HSA Overhaul: 'Personalized Care Act of 2025' Expands Eligibility and Dramatically Increases Contribution Limits

The Personalized Care Act of 2025, if enacted, would significantly change the rules around Health Savings Accounts (HSAs), starting in 2025. This bill aims to give people more flexibility and control over how they spend their healthcare dollars, but it also comes with some potential downsides. Let's break down the key changes and what they could mean for you.

HSA Game Changer

The core of the bill revolves around expanding who can use HSAs and how much they can contribute. Currently, HSAs are mostly tied to high-deductible health plans. This bill throws that out the window. Under the proposed law, you could be eligible for an HSA even if you're on Medicare, Medicaid, CHIP, a military or veteran's health plan, or even a federal employee health plan (SEC. 2). It also includes people in health care sharing ministries (SEC. 8). Basically, almost anyone with any kind of health coverage could potentially qualify.

On top of that, the bill massively increases the amount you can stash away in an HSA. We're talking a jump from $2,250 to $10,800 for individuals and from $4,500 to a whopping $29,500 for families (SEC. 3). That's a lot more tax-advantaged savings potential. The cost-of-living adjustment will be applied to taxable years beginning after 2024, and the base calendar year is updated to 2023 from 1997 (SEC. 3).

Spending Your HSA Funds: More Options, More Questions

The bill expands what you can use your HSA money for. It explicitly allows you to use HSA funds to pay for health plan or health insurance premiums (SEC. 4). It also lets you use HSA funds to pay for "periodic provider fees" – think of things like direct primary care arrangements where you pay a monthly fee for access to a doctor (SEC. 5 & 6). Even fees for health care sharing ministries would count as qualified medical expenses (SEC. 8 & 9).

But here's where it gets a little tricky. The bill lowers the penalty for using your HSA money on non-medical stuff, dropping it from 20% to 10% (SEC. 7). While that might sound appealing, it could also encourage people to use their HSAs for things other than healthcare, defeating the original purpose.

Real-World Rollout: Winners and Losers?

Let's imagine a few scenarios. A high-earning software developer could use this bill to max out their HSA contributions, significantly reducing their tax burden and building a hefty nest egg. A family with modest income, however, might not have enough disposable income to take full advantage of the increased contribution limits. This raises concerns that the bill could primarily benefit wealthier individuals, widening the gap between the haves and have-nots.

Consider someone who joins a health care sharing ministry. While these ministries can offer a more affordable alternative to traditional insurance, they often lack the same consumer protections and regulatory oversight. Allowing HSA funds to be used for these ministries could, on the positive side, give people more choices. On the other hand, it also means directing tax-advantaged dollars to potentially less regulated entities.

Finally, there is a concern that the bill might incentivize some individuals to drop traditional health insurance in favor of HSAs, especially if they are healthy. This could lead to a smaller and potentially sicker pool of people in traditional insurance plans, driving up costs for those who remain.

The Personalized Care Act of 2025 presents a mixed bag. While the increased flexibility and control over healthcare spending are attractive, the potential for increased wealth inequality, misuse of funds, and impact on traditional insurance markets warrant careful consideration.