HSAs are being touted as a way to make healthcare more affordable. But it's more complicated than that.

MW HSAs are being touted as a way to make healthcare more affordable. But it's more complicated than that.

By Jaimy Lee

Several million Americans signed up for HSAs this year as they grapple with increasingly expensive medical care and health-insurance premiums

As healthcare costs rise, Republicans say health savings accounts, or HSAs, can help people make smarter spending choices about their medical care. Some experts disagree.

The health savings account, a decades-old tax vehicle that primarily benefits well-off Americans, is being promoted as a solution to today's healthcare affordability crisis.

The cost of healthcare is soaring. That means higher costs for everyone, including people who get health insurance through Obamacare, their employer or even Medicare. And conservative lawmakers including President Donald Trump believe health savings accounts, or HSAs, are key to fixing that problem.

On Sunday, Trump again posted about the need for "payments being made directly to THE PEOPLE, so that they can buy their own Healthcare, rather than to bloated and uncaring Insurance Companies."

At face value, HSAs are great, particularly if you are someone with a higher income. By putting money into an account dedicated to medical expenses, you get a bunch of tax perks.

But on paper, it's a different story. There's a labyrinth of restrictions that make HSAs confusing. You mostly can't spend your HSA on premiums. You have to keep your receipts. Some companies require a minimum cash balance before you can invest. And in New Jersey, you can't deduct your HSA contribution from your income, among other rules.

"I don't think that most Americans, even people with high-deductible plans and health savings accounts, really think that expanding the scope of health savings accounts is going to make healthcare more affordable for them," said Sherry Glied, an economist and a professor at New York University. "At the end of the day, it's just a tax break."

But the U.S. healthcare system is nearing a tipping point, and lawmakers are scrambling to come up with ways to address skyrocketing medical costs. Millions of Americans were forced to go without insurance this year rather than pay Affordable Care Act premiums that doubled overnight. And consumers are facing financial pressure in many areas of their lives.

This "perfect storm," as Glied puts it, has renewed interest in HSAs among conservatives, who are eager to move Americans to a system in which they can sometimes bypass health insurance and use their HSAs to smartly shop for prescription drugs, copays and other preventive medical care. At least 6.8 million people signed up for ACA plans with HSAs in 2026.

"It's being pushed as a panacea," said Spencer Perlman, director of healthcare research at Veda Partners. "I think they're overselling."

Paying cash for medical care

HealthEquity (HQY), which is the largest administrator of HSAs in the U.S., reported record sign-ups and assets under management in 2025. It attributed that growth to last summer's One Big Beautiful Bill Act, which broadened access to HSAs starting this year. The company recently made its first-ever $1 million political donation - to Trump's super PAC, as first reported by Popular Information.

"HSAs are becoming core infrastructure for how Americans plan and pay for healthcare," HealthEquity CEO Scott Cutler told investors in mid-March.

The new law allows people with Bronze or Catastrophic plans - which have the highest deductibles of all ACA plans - to have HSAs for the first time. About 43% of the people who picked a plan on HealthCare.gov in 2026 enrolled in one that is HSA-eligible, up from 2% in 2025. That's 6.8 million more people with HSAs this year. The law also enables people to spend HSA dollars on monthly or annual fees for direct primary care. The working theory is that ACA enrollees can get a Bronze plan to cover major medical issues, direct primary care for the day-to-day, and a tax-advantaged HSA to help pay for the rest of their care.

Much of the chatter around HSAs emerged last fall after the government shutdown, with KFF describing the focus on HSAs as the latest effort to "repeal and replace" the ACA. It became evident then that the looming expiration of the enhanced tax subsidies that lowered the cost of ACA plans was going to be a problem, and Republican lawmakers considered putting up to $1,500 in HSAs for enrollees depending on their age and income level to help cover the cost of premiums.

Nothing changed at the time, but the momentum around HSAs hasn't slowed down.

A group that includes HealthEquity, the Chamber of Commerce, and Americans for Prosperity, a conservative organization funded by the Koch brothers, are now urging lawmakers to pass legislation introduced last month that would expand HSA eligibility to another 100 million Americans. An HSA expansion could even be included in a reconciliation bill later this year, according to Veda's Perlman.

There are two other significant changes in the U.S. health system that work in tandem with health savings accounts.

Patients can now pay cash for dozens of discounted medications, like Eli Lilly's $(LLY)$ weight-loss shot Zepbound or Pfizer's $(PFE)$ rheumatoid-arthritis treatment Xeljanz, on online platforms like LillyDirect and TrumpRx, which launched in January. In some cases, insurance won't cover certain drugs like GLP-1s for weight loss, and it's simpler to pay out of pocket than contribute toward a mile-high deductible. Lively, another administrator of HSAs, said that HSA spending at LillyDirect soared 5,600% in 2025 compared to 2024.

"People might be able to get a better deal by paying cash out of their own pocket rather than going through their insurance product," Perlman said. "The insurance product is not providing good value right now because of the level of premiums."

At the same time, it's easier than ever to use an HSA to pay for luxury wellness items like saunas, mattresses and Equinox gym memberships through third parties like Flex or Truemed, which was co-founded in 2022 by Calley Means, a senior advisor to Health and Human Services Secretary Robert F. Kennedy Jr.

"There's an interesting opportunity for the country to leverage these accounts and use them to drive more and more dollars towards prevention and towards other sorts of underlying lifestyle interventions that can treat, reverse or prevent chronic conditions," said Justin Mare, TrueMed's other co-founder.

The typical Truemed user is between 35 and 50 years old and is trying to address at least one chronic condition using lifestyle interventions like exercise before getting a prescription, Mare noted. In the idealized version of American healthcare, it's the role of the primary care doctor, or PCP, to guide this patient. But that's not what happens most of the time.

"The average person literally is spending 16 minutes a year with their PCP," he said.

Can you shop for medical care?

There are two types of people who use HSAs. For savvy consumers, it's a triple tax advantage - meaning they aren't taxed for the money they put into an account, the money they make off investing that account, and the money they withdraw to pay for medical care. Once they hit 65 years old, they can withdraw their money 100% tax free for medical care; if they withdraw for any other reason, they pay standard income tax.

Then there's the less familiar consumer. These are people who are often lower income, and they may get an annual contribution from their employer - $842 on average for one person and $1,539 for a family. An HSA isn't an investment vehicle for them; it's a place to hold cash to pay for their medical care.

That dichotomy is reflected in the numbers. About 30% of HSAs have $1 to $499 in them, 19% are unfunded, and 3% have more than $25,000, according to Devenir. For individuals who have up to $4,400 or families with $8,750 to drop into an HSA, the tax benefits are clear. But for the people who don't have much to put in an HSA, the benefits are a lot murkier.

Veda's Perlman points out that you get two types of service when you pay your health-insurance premiums. The first is coverage of day-to-day preventive care that includes medications to manage a chronic condition or quick visits to urgent care. But premiums also cover catastrophic events like hospital stays after a car crash or cancer treatment. Shopping around for a good price usually only pans out in the first instance.

"Sure, it works. But if you're going to the emergency room because you're bleeding, you're not a shopper," Perlman said. "There's a limitation as to how far that goes."

In the current system, premiums are calculated by assessing the full pool of enrollees, including those who are older and sicker and tend to spend more on medical care. The premiums paid by younger, healthier people subsidize the other group. This has long been an issue for Republicans.

"They don't like risk pooling in general, partly because they believe that a lot of the reason some people are healthy and other people are sick is because they don't take care of themselves," Glied said. "They don't think rich people should be subsidizing poor people. If you want to pull subsidies out of the system, moving money from premiums into savings accounts does that."

This is where HSAs get tricky. Widening the pool of consumers who can open a health savings accounts or the types of covered medical care or products will likely benefit some Americans and a lot of financial companies - but it will do little to address the reasons why healthcare costs are soaring in the U.S.

-Jaimy Lee

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March 30, 2026 14:51 ET (18:51 GMT)

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