The flexibility of an HPA paired with the tax advantages of an HSA creates a powerful duo that can create financial wins for employees and employers. Together, these accounts transform costs into a better care-paying experience, fostering healthier outcomes and reducing long-term expenses for all.
Let’s explore what these accounts are, how they complement each other, and why they’re a game-changer for the financial health of employers and their teams.
What Is an HSA?
A health savings account, or HSA, is a powerful savings account available only to those enrolled in an HSA-compatible high-deductible health plan (or HDHP). The HSA offers what’s called a triple tax advantage:
- Pre-Tax Contributions: Deposits are made pre-tax, reducing your taxable income.
- Tax-Free Growth: Funds grow tax-free over time through interest or investments.
- Tax-Free Withdrawals: You can use HSA funds tax-free for qualified medical expenses.
With the ability to roll over unused funds year after year, HSAs aren’t just for immediate healthcare costs—they’re a smart way to save for present and future medical needs, making them a cornerstone of long-term financial planning.
What Is an HPA?
An HPA, or Health Payment Account, is a payment solution that allows employees to pay for care over time without interest or fees. Unlike HSAs, which require upfront savings, HPAs provide immediate affordability with ready-to-spend dollars for out-of-pocket expenses like deductibles, co-pays, and prescriptions.
The power of the HPA is in its ability to transform any healthcare expense into a predictable series of interest-free payments that are easier to afford and that keep savings and other financial plans on track. Most employees choose to have these payments deducted from future paychecks so they can set it and forget it.
HPAs don’t replace HSAs—they work alongside them, giving employees more flexibility when cash flow is tight or allowing them to grow their savings while transforming the year's healthcare costs into affordable payment plans.
Why HPAs and HSAs Are Better Together
1. A Smarter Spending Solution For Today’s Healthcare Needs
HSAs can be a valuable financial safety net for future healthcare needs, but only if there’s a substantial and growing balance saved up. Whether it’s a young employee who doesn’t have much margin to save or someone who’s saving up for healthcare needs in retirement, employees need a different solution for spending on this year’s care.
HPAs don’t penalize the unprepared, and they protect savers with instant access to funds that can be spent whenever the need arises. Pairing an HPA with an HSA means employees don’t have to dip into their HSA savings for routine or surprise expenses. Instead, they can use their HPA to pay the bill and repay the balance out of future paychecks leaving any HSA balances untouched so they can grow.
2. Unlocking Health Insurance Savings
An HSA is only available when the employee is enrolled in an HDHP. Since most employees in healthy years don’t reach their health plan deductible, many would benefit from migrating to a less expensive plan with a higher deductible. The employee can sock away the savings in an HSA, and the employer can reinvest their savings into offering an HPA and other perks.
Why doesn’t this happen more often? The experience of paying for care often involves unknown and unpredictable costs that can make employees hesitate to embrace an HDHP. With an HPA, employees know they can transform unexpected costs into something manageable for their budget. This confidence helps them overcome the psychological barrier that keeps them stuck overpaying for health insurance.
3. Maximizing Tax Advantages
As HPAs help employees preserve their HSA funds for tax-free growth, they’re more likely to use their HSA for future tax-free withdrawals in retirement.
By using their HPA for current costs, employees can maximize the tax-advantaged benefits of their HSA, making their healthcare dollars stretch further and create financial resilience for later in life
For Employers: A Competitive Edge
Employers offering both HPAs and HSAs give their workforce a comprehensive financial wellness package. Here’s why it matters:
- Enhanced Affordability: Employees face fewer barriers to care, reducing financial stress and improving overall health and productivity.
- Increased Engagement: Offering flexible solutions like HPAs and HSAs demonstrates a commitment to employees’ wellbeing.
- Attracting Top Talent: Robust benefits packages make organizations stand out in a competitive job market.
When employees feel supported, they’re more likely to engage with their benefits and take advantage of preventive care and consistent treatment, leading to better outcomes on all fronts.
How to Get Started
Whether you’re an employer looking to enhance your benefits or an individual planning your healthcare expenses, pairing an HPA with an HSA is a smart move. Start by:
- Review Your Benefits: If you’re eligible for an HSA, is it set up? Ask your employer if an HPA is available.
- Maximize Contributions: Contribute as much as possible to your HSA to take full advantage of tax benefits.
- Use Your HPA Strategically: Activate your HPA card and put it in your wallet so it’s ready whenever you have an unexpected healthcare cost.
The Bottom Line
HPAs and HSAs aren’t an either-or decision—they’re better together. With an HPA, you can handle today’s healthcare costs without worry. With an HSA, you can save for tomorrow’s needs and enjoy tax advantages along the way.
By combining these tools, employees and employers alike can create a more accessible, flexible, and financially secure healthcare experience. It’s time to stop thinking of HPAs and HSAs as separate solutions and start seeing them as the ultimate tag team for financial wellness.
Let’s make healthcare more manageable—together.
