HDHP cost math for 2027: break-even, payroll tax and the IRS limits

The four numbers that decide the comparison

Every HDHP comparison, however it is dressed up, reduces to four numbers for each plan. The first is the year's premium, your share of it, times twelve. The second is what you would pay out of pocket for covered, in-network care at a given level of use, which runs through the deductible, then coinsurance or copays, and stops at the out-of-pocket maximum. The third, on the HDHP side only, is any money the employer puts into your health savings account. The fourth, also on the HDHP side, is the tax you do not pay on your own HSA contributions.

Most published comparisons stop after the first two, or add the employer money and forget the tax. That understates the HDHP. Others count the full HSA contribution as if it were a saving, which overstates it, because money you put in is still your money whether you spend it or not; the saving is only the tax on it. The worksheet below keeps those four lines separate and adds them in one direction.

Run the worksheet at three spending levels: a light year, a middle year and a year that hits the out-of-pocket maximum. The light year shows the premium difference almost on its own. The heavy year is the worst case for each plan. The middle year is where the plans most often cross, and where the break-even point lives.

The IRS limits for 2026 and 2027

The IRS defines a high deductible health plan by two numbers each year, a minimum deductible and a maximum on out-of-pocket expenses, and sets the HSA contribution limits alongside them. Revenue Procedure 2025-19 gives the 2026 figures and Revenue Procedure 2026-24 gives the 2027 figures. Out-of-pocket expenses here mean deductibles, copayments and other amounts, but not premiums.

Sources: IRS Revenue Procedure 2025-19 (2026) and Revenue Procedure 2026-24 (2027). Checked October 30, 2026. People 55 or older can add $1,000 to the contribution limit, according to IRS Publication 969.

Two of these numbers do different jobs in the cost math. The out-of-pocket maximum is the HDHP's worst case for covered in-network care, so it goes straight into the heavy-year row of the worksheet. The contribution limit caps line 4: you cannot shelter more than the limit, so the tax saving has a ceiling. Revenue Procedure 2026-24 also records a 2027 change from Public Law 119-21: a direct primary care arrangement does not disqualify HSA eligibility if its fees are no more than $150 a month, or $300 for an arrangement covering more than one person.

The payroll tax line most comparisons miss

How the money gets into the HSA changes how much tax it saves. IRS Publication 969 says contributions made by your employer are not included in your income, and that includes amounts contributed through a cafeteria plan, which is how payroll HSA contributions are usually made. The same publication says amounts an employer contributes to employees' HSAs are not generally subject to employment taxes. Employment taxes are the Social Security and Medicare taxes withheld from pay, 6.2 percent and 1.45 percent for the employee according to IRS Tax Topic 751, 7.65 percent together.

Contributions you make directly to the account, outside payroll, are deducted on your income tax return instead. That deduction saves income tax, but the Social Security and Medicare tax has already been withheld from the wages. So the same dollar saves more through payroll than outside it. As an illustration: a full 2027 self-only contribution of $4,500 through payroll saves $344.25 in Social Security and Medicare tax alone, before any income tax. Add an assumed 22 percent federal income tax rate, an input chosen for the example and not a statement of anyone's bracket, and the federal saving on the full contribution is $1,334.25.

Two limits apply to that line. Social Security tax stops at the wage base, which IRS Tax Topic 751 gives as $184,500 for 2026 earnings; above it, the 6.2 percent part of the saving disappears, while the 1.45 percent Medicare part continues, and an additional 0.9 percent Medicare tax is withheld on wages over $200,000. And state income tax depends on the state. California, for one, does not follow the federal HSA deduction: the Franchise Tax Board's Schedule CA instructions say the deduction is added back, and interest and other earnings in the account are taxable for California. A California worksheet leaves the state rate out of line 4.

Worked year 1: self-only, where the HDHP wins at every level

Every plan figure in this example is invented to show the method. Plan P, a lower-deductible plan, costs $150 a month ($1,800 a year), with a $1,000 deductible, 20 percent coinsurance and a $4,000 out-of-pocket maximum. Plan H, an HDHP, costs $60 a month ($720 a year), with a $2,000 deductible, which meets the 2027 minimum of $1,750, 20 percent coinsurance and a $5,000 maximum, under the IRS cap of $8,700. The employer puts $500 into the HSA. The employee contributes $1,500 through payroll, with an assumed combined tax rate of 22 percent federal, 7.65 percent payroll and 5 percent state, so line 4 is $1,500 x 34.65 percent, which is $519.75.

Plan H's net cost is lower in all three years. The reason is visible in the worst case. Plan H's out-of-pocket maximum is $1,000 higher than Plan P's, but its premium is $1,080 lower, the employer adds $500 and the tax saving is $519.75. Those three together exceed the gap in maximums, so even a year that hits both plans' ceilings leaves Plan H ahead: $4,700.25 against $5,800.00. When the HDHP's advantages in lines 1, 3 and 4 exceed the difference between the two out-of-pocket maximums, there is no break-even point; the HDHP is the lower-cost plan at every level of covered spending, on these inputs.

Worked year 2: family, where the answer flips

Again, every plan figure is invented. Plan P costs $300 a month ($3,600 a year) for family coverage, with a $2,000 deductible, 20 percent coinsurance and an $8,000 maximum. Plan H costs $250 a month ($3,000 a year), with a $4,000 family deductible, above the 2027 minimum of $3,500, 20 percent coinsurance and a $14,000 maximum, under the IRS family cap of $17,400. There is no employer HSA money. The family contributes $3,000 through payroll, in a state with no income tax in this example, so the combined rate is 22 percent plus 7.65 percent and line 4 is $889.50.

Here the HDHP wins the light year and loses the middle and heavy years. Stepping through spending in $100 increments, Plan P first becomes the lower-cost plan at $3,900 of covered spending on these inputs. That is the break-even point: below it, Plan H's premium and tax advantages outweigh its higher deductible; above it, the higher deductible and the higher maximum dominate. In the heavy year, at $40,000 of covered spending, the gap is $1,710.50 in Plan P's favor: Plan P has reached its maximum, while Plan H is still paying coinsurance below its own. Once both plans reach their maximums, from $54,000 of covered spending, the gap widens to $4,510.50, because Plan H's maximum is $6,000 higher while its premium is only $600 lower and there is no employer money.

The two examples differ in exactly the lines the worksheet isolates. A small premium gap, no employer contribution and a wide gap between maximums push the break-even point down, sometimes low enough that an ordinary year crosses it. A large premium gap, employer money and close maximums push it up, sometimes past the worst case. Neither result is a property of HDHPs in general; it is a property of the two plans in front of you.

How each input moves the break-even point

The crossover in worked year 2 is sensitive to every line of the worksheet, and seeing how much helps you decide which numbers to pin down before choosing. The table changes one input at a time from worked year 2 and recomputes the first spending level, in $100 steps, at which Plan P becomes the lower-cost plan. All inputs remain invented.

Three lessons come out of the table. Employer HSA money and a lower HDHP premium move the break-even point up, because they reduce the HDHP's cost in every year, light or heavy. The jumps in the table can look large for a $1,000 change, and the reason is the shape of the two plans: once both deductibles are met, each plan charges the same 20 percent coinsurance, so their totals run parallel until Plan P reaches its maximum. A small shift in the gap can therefore move the crossover across that whole parallel stretch, from just above the HDHP deductible to the point where Plan P stops charging. A lower HDHP out-of-pocket maximum matters only in heavy years: here it leaves the crossover where it was, because the plans cross long before either maximum is reached, but it shrinks the heavy-year gap, and a maximum low enough to close the gap between the two plans' maximums would change the worst case. And skipping your own contributions lowers the break-even point, because line 4 disappears; the HSA's tax saving exists only if money actually goes in. When you compare real plans, the inputs worth confirming first are the ones that move this table most for your household: usually the employer contribution and the two out-of-pocket maximums.

Filling in the worksheet with your own numbers

1. From each plan's Summary of Benefits and Coverage, write down the premium, deductible, coinsurance or copays, and out-of-pocket maximum for in-network care.
2. Pick three spending levels in allowed amounts: a light year, a middle year and a year that reaches both maximums. Your last explanation of benefits statements are the best evidence for the middle year.
3. Compute line 2 for each plan at each level: spending up to the deductible, then the coinsurance share, stopping at the maximum.
4. On the HDHP side, subtract the employer contribution and your own planned contribution times your combined tax rate, counting the 7.65 percent payroll tax only for payroll contributions and the state rate only where your state follows the federal deduction.
5. Compare the totals row by row, and look at the worst case on its own: if the HDHP's advantages exceed the gap between maximums, there is no crossover.

Generic loan and savings arithmetic lives on CalculatorVillage, our sister site for calculators, if you want to model how an HSA balance grows over several years. For the plan comparison itself, the five steps above are the whole method.

Family plans: the embedded deductible test

Family HDHPs carry an eligibility test that can surprise a household mid-comparison. IRS Publication 969 says that if a family plan has both a family deductible and individual deductibles for each family member, the plan does not qualify as a high deductible health plan if either deductible is below the minimum annual deductible for family coverage. For 2027 that minimum is $3,500. A family plan with a $2,000 individual deductible and a $4,000 family deductible is therefore not an HDHP, and nobody on it can contribute to an HSA, even though its family deductible clears the minimum. Check the plan's HSA eligibility statement before you put line 4 into the worksheet.

The same publication explains the other side: if one family member meets an individual deductible that is at or above the family minimum, that member's coverage can start before the full family deductible is met. Out-of-pocket rules have a separate federal layer for non-grandfathered plans, the per-person limit explained in our deductible and out-of-pocket guide, and a family HDHP must satisfy both its IRS cap and that rule.

What a deductible-first plan still covers

An HDHP is allowed to pay for some services before the deductible without losing its status, and those exceptions change the light-year row. IRS Publication 969 says an HDHP may provide preventive care benefits without a deductible, and that a plan will not fail to be treated as an HDHP because it has no deductible for telehealth. Whether your plan uses either permission is a plan design question. If it does, a year of routine preventive visits and a few telehealth visits may cost nothing out of pocket, which lowers line 2 in the light year. The preventive care bill guide explains why a preventive visit can still produce a charge, and the telehealth cost guide covers the visit anchors.

Prescriptions are where the deductible-first design is felt most. If your HDHP applies the deductible to prescriptions, a household with steady drug costs reaches the deductible early in the year and should put those costs into the middle row, not the light one. Price those drugs both ways: through the plan and at the pharmacy's cash price. The discount card guide explains when a cash purchase counts toward the deductible and when it does not.

Timing rules that move the numbers

• Medicare stops contributions. Publication 969 says that beginning with the first month you are enrolled in Medicare, your contribution limit is zero. For someone turning 65 mid-year, line 4 shrinks to the months before enrollment.
• Joining mid-year. Under the last-month rule in Publication 969, a person who is eligible on the first day of the last month of the tax year is treated as eligible for the whole year, but must then stay eligible through a testing period that runs to the end of the 12th month after that month. Failing the testing period has tax consequences, which Publication 969 sets out.
• Unspent money carries over. Publication 969 says amounts that remain at the end of the year are generally carried over to the next year. That is why line 4 counts the tax on contributions, not the contributions themselves.
• Non-medical withdrawals cost extra. A distribution not used for qualified medical expenses is taxed and carries an additional 20 percent tax, except after age 65, disability or death, according to the same publication.

For the choice between an HSA and a health FSA, or for using both, our HSA and FSA guide covers the account rules, the bronze and catastrophic Marketplace plan change from Public Law 119-21, and the FSA limits.

Edge cases where the worksheet needs care

• Out-of-network care. The out-of-pocket maximum in line 2 is usually for in-network care. Out-of-network costs can run above it, so a household that expects out-of-network care should add a separate line.
• Cash flow. The worksheet compares totals over a year. An HDHP's costs can arrive early, before the HSA has filled, so a household without savings may care about the timing as well as the total.
• High earners. Above the $184,500 Social Security wage base for 2026, the payroll part of line 4 falls from 7.65 percent to 1.45 percent, plus the additional 0.9 percent above $200,000.
• Marketplace coverage. If you buy coverage through HealthCare.gov or a state Marketplace, premium tax credits change line 1 and contributions go in outside payroll, so the payroll tax saving does not apply. The 2027 Marketplace cost guide covers the credit arithmetic.
• A spouse's coverage. Other health coverage can affect HSA eligibility. Publication 969 lists the coverage that does and does not disqualify you; check it before relying on line 4.

What the worksheet leaves out on purpose

The four-line worksheet is a one-year cash comparison, and it deliberately ignores a few things that some readers will want to weigh separately. It does not count investment growth on an HSA balance that is left in the account for later years, which can matter to a household that does not expect to spend the money soon. It does not count dental or vision costs, which most medical plans do not cover either way. It does not price the value of predictability, which a plan with a lower out-of-pocket maximum offers in the heavy year. And it does not include out-of-network care, which sits outside both plans' maximums in most designs. Each of those is a real consideration; none belongs inside the same arithmetic as premiums and deductibles, because each depends on choices and circumstances the plan documents cannot tell you.

Questions people ask when comparing an HDHP

IRS limits and tax rules cited

• Internal Revenue Service, Revenue Procedure 2025-19: 2026 HSA contribution limits, HDHP minimum deductibles and out-of-pocket maximums, excepted benefit HRA amount. Checked October 30, 2026.
• Internal Revenue Service, Revenue Procedure 2026-24: the same figures for 2027, and the direct primary care fee limits under section 223(c)(1)(E). Checked October 30, 2026.
• Internal Revenue Service, Publication 969 (for 2025 returns): catch-up contributions, employer and cafeteria plan contributions, preventive care and telehealth, Medicare, last-month rule, carryover, distributions, and family deductibles. Checked October 30, 2026.
• Internal Revenue Service, Tax Topic 751: Social Security and Medicare withholding rates, 2026 wage base, additional Medicare tax. Checked October 30, 2026.
• California Franchise Tax Board, 2025 Instructions for Schedule CA (540): health savings account deduction and earnings. Checked October 30, 2026.

General cost information, not tax, legal or insurance advice. The example plans are invented. Confirm plan figures with the plan in writing, and tax treatment with a tax professional.