Expanded HSA Eligibility Faces Limits As ACA Premiums Skyrocket

Are HSAs the Next Big Lever in ACA Affordability

A conversational look at what insurers should know

Health Savings Accounts have long been positioned as a consumer empowerment tool, giving individuals tax-free dollars to manage a wide range of medical expenses. Yet the debate over expanding HSAs to shore up Affordable Care Act affordability has resurfaced, raising important implications for carriers, policymakers, and the broader industry.

HSAs are attractive on paper. They are flexible, portable, and increasingly popular. But their limits come sharply into focus when positioned as an answer to rising ACA premiums. As the conversation heats up in Washington, insurers are watching closely to understand whether this policy direction aligns with the realities of the ACA market.

“HSAs offer meaningful tax advantages, but they were never built to solve the premium problem.”
Healthcare policy analyst

The Policy Push Behind Expanded HSA Eligibility

Several Republican lawmakers, including former President Trump, have proposed broadening HSA eligibility so more ACA enrollees could access tax-advantaged funds. The idea is emerging as enhanced federal subsidies approach expiration and policymakers search for alternatives that maintain affordability.

The challenge is legal and structural. HSAs can only be paired with high deductible health plans and come with strict contribution caps, set to reach $4,400 for individuals and $8,750 for families in 2026. Just as importantly, federal rules prohibit using HSA dollars to pay insurance premiums. That restriction leaves a large gap between the policy goal of affordability and the actual ability of an HSA to reduce a consumer’s monthly bill.

While some Senate Republicans have floated proposals for the federal government to deposit funds directly into HSAs for ACA enrollees, industry stakeholders remain skeptical about whether such a system could be created and implemented in time to influence 2026 coverage. Premiums are already being set, and enrollment operations are well underway.

Democrats Prefer Subsidy Extensions

Democratic leaders have made clear that their preferred approach is to extend the existing enhanced subsidies rather than replace them with HSA expansions. Their rationale is straightforward. Subsidies target those with the greatest need and reduce the cost of coverage upfront, where consumers feel it most. By contrast, HSAs do not reduce premiums, and they disproportionately benefit higher income, healthier individuals, many of whom already have employer-sponsored coverage.

“You cannot rely on an HSA to do the job of a subsidy. They serve entirely different purposes.”
Former CMS official

The Growing HSA Market and Retail Response

Even as the policy debate continues, HSAs are booming. Over two decades, total assets have grown from roughly $5 billion to nearly $150 billion. Retailers and startups have taken notice. Large companies like Amazon and Walmart now market high-priced wellness products labeled as HSA eligible. Meanwhile, newer entrants such as Truemed are building infrastructure to help consumers channel HSA dollars into fitness and medical products that qualify under IRS guidelines.

This growth signals that HSAs are becoming a core part of the consumer health finance ecosystem, even if their ability to influence ACA premium affordability remains limited.

What HSAs Can and Cannot Do

The only section presented in bullet form

• Can: Provide tax-free spending for qualified medical expenses including services, devices, and certain wellness products.

• Cannot: Be used to pay health insurance premiums for ACA plans, limiting their ability to offset rising monthly costs.

• Can: Accumulate savings over time and act as a long-term financial planning tool.

• Cannot: Substitute for income-based subsidies that directly reduce premium obligations for low and moderate income enrollees.

The Larger Issue: Premium Costs Remain Unresolved

At its core, the HSA expansion debate touches on a broader theme. Consumer-directed health financing appeals to many policymakers who prefer market-based solutions. But rising premiums, especially for subsidized ACA enrollees, are a structural challenge that HSAs cannot solve.

For insurers, the key takeaway is that while HSAs may grow in popularity and consumer visibility, they are not poised to change premium dynamics in the individual market. If enhanced subsidies expire, many enrollees could face higher out-of-pocket costs or gravitate toward less comprehensive coverage, increasing churn and potentially destabilizing risk pools.

As Congress weighs its next steps, the industry’s focus remains on pragmatic solutions that align affordability tools with the actual mechanics of premium calculation and plan selection. HSAs will continue to play an important role in health finance, but they remain only one piece of a much larger puzzle.