Health savings accounts (HSAs) were enacted in 2003 to help Americans cope with the increasingly popular high deductible health plans that offer low premiums, but higher out of pocket costs.
By allowing people to fund an account to pay for qualified medical expenses, HSAs offered a significant tax benefit in that the contributions are made tax-free, the money in the account can be invested to grow tax-free, and qualified medical purchases can be made tax-free. According to Devenir, 28 million Americans are able to take advantage of this tax break.
Why can’t the other 225 million Americans who are covered under some other type of health insurance have the same opportunity?
While the health insurance landscape has evolved significantly since 2003, HSA eligibility requirements have not adapted alongside it. A recent Kaiser Family Foundation report found that the average health plan deductible now exceeds the minimum deductible needed to qualify for an HSA, yet HSAs are still tied to one particular type of health insurance. The requirement to have a high deductible health plan (HDHP) to enjoy the benefits of an HSA is a requirement that needs to be revised.
In addition, the recent COVID-19 pandemic has illuminated the need for Americans to have simple ways to easily save money for unexpected medical expenses. In the wake of hospitalizations and job losses, millions of Americans are struggling to regain their financial footing. Expanding HSAs to all would afford these individuals powerful relief and bolster the American response to this unprecedented crisis.