GOP Pushes HSA Expansion Amid ACA Subsidy Expiration Concerns

Republican lawmakers are proposing to expand the eligibility and use of Health Savings Accounts (HSAs) as an alternative to the expiring enhanced federal subsidies under the Affordable Care Act (ACA). Starting January 2026, more ACA enrollees, particularly those with the lowest-cost bronze and catastrophic plans characterized by high deductibles, may open and contribute to HSAs. Republicans argue that direct federal deposits to these accounts would empower patients to manage some of their health expenses with tax-free dollars, potentially offsetting rising out-of-pocket premium costs. However, legal restrictions on HSAs limit their use to qualified medical expenses and prohibit paying insurance premiums, raising doubts about their effectiveness in addressing soaring ACA marketplace premiums projected to increase by an average of 114% in 2026 without congressional intervention. This limitation is significant since many ACA enrollees rely on subsidies primarily to afford monthly premium payments rather than other medical expenses. Democrats have criticized the GOP proposals, emphasizing that HSAs primarily benefit higher-income individuals with employer-sponsored insurance and wealthier demographics. They continue to advocate for extending the enhanced ACA premium subsidies, which currently assist about 24 million Americans, compared to roughly 7.3 million projected to gain HSA eligibility under the new rules. HSAs allow tax-free savings for a range of medical expenses including eyeglasses, dental and medical exams, and some over-the-counter products but exclude expenditures on insurance premiums, most baby formulas, and general health-related items like gym memberships unless prescribed by a physician. The account contribution limits for 2026 are set at $4,400 for individuals and $8,750 for families. The expansion of HSAs has attracted attention from businesses offering wellness and medical products eligible for purchase with HSA funds. Retail giants such as Amazon, Walmart, and Target are developing storefronts for HSA-eligible items. Additionally, startups like Truemed are facilitating faster approvals for various health and fitness products that can be bought through these accounts. Truemed's product range includes high-cost wellness devices, such as saunas and therapeutic ice baths, alongside fitness equipment and supplements. The involvement of Truemed's co-founder Calley Means, a recent appointee at the Department of Health and Human Services, has prompted scrutiny regarding potential conflicts of interest. HHS officials have stated that Means will divest from the company as part of his federal role. The company remains privately held and details of the divestment process have not been specified. Health economists caution that despite additional funds allocated to HSAs, the inability to use these funds for premiums will leave many ACA enrollees struggling with higher monthly costs, potentially leading some to forgo coverage or select plans with higher out-of-pocket burdens. The legislative timeline is constrained, with enhanced ACA subsidies expiring at the end of the year and policymakers debating the feasibility of extending them versus implementing HSA expansions. Critics note the challenges in enacting significant healthcare policy changes on short notice given pre-set insurance plan designs and enrollment already underway. Overall, while expanding HSAs may offer increased financial flexibility for certain medical expenses, current regulatory limits and significant premium cost challenges raise questions about their ability to serve low-income ACA enrollees effectively. The debate continues amid political negotiations over the best path to manage health coverage affordability as the ACA subsidy enhancements approach expiration.