Why Is Congress Abandoning One of the Best Health Insurance Reforms in a Generation?

T axpayers and those more broadly interested in reversing the slow road to socialized medicine were disappointed last week to learn that the Senate Finance Committee dropped health savings account (HSA) expansions from their “One Big Beautiful” tax bill. It’s imperative that these HSA provisions, which were passed as part of the U.S. House’s version of the tax bill, be restored to the Senate version. They represent the biggest HSA reform and expansion in a generation.

For the uninitiated, an HSA is a triple tax-advantaged savings account: Contributions are tax-deductible to you or to your employer; money in the account can be invested, and grows tax-free; and distributions are tax-free if used for health care. HSAs come with a catch: While distributions can be used on almost any out-of-pocket medical expense, contributions are only permitted in years in which the owner is enrolled in an HSA-qualified health insurance plan (more on that later), and there is a dollar limit on annual contributions (in 2025, $4,300 for individuals, $8,550 for families, plus a $1,000 “catch up” booster for an individual aged 55 and older).

The definition of an HSA-qualified insurance plan is one of the key areas of victory in the House HSA reforms. Since 2003, when HSAs were introduced, there has been only one type of HSA insurance plan: a high-deductible health plan (HDHP). Maddeningly, even though most working-age Americans now have a high-deductible health plan (defined as $1,650 for individuals and $3,300 for families in 2025), that doesn’t mean their plan is necessarily HSA-qualified, thanks to other high-deductible health plan design details that must be met. The House bill fixes that by creating new qualifying health plan sources from which to gain HSA contribution eligibility.

Bronze and Catastrophic tier Obamacare plans are purchased in health marketplace exchanges by 7.3 million families. Chosen for their lower premiums and higher cost-sharing mix of benefits, these plans often fit the description of “has a high deductible, but is not considered an HDHP due to technical reasons.” Under the House bill, they would be HSA-qualified automatically.

In addition, seniors enrolled in Medicare Part A (hospital insurance), which is de facto mandatory for those wanting to collect full Social Security benefits, will now also be able to contribute to HSAs. Under current law, mere enrollment in Medicare Part A was disqualifying, even if you were also enrolled in a current or former employer’s HDHP. Seniors who have Medicare Part A coverage and an HDHP will be able to make HSA contributions.

Americans’ enrollment in direct primary care arrangements, where you surrender a monthly or annual membership fee to a physician group in order to get access to medical services, would also no longer be considered a disqualifying form of medical coverage. The same applies to accessing health care at an on-site employee clinic, as well as the situation where your spouse has a “use it or lose it” health flex spending account at work.

All told, Dan Perrin of the HSA Coalition estimates that the number of Americans eligible to make HSA contributions will grow by 20 million under the House bill. Considering there are 40 million HSAs open today, that’s quite a jump.

There’s more. HSA contributions themselves are rising under the House bill. The dollar-figure limits listed above would double for individuals making less than $75,000 and families making less than $150,000. Spouses who are eligible for the over-55 “catch up” contribution of $1,000 now won’t have to open their own separate HSA to do so. Up to $ 3,300 (in 2025) in flex spending account and health reimbursement account balances that are unused at the end of the year can be rolled into an HSA if an employee switches to an HSA-qualified plan at work.

What HSA dollars can be used for is also a growing list. Today, HSAs can be used for any qualified medical expense: copays and deductibles, as well as direct spending on doctor visits, prescription and over-the-counter medicines, hospital stays, medical equipment, medical travel, etc. Under the House bill, this list grows to include gym memberships and personal trainers (limited to $500 per year, $1,000 for families). Direct primary care membership dues, not to exceed $150 per month ($300 for families), are now considered HSA-qualified medical expenses. Additionally, qualified medical expenses incurred up to 60 days prior to opening an HSA are now eligible for tax-free reimbursement through HSA distributions.

Put this all in one package, and you have a generational leap in HSA policy. Many of us in the conservative movement have been working on these reforms for decades. Getting these coverage, contribution, and distribution expansions signed into law clears the decks and allows the next generation of consumer-driven HSA reforms to begin to ripen on Capitol Hill. The Senate should restore the HSA reforms contained in the original House tax reform bill.