Medical insurance premiums will rise due to collapse of ACA subsidy agreement
Obamacare subsidies will expire after Congress fails to reach an agreement, leaving millions of people facing increased health care costs.
Established more than 20 years ago, health savings accounts are a popular way for consumers to save for medical expenses while receiving tax breaks.
But could these accounts play a larger role in how American consumers pay for and receive health care? That’s exactly what Senate Republicans are proposing. They want to give eligible Americans up to $1,500 to fund health savings accounts, rather than extend the pandemic-era subsidies that made Affordable Care Act health insurance cheaper for 22 million Americans.
Health savings accounts are commonly used among workers who obtain health insurance through their employer. As of mid-2025, U.S. consumers had 40 million health savings accounts with $159 billion in savings, a 16% increase in savings compared to the previous year, according to a national survey.
Scott Cutler, CEO of HealthEquity, which provides health savings accounts, said these numbers show that a growing proportion of Americans are relying on health savings accounts to save for unexpected medical expenses.
“Health care affordability is at risk in America,” Cutler said. “Half of Americans can’t afford a $500 medical bill, so having a safety net that expands over time and can be used for medical expenses will help Americans be more prepared.”
What is a Health Savings Account?
Health savings accounts allow consumers to save money before taxes. For workers, this means a certain amount is deducted from their paycheck and deposited into a Health Savings Account (HSA) before taxes are withheld.
This money can be used for eligible expenses such as doctor and hospital bills and prescription drugs. Consumers can roll over their Health Savings Account balances from year to year, invest the funds, and spend the tax-free profits on qualified expenses.
What are the deductibles and contribution limits for HSA plans?
Health savings accounts are paired with high-deductible health insurance plans. Your deductible is the amount you have to pay out-of-pocket before most insurance coverage kicks in.
The minimum deductible for HSA-eligible plans in 2026 is $1,700 for individuals and $3,400 for family insurance plans.
There is also a limit to the amount you can donate each year. Contribution limits are $4,400 for individuals and $8,750 for families. People age 55 and older can contribute an additional $1,000 per year.
How is an HSA different from an FSA?
Flexible spending accounts are also savings vehicles typically offered through the workplace that allow users to withhold pre-tax payroll deductions. A medical insurance FSA can cover medical expenses, while a dependent care FSA is used for child care or elder care costs.
FSA accounts are spend-it-or-lose-it accounts that require consumers to spend their contributions within one year or forfeit their remaining balance. HSA balances accumulate over the years.
Why do some people choose high deductibles and health savings accounts?
Employers offer high-deductible health plans combined with HSAs to cost-conscious workers who want to lower their monthly health insurance premium payments. The tradeoff with these high-deductible plans is that workers must spend more of their own money when visiting doctors and other health care providers.
Employees in high-deductible plans pay an average of $109 per month in premiums, much lower than the average $191 per month for traditional PPO (preferred provider organization) plans, according to benefits consultant Mercer. However, workers must pay deductibles that are more than twice as high as traditional health plans.
One strategy people use is to save enough to cover their out-of-pocket costs, including deductibles, copays, and coinsurance (an insurance plan’s requirement that the consumer pay a percentage of the bill). If consumers save that amount, they can cover basic medical expenses.
Health savings accounts are popular among young people, with 56% of Gen Z workers and 50% of millennials participating in an HSA, according to a HealthEquity survey of more than 600 workers with employer-sponsored health insurance in 2025. These younger workers often have lower rates of chronic disease, and these healthy individuals may see HSAs as a smart way to build savings for potential future medical expenses..
“If HSA holders are better prepared, they are more likely to have emergency savings and be better prepared for medical expenses,” Cutler said. “They are less likely to skip preventive care and can transparently use their money to purchase eligible medical supplies.”
Can Affordable Care Act enrollees use HSA plans?
Health savings accounts are not limited to consumers who have health insurance through their workplace. In 2026, consumers who select a bronze or catastrophic level Affordable Care Act plan will be able to use a health savings account.
Whether Congress chooses to fund health savings accounts for some consumers remains uncertain.
Congress currently does not fund health savings accounts for Affordable Care Act participants. On Dec. 8, Republican Sens. Mike Crapo and Bill Cassidy announced a bill that would deposit $1,000 to $1,500 into eligible consumers’ health savings accounts. This funding would replace the extension of enhanced COVID-19-era tax credits that significantly lower health insurance premiums under the ACA.
On Dec. 11, the Senate rejected the Crapo-Cassidy plan and a Democratic proposal to extend coronavirus-era tax credits for three years. ACA premiums spiked on Jan. 1 for millions of Americans who relied on coronavirus-era subsidies to lower their monthly premiums. The original ACA Advanced Premium Tax Credit, which reduces premiums for people with incomes up to four times the federal poverty level, will remain in place.
When Congress reconvenes in January, Democrats and Republicans will fight over health care affordability.
In a Dec. 18 social media post, Cassidy defended his idea of giving money to consumers rather than funding ACA subsidies paid to health insurance companies. “Republicans support it. Americans support it,” Cassidy said. “Democrats should support it, too.”
But Democrats and some health policy analysts are skeptical about using taxpayer money to support health savings accounts.
“Most Americans don’t have enough savings to pay for medical emergencies, let alone pay high HSA deductibles,” said Representative Lloyd Doggett, D-Texas.
Sabrina Corlett, co-director of Georgetown University’s Center on Health Care Reform, said most Americans don’t have enough cash to pay for anticipated health care costs. Hospital bills alone can cost thousands of dollars, she said.
If Congress funds health savings accounts instead of the ACA’s enhanced subsidies, Corlett said, consumers with chronic health conditions and those who require hospital care “will end up with a very high financial liability.” “Medical debt will increase even more.”
