Photo by Jonathan Borba on Unsplash

Today, on the 20th anniversary of the creation of Health Savings Accounts (HSAs), Americans for Tax Reform celebrates the great success of these tax-advantaged savings vehicles that now cover almost 72 million people.

On December 8, 2003, the President signed the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003, a law that created HSAs. Since then, there are over 35.5 million HSAs, covering nearly 72 million people.

Since they were created, HSAs have become a popular and successful vehicle that promotes patient choice in health care. HSAs are used in conjunction with low premium, high deductible health insurance plans and provide a vehicle for individuals to spend and control their own money on their own health needs.

HSAs contribute to lower healthcare spending by promoting consumer driven healthcare. HSA funds are completely controlled by the individual and follow them between jobs, creating an incentive to spend funds wisely.

Research shows that families and individuals that utilize HSAs spend less on health care and use fewer medical services without forgoing necessary primary and preventative care.

HSAs are already a significant vehicle to pay for healthcare expenses. An HSA user can accumulate as much as $360,000 after contributing to an account for 40 years, assuming a rate of return of just 2.5 percent, according to the Employee Benefit Research Institute. With a rate of return of 5 percent, an HSA user can accumulate $600,000 over 40 years.

HSAs also reduce taxes for American families. HSAs offer triple tax benefits to users – contributions made are tax free, interest and investment is earned tax free, and payments made to qualifying health expenses are tax free. Expanding HSAs will provide additional tax reduction for American families and will promote saving and investment.

As outlined by the 2022 Devenir & HSA Council Demographic Survey, these accounts benefit a broad spectrum of people: in particular, millennials, seniors, and low-income Americans. Roughly 20 percent of Americans in their 30s had an HSA at the end of 2022 and 75 percent of “accountholders live in a zip code with a median household income of less than $100,000.” Further, “accountholders over the age of 50 had amassed over $56 billion in their accounts at the end of 2022 (a 7 percent increase from the previous year), with an average balance of $4,642.” About 86 percent of HSA participants reported being satisfied with their HSA provider.

Given the success of HSAs, Congress has an important opportunity to build on these benefits.

This Congress, members have introduced bills like H.R. 5688, the Bipartisan HSA Improvement Act of 2023 and H.R. 5687, the HSA Modernization Act of 2023. These bills will expand tax-advantaged Health Savings Accounts (HSAs), promoting consumer driven healthcare, reducing taxes for families, and encouraging lower healthcare spending.

The Bipartisan HSA Improvement Act permits tax-free spending from an HSA on monthly fees charged by physicians, allows employees to use their HSA at their employer’s on-site health clinic, allows for transitions of deposits from a terminating FSA or HRA, and facilitates HSA contributions even when a spouse has an FSA.

The HSA Modernization Act will allow disabled veterans to contribute to an HSA, allows working seniors to possess and contribute to an HSA, establishes automatic HSA eligibility for bronze and catastrophic health plans on the health benefit exchange, allows both spouses to contribute catch-up contributions to the same HSA, and more.

Further, earlier this year, Reps. Smucker (R-Penn.), Blumenauer (D-Ore.), Tenney (R-N.Y.), and Schneider (D-Ill.) introduced of the bipartisan Primary Care Enhancement ActH.R. 3029.

This bill would expand access to Direct Primary Care (DPC), clarifying provisions in the Internal Revenue Code to allow Americans with HSAs to use those funds to access DPC.

As Rep. Smucker (R-Penn.) explains, “… innovative care delivery models like Direct Primary Care put patients in charge of their health, improve outcomes, and reduce costs for businesses and employees. Unfortunately, the Internal Revenue Service’s interpretation of current tax law prevents individuals with Health Savings Accounts (HSAs) from accessing DPC, even when their colleagues without HSAs can do so.”

Since they were created almost 20 years ago, HSAs have proven successful in promoting healthcare choice, lowering taxes, and lowering healthcare costs. Expanding HSAs will build on this success.