type of health costs you can spend the money on and the rollover rules.
Usually, you can use an HRA to reimburse premiums and apply to deductibles. A small employer might give you an HRA to help you to afford overall healthcare coverage. A larger employer might fund an HRA to encourage you to enroll in a high-deductible health plan.
HRAs are not portable. If you leave your employer, you also leave your HRA.
Should You Get an HRA if Offered by Your Employer?
Yes. If your employer offers you an HRA, it is money that will help you pay your healthcare costs, and you won’t have to pay tax on that money. You will receive reimbursements for qualified medical expenses. You don’t have to report these reimbursements to the IRS because they are not considered taxable income. However, you cannot then claim medical expenses that have been reimbursed by your HRA as an itemized deduction on your taxes.
That said. If you have an individual coverage HRA (ICHRA), or an HRA from your employer who is a small business (QSEHRA), you might not be eligible for premium tax credits on a marketplace plan.
What Is a Flexible Spending Account (FSA)?
An FSA is an employer-sponsored account where you can place pre-tax dollars to pay for healthcare expenses. You can get an FSA account for your medical, dental, and vision costs or one for eligible childcare and eldercare expenses.
You choose an annual contribution amount during your employer's open enrollment period, up to the federal limits, and that amount is deducted from your paycheck before taxes are withheld, reducing your overall taxable income.
Typically, you will either receive a reimbursement for out-of-pocket expenses or use a debit card provided by your FSA.
Should You Get an FSA if Offered by Your Employer
It depends on your unique situation. An FSA, like an HRA, will help you pay for medical expenses and reduce the amount of taxes you pay on your earnings.
BUT BE AWARE: You may have to use all the funds you save WITHIN the plan year. This means if you don’t use the money within the allocated time you lose it. So be very careful when deciding how much to contribute to a FSA.
HSAs, HRAs, and FSAs At a Glance
HSAs, HRAs, and FSAs are largely benefits provided by your employer to help you pay for a healthcare plan with a high deductible. The main attraction of these accounts are the tax advantages. However, these plans are usually paired with health plans with high deductibles and out-of-pocket costs. Thus, it is very important to perform your due diligence to see if these additional benefits make it worth while to use a high deductible healthcare plan.
The table below is a summary of the main points of each plan and why they might be a good option for you.
HSA | HRA | FSA |
Funded by employee only | Funded by the employer | Employee places funds in an account |
Fully portable | Not portable | Not portable, funds typically must be used within the year |
Good if you want to contribute pre-tax dollars regularly to the account and save money long-term for later medical costs. | Good if you have a high deductible. Since it is entirely employer-funded, it is essentially "free money" for medical expenses. | Good if you anticipate predictable, near-term medical expenses |
Sources
[1] U.S. Bureau of Labor Statistics. n.d., Employee Benefits: High deductible health plans and health savings accounts. https://www.bls.gov/ebs/factsheets/high-deductible-health-plans-and-health-savings-accounts.htm. Accessed October 8, 2025
[2] Ibid.
[3] IRS. n.d. Part III Administrative, Procedural, and Miscellaneous 26 CFR 601.602: Tax forms and instructions https://www.irs.gov/pub/irs-drop/rp-24-25.pdf. Accessed October 8, 2025.
[4] Congress.gov. February 11, 2025. Health Savings Accounts (HSAs). https://www.congress.gov/crs-product/R45277. Accessed October 8, 2025.
📙 Nathan Haas’s Scripture of the Week
Deuteronomy 28:12 (ESV)
"The Lord will open to you his good treasury, the heavens, to give the rain to your land in its season and to bless all the work of your hands. And you shall lend to many nations, but you shall not borrow."
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Nathan Haas, Founder & CEO, Financial Advisor & Coach
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