Why Trump’s Push for HSAs Misses the Key Premium Constraint
Americans relying on the Affordable Care Act face a brutal 114% average hike in out-of-pocket insurance premiums next year without congressional intervention. President Donald Trump and GOP lawmakers are pivoting toward expanding health savings accounts (HSAs) for millions of ACA enrollees starting in 2026. But this move doesn’t solve the core problem: federal rules prohibit HSAs from covering insurance premiums. “It doesn’t help them pay that monthly premium,” said University of Michigan economist Tom Buchmueller.
Republicans argue HSAs put power directly in patients’ hands by allowing tax-free spending on medical expenses, not premiums. Yet this overlooks a critical leverage point—the rigid constraint limiting HSAs’ use to deductible and treatment costs only. This tension masks why premium escalation persists despite expanding HSAs.
Why Expanding HSAs Is Not the Shortcut to Lower Premiums
Conventional wisdom says expanding HSAs to cover more Obamacare enrollees reduces overall federal spending by shifting payment flexibility to consumers. Senator Bill Cassidy leads a proposal to put federal funds directly into HSAs to offset premium cost increases, promising to “give power to the patient, not profit to insurers.” But this plan presumes people can then use funds to pay premiums, which current IRS rules forbid.
Even conservative think tank expert Douglas Holtz-Eakin warned Congress in November there’s minimal time or policy bandwidth to change premium pricing or enrollment frameworks for 2026. This constraint makes the HSA expansion a misdirected lever. Discounts or subsidy extensions directly targeting premiums remain the primary mechanism to blunt cost shocks for nearly 24 million ACA users, far surpassing the 7.3 million eligible for HSAs.
See why premium shocks will outpace relief without subsidy action here.
HSAs Fuel New Markets for Wellness but Stick to Strict Tax Rules
The IRS confines HSAs to spending on qualified medical expenses, excluding insurance premiums, most food, and general health products unless prescribed. This creates a peculiar market where expensive wellness gadgets—from a $1,700 smart bassinet to $9,000 ice baths sold by startups like Truemed—become eligible for tax-free purchases. Retail giants like Amazon, Walmart, and Target increasingly curate online storefronts around HSA-eligible products.
This niche expansion boosts consumer health spending but sidesteps core insurance payment burdens. As deductibles and consumer account balances rise to an estimated $146 billion nationally, the disconnect intensifies: HSAs reward those with high deductible plans and disposable income, largely wealthier, healthier demographics per a recent Government Accountability Office report. Meanwhile, ACA-dependent lower-income Americans still confront steep monthly premiums.
Internal analysis of health policy dynamics can also be contrasted with technology scaling failures highlighting fundamental constraint misreads, as detailed in this piece.
Shifting the Constraint to Premium Subsidies Unlocks Real Leverage
The real constraint is premium affordability, which HSAs do not address without regulatory change. Unlike direct subsidy extensions that reduce monthly insurer bills, HSAs only help pay deductible or treatment expenses once care is accessed. This forces many to choose bronze plans with onerous out-of-pocket costs or forgo coverage altogether.
Health care leverage emerges from policy adaptations that reduce or stabilize premiums upfront, lowering the barrier to entry for coverage. Congressional inertia around subsidy renewal risks eroding ACA enrollment gains despite HSA expansions. The strategic insight is: expanding HSAs reallocates spending power without recalibrating the fixed cost constraint—monthly insurance premiums.
Learn why failing to identify system-level constraints can cripple outcomes in high-stakes markets in this analysis.
Who Should Watch This Policy Pivot?
Policy operators and insurers must note that expanding HSAs without loosening premium payment rules reshuffles expenditures rather than reduces financial strain for low-income ACA enrollees. Retailers and startups selling HSA-approved wellness products stand to gain disproportionally despite the broader cost problem.
Insurers and policymakers in other federal and state marketplaces can learn from this unfolding dynamic: shifting financial leverage requires aligning policy constraints with actual cost bottlenecks, not partial fixes. As Senator Cassidy and Republicans push for “patient power,” the real test is whether premium subsidies return to the policy spotlight. “The accounts help the wealthy; they don’t solve comprehensive affordability,” Senator Ron Wyden said.
Related Tools & Resources
For businesses looking to navigate the complexities of healthcare financing and enhance customer outreach, tools like Apollo can streamline your B2B engagement. With advanced sales intelligence and prospecting capabilities, you can ensure that your marketing and outreach strategies align closely with the changing regulatory landscape discussed in this article. Learn more about Apollo →
Full Transparency: Some links in this article are affiliate partnerships. If you find value in the tools we recommend and decide to try them, we may earn a commission at no extra cost to you. We only recommend tools that align with the strategic thinking we share here. Think of it as supporting independent business analysis while discovering leverage in your own operations.
Frequently Asked Questions
What are health savings accounts (HSAs) and who can use them?
Health savings accounts (HSAs) are tax-advantaged accounts that allow users to save for qualified medical expenses. Currently, about 7.3 million ACA enrollees are eligible for HSAs, which mainly benefit those with high deductible health plans.
Why can’t HSAs be used to pay health insurance premiums?
HSAs are restricted by IRS rules to spending on qualified medical expenses, which excludes insurance premiums in most cases. This limitation means HSAs cannot directly offset rising monthly premium costs faced by ACA enrollees.
How much are ACA health insurance premiums expected to increase?
ACA health insurance premiums are expected to increase by an average of 114% out-of-pocket next year without congressional intervention, presenting a severe affordability challenge for millions of Americans.
Why does expanding HSAs not solve premium affordability?
Expanding HSAs reallocates spending power to consumers for deductible and treatment costs but does not address the core premium cost constraint. Without policy changes allowing HSAs to cover premiums, monthly insurance costs remain a barrier to coverage.
Who benefits most from HSAs under current regulations?
HSAs primarily benefit wealthier and healthier individuals with high deductible plans who have disposable income, according to a Government Accountability Office report. Lower-income ACA-dependent Americans facing steep premiums gain less from HSAs.
What policy actions could effectively reduce health insurance premiums for ACA users?
Direct subsidy extensions or discounts targeting monthly premiums remain the most effective mechanisms to reduce premium shocks for the nearly 24 million ACA users, as HSAs do not currently cover these costs.
Are there any market impacts from the expanding use of HSAs?
The IRS qualification rules for HSAs have spurred niche markets for wellness products, with retailers like Amazon, Walmart, and Target curating HSA-eligible items. However, this market growth does not alleviate premium payment burdens.
What is the main criticism of the Trump administration’s push to expand HSAs?
Critics argue that expanding HSAs without regulatory changes to cover premiums is a misdirected policy lever that reshuffles spending but fails to reduce the actual financial strain of rising insurance premiums faced by ACA enrollees.