Republican Push to Expand HSAs as ACA Subsidies Expire Faces Challenges

Republican lawmakers, including former President Donald Trump, are proposing the expansion of health savings accounts (HSAs) as an alternative to the soon-to-expire enhanced federal subsidies under the Affordable Care Act (ACA) that currently help reduce insurance premiums for millions of Americans. These proposals build on recent legislative changes that have extended HSA eligibility to more ACA enrollees, specifically those enrolled in the least expensive "bronze" and catastrophic plans starting in 2026. HSAs allow individuals with high-deductible health plans to save tax-free money for eligible medical expenses, but existing regulations prohibit the use of HSA funds to pay insurance premiums, limiting their utility in addressing rising premium costs. Premium payments for unsubsidized ACA enrollees are expected to increase by an average of 114% next year if Congress does not act to extend subsidies or implement alternative measures, raising concerns about affordability and potential disenrollment. The GOP framework suggests providing direct federal deposits into HSAs for ACA enrollees, although this approach faces skepticism regarding its effectiveness in mitigating premium hikes or ensuring comprehensive coverage. Critics, mainly Democrats and some policy analysts, argue that HSAs are more beneficial to higher-income or healthier individuals and may push lower-income patients into plans with higher out-of-pocket costs. Additionally, the scope of eligible HSA purchases excludes common daily necessities such as baby formula and most dental products while allowing payment for certain health-related items and services. The expansion of HSA use has also spurred growth in companies marketing wellness and medical products that qualify for HSA reimbursement, including startups offering items like advanced fitness equipment and health devices, capitalizing on increased consumer investment in these accounts. The discussion is complicated by the legislative timeline, as premium rates for 2026 have already been set, and there is limited time for Congress to enact significant changes before subsidy expirations at year-end. The debate underscores ongoing tensions in U.S. health policy between market-based mechanisms and direct subsidy approaches to address affordability in the health insurance marketplace. Overall, the proposals illustrate a strategic shift toward leveraging HSAs as a tool for managing health care costs, though their capacity to fully replace enhanced ACA subsidies remains uncertain given regulatory limits and diverse stakeholder opposition.