Healthcare is one of those expenses that can be easy to underestimate when building a financial plan. We tend to think about the monthly premium, perhaps glance at the deductible, and move on. But over the course of a year, the costs of prescriptions, copays, dental work, vision care, braces, medical equipment, and other healthcare expenses can add up quickly.
One way to make some of those expenses less expensive is by using a tax-advantaged health account. For many employees, that might mean a Health Savings Account, or HSA. For eligible federal employees and service members, it may instead mean a Health Care Flexible Spending Account, or HCFSA. And for military families using TRICARE, understanding the difference is particularly important because TRICARE generally does not qualify as an HSA-eligible high-deductible health plan.
An HSA is one of the more powerful accounts available in the tax code. When you are eligible, contributions can receive favorable federal tax treatment, the money can be invested, and withdrawals can be tax-free when used for qualified medical expenses. The account belongs to you rather than simply being an annual benefit that disappears if you don’t use it. For 2026, the HSA contribution limit is $4,400 for self-only coverage and $8,750 for family coverage, assuming you meet the eligibility requirements.
The catch is that you have to be eligible to contribute to an HSA. The primary requirement is that you be covered by a qualifying high-deductible health plan, or HDHP, and not have other disqualifying health coverage. For 2026, an HSA-qualified HDHP generally must have a deductible of at least $1,700 for self-only coverage or $3,400 for family coverage, while also staying within the applicable out-of-pocket maximums. There are additional rules, including restrictions involving other health coverage and certain FSAs or HRAs.
This is where military families sometimes get confused. You might hear someone say, “I have a high deductible, so I should be able to contribute to an HSA.” But having a deductible does not automatically make a health plan an HSA-qualified HDHP. The plan has to meet the specific requirements established under federal tax law. TRICARE does not qualify as an HSA-eligible HDHP. TRICARE itself specifically states that HSAs don’t work with TRICARE because TRICARE doesn’t qualify as a high-deductible health plan.
That means a service member or military family covered by TRICARE generally can’t simply open an HSA and start making tax-deductible contributions because they wish to. The HSA rules are determined by federal tax law, not by whether the healthcare plan feels like a “high deductible” plan. And this distinction matters because an HSA is not just another savings account. Making contributions when you are not eligible can create tax problems and potentially require corrective action.
So what can military families use instead?
For eligible service members, the Health Care Flexible Spending Account, or HCFSA, can be a valuable alternative. The HCFSA allows eligible participants to set aside money from their paycheck before taxes and then use those funds for eligible healthcare expenses. For 2026, the HCFSA contribution limit is up to $3,400. The account can be used for a broad range of eligible medical, dental, vision, prescription, and certain other healthcare expenses.
This can be particularly useful for military families because TRICARE can cover a significant amount of healthcare costs, but it doesn’t necessarily cover everything a family might spend on healthcare. Depending on the TRICARE plan and the particular service, families may still encounter copayments, deductibles, coinsurance, prescriptions, dental expenses, vision expenses, braces, and other qualified expenses. TRICARE itself points out that an HCFSA can be used for costs that TRICARE doesn’t cover.
The HCFSA can be useful even if you think, “We have TRICARE, so we don’t really spend much on healthcare.” Maybe your family doesn’t have many medical bills. But perhaps one child needs braces. Someone needs new glasses or contact lenses. You have recurring prescriptions. You use an eligible wellness service. Or you simply want to purchase qualified over-the-counter healthcare products with pre-tax dollars. Those expenses can add up.
TRICARE specifically lists examples of HCFSA-eligible expenses including medical copayments, coinsurance and deductibles, dental exams and braces, vision exams and eyeglasses, contact lenses and supplies, certain wellness services such as chiropractic care, acupuncture and massage therapy, prescription medications, prescribed over-the-counter medications, and eligible over-the-counter healthcare items such as bandages and blood-pressure monitors. The IRS ultimately determines which expenses qualify, so it is important to check the current eligible-expense list rather than assuming something qualifies simply because it is related to health or wellness.
There is another important distinction between an HSA and an HCFSA: the money works differently. An HSA is designed to be a long-term health savings vehicle. If you don’t spend the money this year, it generally remains in the account and can continue growing. An HCFSA is much more focused on using pre-tax dollars for eligible healthcare expenses during the applicable plan period, subject to the plan’s carryover and other rules. In other words, an HSA can become a long-term asset; an HCFSA is primarily a way to reduce the tax cost of healthcare spending you expect to have.
That difference makes planning especially important with an HCFSA. You don’t want to put $3,400 into an account simply because that’s the maximum contribution and then discover that you only have $500 of eligible expenses. The rules governing unused balances, carryovers, and grace periods can vary, so you should understand the current FSAFEDS rules before making your election. The better approach is to estimate your family’s predictable eligible healthcare expenses for the coming year and use the account strategically.
Think about it like any other part of a financial plan. If you know your child is getting braces next year, you have predictable prescription expenses, your family regularly purchases eligible vision products, or you know you’re going to have recurring qualified medical expenses, an HCFSA may allow you to pay those bills with pre-tax dollars instead of after-tax dollars. That difference can effectively reduce the true cost of the expense.
Enrollment generally occurs through FSAFEDS during Federal Benefits Open Season, with qualifying life events providing certain opportunities to make changes during the year. Think of TRICARE as the healthcare coverage and the HCFSA as a tax-advantaged account that can help you pay certain eligible expenses that arise alongside that coverage.
Cleared to Rejoin!
Tactical takeaway: Before the next benefits enrollment period, look at your family’s expected medical, dental, vision, prescription, and other eligible healthcare expenses. If you’re eligible for an HCFSA, consider whether putting some of those predictable expenses through a pre-tax account could lower your overall tax bill. And if you think you might be eligible for an HSA because of another health plan, verify your eligibility under the IRS rules first.
Fight’s On!
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