Why Tax Season Is the Right Time to Review Health Plan Options
Tax season is more than filing deadlines and financial reports. For small business owners it’s also the perfect time to evaluate your employee benefits strategy, especially your health plan offerings.
If you’re comparing Preferred Provider Organization (PPO) plans, High-Deductible Health Plans (HDHPs), and Health Savings Accounts (HSAs), understanding the cost structure and tax implications can help you make smarter decisions for both your company and your employees.
Here’s what to consider.
Health Savings Accounts (HSAs)
An HSA is available to employees enrolled in a qualified HDHP and offers one of the most tax-advantaged savings vehicles available today.
Why HSAs Matter to Employers and Employees
HSAs provide a triple tax benefit:
- Contributions are tax-deductible
- Funds grow tax-free
- Withdrawals for qualified medical expenses are tax-free
Unlike a Flexible Spending Account (FSA), unused HSA funds roll over year after year with no limit. Employees own their HSA account, meaning they take it with them if they change jobs or retire, reducing administrative complexity for employers.
2026 HSA Contribution Limits
- $4,400 for self-only HDHP coverage
- $8,750 for family HDHP coverage
- Additional $1,000 catch-up contribution for individuals age 55+
Funds can be used for deductibles, copayments, prescriptions, and other qualified medical expenses (see IRS Publication 502 for a full list).
Important note: Withdrawals for non-qualified expenses before age 65 are subject to income tax plus a penalty. After age 65, non-medical withdrawals are taxed as income but not penalized.
Why business owners like HSAs:
- Potential payroll tax savings on employee contributions
- Lower premium costs when paired with HDHPs
- A strong recruiting and retention tool for financially savvy employees
High-Deductible Health Plans (HDHPs)
HDHPs typically offer lower monthly premiums in exchange for higher deductibles. They are often a good fit for:
- Younger or healthier employees
- Employees with minimal ongoing medical needs
- Employees interested in building long-term HSA savings
HDHP enrollment continues to rise. According to the 2025 Employer Health Benefits Survey from the Kaiser Family Foundation, one-third of covered workers were enrolled in an HDHP last year, up from 27% the year prior.
For employers, HDHPs can:
- Reduce overall premium spend
- Create room in the budget for employer HSA contributions
- Offer a lower-cost entry plan alongside richer options
However, higher deductibles may feel risky for employees who expect frequent medical expenses.
Preferred Provider Organization (PPO) Health Plans
PPOs remain the most common employer-sponsored health plan design. Nearly half (46%) of employers nationwide offer a PPO, making it the dominant plan type.
Why PPOs Appeal to Employees
- Access to broad provider networks
- Ability to see specialists without referrals
- More predictable out-of-pocket costs
Members receive reduced pricing when using in-network physicians, hospitals, and specialists, but still have the flexibility to seek out-of-network care (typically at a higher cost).
For businesses, PPOs can:
- Support employee satisfaction
- Appeal to families and employees with ongoing care needs
- Provide a “richer” benefits option in a multi-plan strategy
The trade-off? PPOs generally carry higher premiums compared to HDHPs.
PPO vs. HDHP with HSA: Understanding the Key Differences
| PPO Pros | PPOs Cons | HDHP with HSA Pros | HDHP With HSA Cons | |
| PPO requires no Primary Care Physician. Offers lower deductibles and a broad network of providers. | Higher premiums (as compared to HDHPs). | HDHPs offer lower premiums and triple tax advantages. Enrollees can put aways funds, pre-tax, to pay out-of-pocket health care costs. | HDHPs require a Primary Care Physician. Due to costs, HDHPs may discourage members from seeking medical care. | |
| No referrals needed for specialists. Lower out-of-pocket maximum. | Costs are higher when using an out-of-network health care provider. | People ages 55 and up are allowed a catch-up contribution of $1,000. | Those who seek care but underfund their HSAs are often caught short. Out-of-network treatment comes with higher costs. | |
| May have access to a tax-advantaged Flexible Spending Account (FSA) to pay out-of-pocket health care costs. | FSA funds are “use it or lose it” and do not carry over from one plan year to the next. | HSAs offer triple tax advantages. Funds roll over from year to the next. Members can take the funds if they change jobs or retire. | An HDHP may work best for younger, healthier people with no medical conditions requiring regular care. Others may find an HDHP is not a good fit. |
What Business Owners Should Consider This Tax Season
As you review financials and prepare for the year ahead, ask:
- Are we balancing premium costs and employee out-of-pocket risk?
- Are we offering tax-advantaged options like HSAs?
- Does our plan lineup support different employee needs?
- Could adding an HDHP lower costs while maintaining competitive benefits?
There’s no one-size-fits-all solution. Many employers find success offering multiple plan options such as a PPO alongside an HDHP with an HSA to provide flexibility and cost control. Tax season is a natural checkpoint for you. Use it to evaluate whether your current health plan strategy supports both your bottom line and your employees’ financial wellbeing. Your broker can help guide you through the process.
