- - Will health savings accounts replace ACA subsidies for some Americans?

Ken Alltucker, USA TODAYJanuary 4, 2026 at 11:02 AM

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Created more than two decades ago, health savings accounts are a popular way for consumers to get tax breaks while saving for medical expenses.

But could these accounts take on a larger role in how U.S. consumers pay for and get health care? Senate Republicans have proposed just that. They want to give eligible Americans up to $1,500 to fund health savings accounts rather than extend COVID-19 pandemic-era subsidies that made Affordable Care Act health insurance less expensive for 22 million Americans.

Health savings accounts are commonly used among workers who get health insurance through an employer. As of mid-2025, a national survey showed U.S. consumers had 40 million health savings accounts with $159 billion in deposits, a 16% surge in savings from a year before.

Those figures show an increasing share of Americans rely on health savings accounts to save for unexpected medical expenses, said Scott Cutler, CEO of HealthEquity, which offers health savings accounts.

"We have an affordability crisis for health care in America," Cutler said. "Half of Americans can't afford a $500 medical bill, so having a safety net that grows over time, that you can use for medical expenses, helps Americans be more prepared."

What are health savings accounts?

Health savings accounts allow consumers to save money before taxes. For workers, that means a set amount is deducted from your paycheck and put into a health savings account, or HSA, before taxes are deducted.

The money can be spent on eligible expenses such as doctor or hospital bills or prescription drugs. Consumers can roll over health savings account balances from year to year, invest the money and spend tax-free gains on eligible expenses.

What are deductibles and contribution limits for HSA plans?

Health savings accounts are paired with high-deductible health insurance plans. A deductible is the amount you must pay out of pocket before most insurance coverage kicks in.

In 2026, the minimum deductible for an HSA-eligible plan is $1,700 for an individual or $3,400 for a family insurance plan.

The amount you can contribute per year also is capped. The contribution limit is $4,400 for an individual and $8,750 for a family. People who are 55 or older can contribute another $1,000 per year.

How do HSAs differ from FSAs?

Flexible spending accounts also are a savings vehicle, typically offered through the workplace, that allow users to set aside payroll deductions before taxes. Health care FSAs can cover health expenses while dependent-care FSAs are used for child care or elder care expenses.

FSA accounts are use-it-or-lose-it accounts that require consumers to spend the contributions within a year or forfeit any remaining balance. HSA balances accumulate from year to year.

Why do some choose high deductibles and health savings accounts?

Employers offer high deductible health plans paired with HSAs to cost-conscious workers who want to pay less each month for health insurance. The tradeoff with these high deductible plans is workers must spend more of their own money when visiting a doctor or other medical provider.

Workers enrolled in a high-deductible plan pay an average monthly premium of $109, much lower than the average $191 per month for a traditional PPO (preferred provider organization) plan, according to benefits consultant Mercer. But workers must cover a deductible that is more than twice as much as a traditional medical plan.

One strategy people use is to save enough to cover the amount they must pay out of pocket, including the deductible, copays and coinsurance − an insurance plan's requirement that consumers pay a percentage of the bill. Once consumers have that amount saved, they can cover basic medical costs.

Health savings accounts have been popular among young adults with 56% of Gen Z workers and 50% of Millennials enrolled in an HSA, according to a HealthEquity survey of more than 600 workers enrolled in employer-sponsored health plans in 2025. These younger workers often have lower rates of chronic disease, and these healthy individuals might see HSAs as a smart way to build savings for medical expenses they may incur later in life.

"If an HSA holder is better prepared, they're more likely to have emergency savings and be better prepared for health care costs," Cutler said. "They're less likely to skip preventative care, and they can use their dollars transparently to be able to make qualified medical purchases."

Can Affordable Care Act enrollees use HSA plans?

Health savings accounts aren't limited to consumers who get health insurance though the workplace. In 2026, consumers who pick a bronze or catastrophic-level Affordable Care Act plan can use a health savings account.

Still unsettled is whether Congress will choose to fund health savings accounts for some consumers.

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Congress does not currently fund health savings accounts for Affordable Care Act enrollees. On Dec. 8, Republican Sens. Mike Crapo and Bill Cassidy unveiled a bill that would deposit $1,000 to $1,500 into health savings accounts for eligible consumers. This money would be in lieu of extending COVID-19-era enhanced tax credits that sharply reduced health insurance premiums under the ACA.

On Dec. 11, the Senate rejected the Crapo-Cassidy proposal and a Democrat proposal to extend the COVID-era tax credits for three years. ACA insurance premiums rose sharply on Jan 1 for millions of Americans who relied on the COVID-era subsidies to lower their monthly insurance bills. The original ACA advanced premium tax credits − which lowered insurance costs for those who earn up to four times the federal poverty level − remain in place.

Democrats and Republicans will likely spar over health care affordability when Congress resumes in January.

In a Dec. 18 social media post, Cassidy defended his idea of giving consumers money rather than funding ACA subsides that go to health insurance companies. "Republicans support it. Americans support it," Cassidy said. "Democrats should support it too."

But Democrats and some health policy analysts have been skeptical of using taxpayer funds to support health savings accounts.

U.S. Rep Lloyd Doggett, D-Texas, said "most Americans do not have enough savings to afford emergency care, let alone pay an HSA sky-high deductible."

Sabrina Corlette, co-director of Georgetown University's Center on Health Insurance Reforms, said that most Americans don't have enough cash to pay for an expected medical bill. A hospital bill alone could cost thousands of dollars, she said.

If Congress funds health savings accounts instead of the ACA's enhanced subsidies, consumers with chronic health conditions or those who need hospital care are "going to end up with really significant financial liabilities," Corlette said. "There's going to be a lot more medial debt."

This article originally appeared on USA TODAY: Could health savings accounts change how Obamacare works?

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