Open Enrollment Brings Expanded Access to Health Savings Accounts
This year, with open enrollment underway, a greater number of Americans will have the opportunity to utilize tax-advantaged accounts for medical expenses starting next year.
The recent “big and beautiful” bill, passed in July, introduces three key provisions aimed at increasing access to health savings accounts (HSAs) for individuals with high-deductible health plans.
This shift could see an influx of 3 to 4 million new HSA users by 2026, based on Morningstar estimates.
Similar to flexible spending accounts, HSAs allow for contributions made with pre-tax dollars, which can be used to cover medical expenses throughout the year. Unlike FSAs, though, HSAs don’t have the “use it or lose it” rule. The funds are yours to keep and can be transferred even if you change jobs.
Another notable feature of HSAs is the option to invest your funds in various assets, such as stocks and bonds. Experts emphasize the advantages of investing rather than just spending these funds on immediate healthcare needs.
“HSAs are among the most powerful financial tools out there, but many people don’t fully utilize them,” mentioned certified financial planner Sean Robison, highlighting their unique triple tax benefits: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.
New Eligibility for HSAs
Generally, you need to be enrolled in a high-deductible plan with a minimum deductible of $1,700 for individuals and $3,400 for families to qualify for an HSA. Enrollment in disqualifying health insurance, Medicare, or someone else’s tax return can also prohibit eligibility.
The new legislation opens the door for three groups previously hindered by unclear or restrictive rules.
1. Participants in Bronze and Catastrophic Plans
Insurance options in the Affordable Care Act Marketplace fall into several categories: Platinum, Gold, Silver, Bronze, and Catastrophic. While platinum plans have higher premiums and lower deductibles, bronze and catastrophic options offer the opposite. Recently, those enrolled in these plans could qualify for HSAs on a limited case-by-case basis; now, anyone eligible for these plans can qualify for an HSA.
Catastrophic plans may not be widely used, but there are about 7.2 million Americans currently enrolled in bronze plans, according to the Centers for Medicare and Medicaid Services.
2. Users of Direct Primary Care Services
The new law extends HSA eligibility to individuals utilizing direct primary care services, provided these services meet other high-deductible health plan criteria.
This model, offered by providers like One Medical, allows patients to pay a flat fee for a range of services without insurance billing, placing it in a somewhat ambiguous compliance zone regarding HSAs.
As Jake Spiegel from the Employee Benefits Research Institute puts it, “What the bill clarifies is that you can participate in this model while still contributing to your HSA.”
3. Telemedicine Users
Legislation implemented during the pandemic, including the CARES Act, allowed high-deductible plans to waive deductibles for telehealth services while still qualifying for HSAs. Although those allowances expired at the end of 2024, they’ve now been reinstated permanently.
However, this doesn’t mean that a high-deductible plan must provide telehealth services to qualify for an HSA; plans can’t be disqualified simply for allowing telehealth without requiring a deductible contribution.
