Is an HSA Worth It in 2027? An Open Enrollment Guide for Houston Families

If your employer offers a high-deductible health plan with a health savings account (HSA) for 2027, it's usually worth a serious look. That's especially true if you're healthy, in a higher tax bracket, and able to pay a few thousand dollars of medical bills from savings. The tax benefits are hard to match. But it isn't automatically the right choice, and the answer depends on your expected medical costs and the premium difference between plans.

Open enrollment season is here. Most employers run it in October and November, and the ACA Marketplace opens November 1. The plan you choose generally locks you in for all of 2027, so it's worth an hour of homework now.

This is general education, not advice for your specific situation.

What are the 2027 HSA limits?

The IRS released the 2027 numbers in Rev. Proc. 2026-24. To contribute to an HSA, you need to be covered by a qualifying high-deductible health plan (HDHP) and have no other disqualifying coverage.

The $1,000 catch-up isn't indexed for inflation, and each spouse who qualifies has to put it in their own HSA (IRS Publication 969). Employer contributions count toward the limit, so if your company seeds your account with $1,000, you can add up to $8,000 for family coverage.

For comparison, the 2026 limits are $4,400 and $8,750 (Rev. Proc. 2025-19). You can still make 2026 contributions until the April 2027 filing deadline.

Why do people call an HSA "triple tax-free"?

An HSA gets three tax breaks:

1. Contributions are deductible, or excluded from your pay if they go through payroll.
2. Growth isn't taxed while the money stays in the account, including if you invest it.
3. Withdrawals for qualified medical expenses are tax-free, at any age (Texas Department of Insurance).

There's a fourth benefit that's easy to miss. When you contribute through your employer's cafeteria plan, the IRS treats the money as an employer contribution, which generally isn't subject to employment taxes (IRS Publication 969). That means no Social Security or Medicare tax on those dollars. A 401(k) deferral doesn't get that break, and neither does an HSA contribution you make on your own and deduct on your return.

Texas has no state income tax, so for Houston families the federal savings are the whole story.

How much does an HSA actually save?

Here's a rough look at a full $9,000 family contribution made through payroll. Social Security tax is 6.2% on wages up to $184,500 in 2026 (SSA), and Medicare tax is 1.45% with no cap.

That's every year, before any investment growth. Over 15 or 20 years, an HSA that's invested and left alone can become a meaningful pool of money set aside for health care in retirement.

Is a high-deductible plan better than a PPO for my family?

The tax savings only help if the plan itself makes sense. Compare the plans on total expected cost, not just the deductible:

• Add up the annual premiums for each plan. HDHP premiums are usually lower, and that difference is real money in your pocket.
• Add your employer's HSA contribution, if any. Treat it as a discount on the HDHP.
• Estimate your medical spending for 2027: prescriptions, regular specialist visits, planned procedures, a baby on the way.
• Look at the worst case. Compare each plan's out-of-pocket maximum, and ask yourself whether you could pay the HDHP's maximum from savings without stress.

An HDHP with an HSA tends to win when:

• Your family is generally healthy and uses mostly preventive care, which HDHPs cover before the deductible.
• You're in a higher tax bracket.
• You have an emergency fund that can cover the deductible.
• The premium savings plus any employer contribution cover a good share of the higher deductible.

A traditional PPO can be the better choice when:

• You expect high medical bills in 2027 and will likely hit the out-of-pocket maximum under either plan anyway.
• The premium difference is small and the PPO's deductible is much lower.
• Paying a $3,500 or larger deductible would mean using a credit card.
• Your preferred doctors or hospitals are in network only on the PPO.

What changed for HSAs in 2026?

The 2025 tax law (the One Big Beautiful Bill Act) made three changes that open HSAs to more people (IRS):

• Bronze and catastrophic plans now qualify. Starting January 1, 2026, these plans are treated as HSA-compatible even if they don't meet the normal HDHP rules. Notice 2026-05 says they don't have to be bought through the Marketplace. This is a big deal for self-employed people and early retirees who buy their own coverage.
• Direct primary care works with an HSA. If you pay a monthly membership fee to a direct primary care practice, it no longer disqualifies you. You can also pay those fees from your HSA tax-free. For 2027, the fees can't exceed $150 a month for an individual or $300 a month for a family (Rev. Proc. 2026-24).
• Telehealth before the deductible is permanent. HDHPs can cover telehealth visits before you meet the deductible without costing you HSA eligibility.

What are the common HSA mistakes to avoid?

These are the issues I see most often:

• Having a general-purpose FSA. If you or your spouse has a general-purpose health FSA that can pay your medical bills, you generally can't contribute to an HSA. A limited-purpose FSA for dental and vision is fine (IRS Publication 969). Check this carefully when spouses work for different employers.
• Contributing after Medicare starts. Your HSA limit drops to zero starting with the first month you're enrolled in Medicare. If you sign up after 65, Part A is backdated up to six months (Medicare & You 2027), so plan to stop contributions about six months before you apply.
• Spending it all every year. If you can afford to, pay current medical bills from cash and let the HSA grow. You can reimburse yourself tax-free later for qualified expenses incurred after the account was opened, as long as you keep the receipts.
• Using it for non-medical expenses before 65. Those withdrawals are taxed as income plus a 20% additional tax. After 65, the extra 20% goes away, but non-medical withdrawals are still taxable (IRS Publication 969).
• Leaving the beneficiary blank. A spouse beneficiary can keep the account as their own HSA. Any other beneficiary owes income tax on the full balance in the year of death. Name your spouse first, and think about whether a child in a lower bracket makes sense as the contingent beneficiary.

Where does an HSA fit in my savings order?

For many of the families I work with, a reasonable order looks like this:

1. Contribute enough to your 401(k) to get the full employer match.
2. Max out your HSA through payroll.
3. Go back and add more to your 401(k), up to the limit.
4. Then consider options like a backdoor or mega backdoor Roth, or a taxable brokerage account.

The HSA ranks high because it's the only account that is tax-free going in, while it grows, and coming out for medical costs. Health care is a major expense in retirement for most families, so it's a natural fit.

Your 2027 open enrollment checklist

• Compare total annual cost (premiums plus expected out-of-pocket costs) for each plan
• Check whether your employer contributes to the HSA
• Confirm neither spouse is enrolled in a general-purpose health FSA for 2027
• Set your payroll HSA contribution so the total (yours plus your employer's) stays at or under $4,500 or $9,000
• Add the $1,000 catch-up if you're 55 or older
• Choose how the HSA cash will be invested, and keep enough in cash for this year's deductible
• Update your HSA beneficiary
• If you're within a year of Medicare, plan when to stop contributing

If you're also thinking about year-end moves for 2026, my year-end tax planning checklist covers the December 31 deadlines.

How we help

Benefits elections are a good example of a decision that's worth getting right once, then revisiting each year. At Mercer Street, we work on an hourly, fee-only basis, so you can get a focused review of your open enrollment choices without signing up for ongoing asset management. You can read more about how we work or browse our frequently asked questions.

Ad hoc planning is billed at $600 per hour with a two-hour minimum. That's usually enough time to compare your health plan options, set your 2027 HSA and 401(k) contributions, and check the rest of your benefits package.

If you'd like help with your 2027 elections before your enrollment window closes, schedule a call.