By Rich Argentieri, Chief Sales & Marketing Officer, Independent Health
Health Savings Accounts (HSAs) are not the solution to rising health care costs. However, until the systemic issues that drive costs and prices are addressed, HSAs can be an increasingly important tool to help Americans manage their financial responsibility for coverage and care. Permitting more consumers to own, fund, and manage HSAs would be impactful.
Current federal tax law requires HSAs to be connected to certain insurance policies, but should it? Wouldn’t it be a good thing to enable people to save as much as possible for their healthcare?
Federal tax law allows almost anyone to save for retirement or education through tax-advantaged vehicles because this saving has been established as good public policy to help people pursue these goals. The ability to use tax-free funds to pay for current medical care services – and save for future medical care expenses – is a universal need that goes beyond members of high-deductible medical plans.
When HSAs were first introduced in 2004, they represented a consumer trade-off. In exchange for enrolling in a plan with a high deductible, the consumer could defer a portion of their income into the most tax-advantaged account available at the time. Consumers could then pay those higher out-of-pocket expenses with tax-advantaged dollars. For most, the tax savings associated with an HSA stretched their money by 20% to 35%. In other words, they could pay a $100 bill with $100 of earned income, whereas a neighbor without an HSA would have to earn between $125 and $150 to pay the same $100 expense and the associated taxes.
The Health Savings Account Bill Congress passed in late 2003 defined a qualifying high-deductible health plan as coverage with a deductible of at least $1,000 for self-only and $2,000 for family coverage. Today, those annually adjusted figures are now $1,700 and $3,400. More importantly, nearly 9 in 10 employees (about 88%) who receive coverage through their company face deductible responsibility, with the average deductible on these plans being almost $1,900 in 2025, according to the annual Kaiser Family Foundation survey.
The dilemma? Most plans with high deductibles do not meet the highly restrictive HSA-qualified plan design requirement because they cover some non-preventive services (often physician visits and some prescription drugs) in full or with a copayment without being subject to the plan deductible first. Members of these plans face high out-of-pocket expenses without the opportunity to open and fund an HSA. Loosening the plan design requirements would enable more individuals to access this valuable savings vehicle. A promising step toward wider HSA access came from the One Big Beautiful Bill Act, which now allows Bronze or Catastrophic plan members enrolled through the Individual Exchange to have an HSA.
The bottom line
Congress recognizes the importance of encouraging individuals to save for retirement and education by offering savings vehicles with special tax treatment. Most Americans face high out-of-pocket expenses for medical care but do not have a similar savings vehicle. Decoupling HSA eligibility from their current high-deductible plan requirements would be a valuable policy change: it would permit consumers to save for current and future out-of-pocket expenses on a tax-free basis.
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