Health Savings Accounts: A New Frontier in Healthcare Financing?
Health savings accounts (HSAs) have been around for over two decades, offering consumers a way to save money for medical expenses while enjoying tax benefits. But could they become a more significant player in how Americans pay for healthcare? Senate Republicans think so. They're proposing to allocate up to $1,500 to eligible Americans for HSAs instead of extending the COVID-19 pandemic-era subsidies that made Affordable Care Act (ACA) health insurance more affordable for 22 million Americans.
HSAs are already popular among workers who get health insurance through their employers. As of mid-2025, a national survey revealed that U.S. consumers had 40 million HSAs with $159 billion in deposits, a 16% increase from the previous year. This indicates that a growing number of Americans rely on HSAs to save for unexpected medical expenses.
"We have an affordability crisis for healthcare in America," says Scott Cutler, CEO of HealthEquity. "Half of Americans can't afford a $500 medical bill, so having a safety net that grows over time and can be used for medical expenses helps Americans be more prepared."
But what exactly are HSAs, and how do they work? HSAs allow consumers to save money before taxes. For workers, a set amount is deducted from their paycheck and put into an HSA before taxes are deducted. This money can be spent on eligible expenses like doctor or hospital bills, prescription drugs, and more. Consumers can roll over HSA balances from year to year, invest the money, and spend tax-free gains on eligible expenses.
HSAs are often paired with high-deductible health insurance plans. A deductible is the amount you must pay out of pocket before most insurance coverage kicks in. In 2026, the minimum deductible for an HSA-eligible plan is $1,700 for an individual or $3,400 for a family insurance plan. The amount you can contribute per year is also capped at $4,400 for an individual and $8,750 for a family. People aged 55 or older can contribute an additional $1,000 per year.
HSAs differ from Flexible Spending Accounts (FSAs) in that they allow users to set aside payroll deductions before taxes. While FSAs can cover health expenses, dependent-care FSAs are used for childcare or elder care expenses. FSA accounts are 'use-it-or-lose-it' accounts, requiring consumers to spend the contributions within a year or forfeit any remaining balance. HSA balances, on the other hand, accumulate from year to year.
Some people choose high-deductible health plans and HSAs because they want to pay less each month for health insurance. While workers enrolled in a high-deductible plan pay an average monthly premium of $109, much lower than the average $191 for a traditional PPO plan, they must cover a deductible that is more than twice as much as a traditional medical plan. One strategy is to save enough to cover the amount they must pay out of pocket, including the deductible, copays, and coinsurance. Once they have that amount saved, they can cover basic medical costs.
HSAs are particularly popular among young adults, with 56% of Gen Z workers and 50% of Millennials enrolled in an HSA, according to a HealthEquity survey of over 600 workers in 2025. These younger workers often have lower rates of chronic disease, and these healthy individuals might see HSAs as a smart way to build savings for medical expenses they may incur later in life.
However, the question remains whether Congress will fund HSAs for some consumers. Currently, Congress does not fund HSAs for ACA enrollees. On December 8, Republican Senators Mike Crapo and Bill Cassidy unveiled a bill that would deposit $1,000 to $1,500 into HSAs for eligible consumers instead of extending the COVID-era enhanced tax credits that sharply reduced health insurance premiums under the ACA.
The Senate rejected the Crapo-Cassidy proposal and a Democrat proposal to extend the COVID-era tax credits for three years on December 11. As a result, ACA insurance premiums rose sharply on January 1 for millions of Americans who relied on the COVID-era subsidies to lower their monthly insurance bills. The original ACA advanced premium tax credits, which lowered insurance costs for those earning up to four times the federal poverty level, remain in place.
Democrats and Republicans will likely debate healthcare affordability when Congress resumes in January. Cassidy defended his idea of giving consumers money rather than funding ACA subsidies in a December 18 social media post, stating, 'Republicans support it. Americans support it. Democrats should support it too.' However, Democrats and some health policy analysts have been skeptical of using taxpayer funds to support HSAs.
U.S. Rep. Lloyd Doggett, D-Texas, said, 'Most Americans do not have enough savings to afford emergency care, let alone pay an HSA's sky-high deductible.' Sabrina Corlette, co-director of Georgetown University's Center on Health Insurance Reforms, agreed, stating that most Americans don't have enough cash to pay for an expected medical bill. A hospital bill alone could cost thousands of dollars.
If Congress funds HSAs instead of the ACA's enhanced subsidies, consumers with chronic health conditions or those who need hospital care are likely to face significant financial liabilities. Corlette warned that there would be a lot more medical debt. The debate over healthcare affordability is set to continue as Congress grapples with the best way to ensure Americans have access to affordable healthcare.
