The big changes to HSAs and what they mean for planning

Health savings accounts (HSAs) remain one of the most versatile tools in a client's financial planning toolkit, allowing tax-free savings and investment growth for health care expenses. Yet for years, strict eligibility rules have kept many Americans from taking advantage of them. 

The One Big Beautiful Bill Act (OBBBA) changed that, opening the door to millions of new HSA-eligible individuals. While experts are applauding the expanded access, they caution that significant gaps remain.

As health care costs continue to rise, financial advisors say HSAs are a crucial option for many retirees when it comes to paying for medical expenses.

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"It's a great vehicle that more and more people are qualifying for. And yet, I've found a lot of people don't know what they are. They're not being well explained by their HR department, or whatever, as a benefit," said Andrew Crowell, vice chairman of wealth management for D.A. Davidson in Pasadena, California. "But that is a way people can start early, let it compound over time and know that's another bucket that I have access to, that even if I just want to buy insurance, I can pay for it out of my HSA."

In 2024, there were more than 39 million HSA account holders, representing about 22% of all privately insured Americans, according to plan provider Devenir. Here's how that is changing.

Millions of health care exchange plan holders gain HSA access

OBBBA broadens HSA eligibility by allowing certain exchange-based plans to qualify. High-cost Bronze and Catastrophic plans purchased through a state or federal exchange were previously excluded from HSA consideration because they covered certain services below the deductible, meaning they allowed some medical services to be paid for before the deductible was met.

"What OBBBA has done here is essentially remove the below-deductible cost restrictions to make these qualified high-deductible health plans," said HSA expert Cat Torres last week during a webinar for Sentinel Group, a financial services and employer benefits provider.

With more than 7 million Americans enrolled in these exchange plans, the change could see more people signing up for non-employer-sponsored HSA accounts, Torres said.

"We might see an increase in non-employer-sponsored HSAs," she said. "But, overall, I don't see a mass exodus of employees leaving their employer-sponsored health plans for an exchange plan. So I don't think there's a huge impact to employer plans on this one."

Direct primary care plans now compatible with HSAs

Barriers to HSA access caused by direct primary care (DPC) arrangements are also changing under OBBBA. These membership-based medical plans, in which patients pay a flat monthly or annual fee to a specific physician or clinic for a defined set of primary care services, previously prevented participants from contributing to an HSA. 

OBBBA clarifies that DPC plans are no longer considered conflicting coverage, provided the cost stays at or below $150 per month for individuals or $300 per month for families. This update removes a long-standing barrier, enabling clients who prefer subscription-style care to continue contributing to an HSA and grow their tax-advantaged health care savings.

About 300,000 Americans currently use DPC arrangements, which have seen significant growth in recent years, Torres said.

Telehealth coverage now permanently exempt for HSA eligibility

Telehealth services can now be accessed pre-deductible on HSA-compatible high-deductible health plans, thanks to a permanent change under OBBBA.

During the COVID-19 pandemic, this coverage was initially carved out through a temporary safe harbor provision. Lawmakers revived the revision a few times, but it eventually expired on Dec. 31, 2024. OBBBA now makes the carve-out retroactive to the start of 2025, with no expiration date.

The Americans who will still miss out on HSA access

While OBBBA has expanded HSA eligibility in several meaningful ways, significant gaps remain for four large groups of Americans, Torres said.

61 million seniors, including 9 million working seniors, enrolled in any part of Medicare are still ineligible to contribute to an HSA. This means retirees and near-retirees who might want to continue building their tax-advantaged health care savings after signing up for Medicare remain excluded.

Some 9 million active-duty military members enrolled in TRICARE, the government-managed health plan for service members and their families, also remain barred from contributing to HSAs. An additional 9 million veterans enrolled in Department of Veterans Affairs health care programs are also still ineligible, leaving a substantial portion of the veteran population without access.

Nearly 3 million Americans who rely on Indian Health Services across 570 federally recognized tribes are also still excluded from HSA participation. 

"The biggest miss, and where we should all be focusing our time and energy, are [these] four groups we've been ignoring for 20 years," Torres said. "Huge miss for OBBBA."