Health Savings Account Provisions in the 2025 Reconciliation Act

HSA Expansion: New Rules to Boost Access and Versatility

WASHINGTON D.C. – in a significant move impacting healthcare savings options, new legislation is set to broaden access to Health Savings Accounts (HSAs) and increase flexibility in how they can be used.Three key provisions, passed recently, will reshape the landscape of high-deductible health plans (HDHPs) and associated savings vehicles.

Telehealth Coverage Before Deductible Now Permitted

Starting in plan years after December 31,2024,HDHPs paired with HSAs will be allowed to cover telehealth and remote care services before the plan’s deductible is met. This change addresses a long-standing barrier to utilizing these convenient care options for HSA participants. Individuals with existing telehealth coverage will not lose HSA eligibility.

Bronze & Catastrophic Plans Eligible for HSA Pairing

As of January 1, 2026, both Bronze and Catastrophic health plans sold through the Affordable care Act (ACA) Marketplace – and off-exchange – will qualify as HDHPs eligible for pairing with an HSA. Currently, only certain Bronze plans meet HSA requirements, and Catastrophic plans are entirely ineligible. This expansion aims to provide more plan choices for HSA savers.

Direct Primary Care Arrangements Gain HSA Clarity

Also beginning January 1, 2026, specific Direct Primary Care (DPC) arrangements will no longer be considered traditional health plans, opening the door for individuals enrolled in these arrangements to utilize HSAs. To qualify, DPC arrangements must involve a fixed periodic fee not exceeding $150 per month for individual coverage or $300 per month for multiple individuals.These arrangements are limited to primary care services, excluding procedures requiring general anesthesia, prescription drugs (except vaccines), and extensive laboratory services. Moreover, fees paid to DPC arrangements will be considered eligible medical expenses payable with HSA funds.

Financial Implications

The congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) project a combined revenue decrease of over $10.6 billion through 2034 as an inevitable result of these changes.

These legislative updates represent a significant shift in HSA regulations, possibly increasing enrollment and providing greater healthcare financial planning options for millions of Americans. Further details and resources are available through the Kaiser Family Foundation (KFF).

What is the individual contribution limit for HSAs in 2025 under the 2025 Reconciliation Act?

Health savings Account (HSA) Provisions in the 2025 Reconciliation Act

Increased Contribution Limits for 2025 & Beyond

The 2025 reconciliation Act brings meaningful changes to Health Savings Accounts (HSAs), primarily focusing on increased contribution limits and expanded eligibility. These adjustments aim to make HSAs more accessible and valuable for individuals and families managing healthcare expenses. for 2025, the individual contribution limit rises to $4,150, and the family contribution limit increases to $8,300. These figures represent a considerable increase from previous years, directly addressing concerns about rising healthcare costs.

Furthermore, the Act introduces annual inflation adjustments beginning in 2026, ensuring contribution limits keep pace with the increasing cost of medical care. This proactive approach is a key feature of the legislation. Catch-up contributions for those age 55 and older remain at $1,000,but are also subject to annual inflation adjustments.

Expanded HSA Eligibility Rules

Historically, HSA eligibility has been tied to enrollment in a High-Deductible Health Plan (HDHP). The 2025 Reconciliation Act expands eligibility in two key ways:

1. Chronic Condition Exception: Individuals with chronic conditions requiring ongoing, expensive care can now contribute to an HSA even if they don’t meet the traditional HDHP requirements, provided they demonstrate consistent medical expenses exceeding a specified threshold (currently set at 7.5% of adjusted gross income). this is a major win for those managing conditions like diabetes, heart disease, or autoimmune disorders.
2. Direct Primary Care (DPC) Integration: The Act clarifies that participation in a Direct Primary Care arrangement dose not disqualify an individual from HSA eligibility, as long as the DPC arrangement doesn’t cover services that woudl otherwise be considered “first dollar” coverage. This opens up HSA benefits to a growing number of individuals opting for DPC models.

Changes to HSA Investment Options

The 2025 Reconciliation Act addresses concerns about limited investment options within HSAs.

Broader Investment Choices: The Act mandates that HSA custodians offer a wider range of investment options, including low-cost index funds, exchange-traded funds (ETFs), and target-date funds. This aims to empower HSA holders to grow their savings more effectively.

Custodial Fee Transparency: HSA custodians are now required to disclose all fees associated with HSA accounts, including administrative fees and investment management fees, in a clear and concise manner. This increased transparency will help consumers make informed decisions.

Pooled investment Options: The Act allows for the creation of pooled investment options within HSAs, potentially lowering investment costs and providing access to strategies previously unavailable to individual HSA holders.

HSA Funds for Qualified Medical Expenses – Clarifications

The act provides further clarification on what constitutes a qualified medical expense eligible for HSA reimbursement.

Over-the-Counter (OTC) Medications: The temporary allowance for OTC medications to be reimbursed with HSA funds, initially implemented during the pandemic, has been made permanent.

Menstrual Products: Menstrual products are now explicitly designated as qualified medical expenses, aligning with efforts to address period poverty and improve access to essential healthcare items.

Virtual Care: Expenses related to telehealth and virtual care services are fully HSA-eligible, even if the minimum deductible hasn’t been met. This reflects the growing importance of remote healthcare delivery.

impact on Employers & HSA Administration

The 2025 Reconciliation act also includes provisions impacting employers offering HSAs:

Employer HSA contributions: Employers can now contribute directly to employee HSAs, even if the employee doesn’t make their own contributions. This incentivizes participation and promotes employee wellness.

Wellness Program Integration: The Act encourages employers to integrate HSA-eligible wellness programs into their benefits packages, further promoting preventative care and reducing long-term healthcare costs.

Simplified Reporting Requirements: The IRS is tasked with streamlining HSA reporting requirements for both employers and individuals, reducing administrative burdens and improving compliance.

Tax Advantages of HSAs – A Reminder

HSAs offer a “triple tax advantage”:

1. Tax-deductible contributions: contributions are tax-deductible,reducing your taxable income.
2. Tax-free growth: Investment earnings grow tax-free.
3. Tax-free withdrawals: Withdrawals for qualified medical expenses are tax-free.

This makes HSAs a powerful tool for long-term healthcare savings and retirement planning. Understanding these tax benefits is crucial for maximizing the value of your HSA.

Real-World Example: The Smith Family

The Smith family, with a family HDHP, previously maxed out their HSA contributions at $7,750. Under the 2025 Reconciliation Act, they can now contribute $8,300, providing an additional $550 for healthcare expenses. Furthermore, their daughter, diagnosed with asthma, now qualifies for the chronic condition exception, allowing them to contribute even if their deductible isn’t fully met due to ongoing medication costs. This increased flexibility significantly eases their financial burden.

Practical Tips for Maximizing Your HSA

Invest your HSA funds: Don’t let your HSA sit in cash. Invest in low-cost index funds or ETFs to maximize long-term growth.

* Keep detailed records: Maintain meticulous records of all medical expenses for potential