Center for American Progress

RELEASE: Recent Health Savings Account (HSA) Expansion Proposals Are Costly and Misguided, Says New CAP Column
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RELEASE: Recent Health Savings Account (HSA) Expansion Proposals Are Costly and Misguided, Says New CAP Column

Washington D.C. — Changes recently approved by the House Ways and Means Committee would expand the tax subsidies for health savings accounts (HSAs) and allow many more people to enroll in them. A new column from the Center for American Progress explains why HSAs do little to nothing to make health care more affordable and how these new HSA expansion proposals would create larger tax shelters for the wealthy while exacerbating health and wealth disparities. 

HSAs are special savings accounts available to people enrolled in eligible high-deductible health plans (HDHPs), which offer multiple tax advantages that disproportionately benefit higher-income individuals. The new column reviews how the proposed changes—which include doubling the maximum allowable annual contribution, broadening the range of health plans that qualify people to contribute to an HSA, and allowing account balances to be used for a wider range of health-related purposes—are both costly and misguided.

Some key takeaways from the column include:

  • HSAs and HDHPs shift costs to families and exacerbate health inequities: While they were initially viewed as tools to lower health care costs by giving people more “skin in the game,” HDHPs simply shift costs from employers to workers and their families in the form of higher deductibles. Some research has shown that enrollment in HDHPs is associated with lower use of necessary care and greater out-of-cost burdens, which is especially problematic for populations who already have trouble affording the care they need.
  • HSAs largely serve as tax shelters for the wealthy: Because of their structure, the deductions and exclusions for contributions to an HSA provide greater benefits to those in the highest tax brackets. Each dollar contributed to an HSA by a millionaire is worth 37 cents, for example, while the same dollar contribution is only worth 22 cents for a married couple earning $75,000 per year. 
  • House Ways and Means proposals would create even greater inequities and disproportionately benefit the wealthy: The proposed changes include increasing the 2023 maximum annual contribution from $3,850 to $7,500 for those under the age of 55 with individual coverage and from $7,500 to $15,000 for those with family coverage. This would enable higher-income households, who are more likely to have sufficient disposable income, to contribute more to an HSA, but it would be of little use to low- and middle-income households, who have insufficient resources to hit the current HSA contribution cap. The proposed change would also be costly, reducing tax revenues by $44.2 billion between 2026 and 2033 according to estimates from the Joint Committee on Taxation.

“If enacted, these proposed HSA policy changes would significantly increase costs for the federal government while exacerbating current income and racial inequities and failing to address underlying health care cost and access issues,” said Jean Ross, senior fellow at CAP and co-author of the column.

“HSAs do nothing to address the underlying drivers of health care costs that fuel premium cost growth,” said Andrea Ducas, vice president of Health Policy at CAP and co-author of the column. “Rather than expanding tax shelters for higher-income Americans, Congress should pursue aggressive reforms to lower health care prices and the cost of prescription drugs while ensuring that everyone has access to affordable health insurance.” 

Read the column: “Recent Health Savings Account (HSA) Expansion Proposals Are Costly and Misguided” by Jean Ross and Andrea Ducas

For more information on this topic or to speak with an expert, please contact Sarah Nadeau at [email protected]

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