Health Savings Accounts Poised for Comeback Under Republicans

By Lauren Clason | Originally posted on Bloomberg

Republicans have a new chance to expand health savings accounts offered by employer plans when Congress reconvenes in 2025, revisiting a divisive policy that some Democrats support even as others denounce it as a tax break for the wealthy.

Health savings accounts let high-deductible health plan enrollees use tax-free dollars on certain medical expenses. The money rolls over annually and can be invested tax-free for higher returns. Twenty-two percent of employers surveyed by the Kaiser Family Foundation offered HSA-eligible plans in 2024.

Advocates see the tax-advantaged accounts as a vehicle to increase both health care access and conscious spending for high-deductible plan members, who pay more out-of-pocket before insurance kicks in. Lawmakers from both parties have proposed bills to allow patients to use HSAs for everything from gym memberships and menstrual products to funeral expenses and veterinary bills.

But critics argue the accounts mostly benefit wealthier individuals who can invest the money and spend it however they like in retirement. HSAs are more likely to expose low-income people to higher out-of-pocket costs, and federal scorekeepers project expansions will cost the government tens of billions in lost tax revenue that could be spent on closing coverage gaps instead.

“They’re pretty helpful in helping people stretch their spending further than they could if they did not have access to participate in a health savings account,” said Jake Spiegel, an Employee Benefit Research Institute research associate.

HSAs can be a “hugely valuable tool” for maximizing retirement funds—but if enrollees are unable to save the money, then that “avenue to building wealth is kind of cut off,” he said.