The Health Savings Account (HSA) continues to evolve as an important component of consumer-directed healthcare. This tax-advantaged medical savings account, when paired with a qualified High Deductible Health Plan (HDHP) can provide significant benefits to both employers and employees.

For employers, introducing an HDHP can save money, reduce administrative costs, and more. HDHPs have lower premiums than traditional health plans and help raise employee awareness about their healthcare consumption. Studies have shown that employees enrolled in an HDHP paired with a Health Savings Account tend to be more prudent about their healthcare spending and experience lower plan usage.

For employees, flexibility is a key feature of the HSA. Some employees choose to use their account for current, qualified medical expenses and reap the short-term tax benefits of their contributions. Others prefer to use the HSA as part of their retirement savings strategy: with a healthcare 401(k) funds accumulate year to year, earning tax-free interest until they are needed.