The HSA Modernization Act expands eligibility and increases flexibility for Health Savings Accounts (HSAs), allowing more individuals to contribute and use HSAs for a wider range of healthcare expenses, including mental health, long-term care, and coverage purchased up to 60 days before the HSA was established. It also adjusts contribution limits and eligibility requirements related to veteran's benefits, Medicare, and Indian Health Service assistance.
Beth Van Duyne
Representative
TX-24
The HSA Modernization Act expands access to health savings accounts (HSAs) by allowing individuals with certain veterans' benefits, those entitled to Medicare Part A due to age, and those eligible for Indian Health Service assistance to contribute. It also broadens the types of health plans that qualify for HSAs, including bronze and catastrophic plans, and allows high-deductible plans to offer mental health services with no deductible for the first $500 of expenses. The Act also increases HSA contribution limits to match deductible and out-of-pocket maximums and enables the use of HSAs for qualified long-term care services. Additionally, it permits HSAs to cover medical expenses incurred up to 60 days before the HSA was established and allows both spouses to make catch-up contributions to the same HSA.
HSA Modernization Act: Bigger Tax Breaks for Healthcare, Expanded Access for Vets and Seniors Kicks Off in 2026
The HSA Modernization Act is a major overhaul of Health Savings Accounts (HSAs), aiming to make them more accessible and useful for a wider range of people. Starting in 2026, the bill expands who can use HSAs, increases how much you can contribute, and broadens what you can spend HSA money on.
More Ways to Save
This bill throws open the doors of HSA eligibility. Previously, certain groups faced restrictions. This bill changes that:
- Veterans: Even without a service-connected disability, veterans eligible for specific benefits can now contribute to HSAs (SEC. 2). This means more options for managing healthcare costs.
- Seniors on Medicare: If you're enrolled in Medicare Part A solely due to age, you can also contribute to an HSA (SEC. 3). This is a big shift, giving older Americans more flexibility.
- Native Americans: Access to Indian Health Service (IHS) won't disqualify you from having an HSA (SEC. 4). This removes a barrier that previously kept some individuals from benefiting from these accounts.
- Bronze & Catastrophic Plan Holders: If you are enrolled in one of these plans, you can contribute to an HSA. (SEC. 5).
Real-World Relief
Beyond expanding access, the bill makes HSAs more practical:
- Mental Health Boost: High-deductible health plans can now cover up to $500 of mental health services without a deductible (SEC. 6). Imagine a therapist offering sessions at $125 each – the first four could be covered directly by your plan, no out-of-pocket costs until you hit that $500 mark.
- Retroactive Coverage: Got medical bills before your HSA was officially set up? The bill allows you to use HSA funds for expenses incurred up to 60 days prior to the account's establishment, provided the HSA is set up within 60 days of starting your high-deductible plan (SEC. 7). This provides a crucial buffer for unexpected healthcare needs during that initial coverage period.
- Spousal Catch-Up: Both spouses can now contribute those extra "catch-up" contributions (for those 55 and older) to the same HSA (SEC. 8). This simplifies things for couples managing their healthcare savings together.
- Higher Contribution Limits: The maximum amount you can contribute to your HSA is increased to match your plan's deductible and out-of-pocket maximum (SEC. 9). This translates to potentially much larger tax-advantaged savings for healthcare.
- Long-Term Care: HSA funds can now be used for qualified long-term care services (SEC. 10). This adds a new layer of flexibility for those planning for future care needs.
The Bottom Line
The HSA Modernization Act represents a significant expansion of how Americans can save for and manage their healthcare expenses. By increasing contribution limits, expanding eligibility, and covering a wider range of services, the bill aims to make HSAs a more powerful tool for individuals and families – from veterans managing their care to seniors planning for the future.