HSA Overhaul: 'Personalized Care Act of 2025' Expands Eligibility, Boosts Contribution Limits, and Could Shake Up Healthcare

The 'Personalized Care Act of 2025' is proposing some major changes to Health Savings Accounts (HSAs). Basically, it's aiming to give people more control over their healthcare spending, but it's doing it in a way that could have some pretty big ripple effects. It's set to take effect in taxable years after December 31, 2025. (SEC. 1)

Opening the HSA Floodgates

Right now, HSAs are mostly for people with high-deductible health plans. This bill throws the doors wide open. Starting in 2026, anyone with any health plan, insurance (including Medicare and Medicaid), or even those in health care sharing ministries, can have an HSA. (SEC. 2). This means way more people will be eligible to stash money away, tax-free, for healthcare costs.

Super-Sized Savings (and Tax Breaks)

The bill also significantly increases how much you can put into an HSA each year. 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 money that can grow tax-free. For example, a family could sock away almost $30,000 a year and avoid paying taxes on that amount, plus any interest it earns. While that sounds great on the surface, it also means those who can afford to contribute more will get a much bigger tax break. This provision could disproportionately benefit higher-income folks.

Spending Your HSA Your Way

Currently, there are rules about what you can spend your HSA money on. The Personalized Care Act loosens those restrictions. Starting in 2026, you could use your HSA funds to pay for any health plan or health insurance premiums (SEC. 4). It also clarifies that things like direct primary care arrangements (where you pay a monthly fee for access to a doctor) count as qualified medical expenses (SEC. 5 & 6). Think of it like this: instead of being limited to specific 'approved' expenses, you've got a much broader range of options for using your HSA dollars. It also reduces the penalty for using HSA funds on things that aren't medical expenses, taking it down from 20% to 10% (SEC. 7).

The Health Care Sharing Ministry Question

One of the most interesting (and potentially controversial) parts of the bill is how it deals with health care sharing ministries. These are groups where members share medical expenses, often based on religious beliefs. The bill says these ministries aren't considered insurance (SEC. 8), but it does allow people to use HSA funds to pay for membership fees and medical expenses shared through these ministries (SEC. 8 & 9). This could be seen as legitimizing these alternatives to traditional insurance, which operate outside many standard regulations. It's important to note that while these ministries can be a good fit for some, they don't always offer the same level of coverage or consumer protections as traditional insurance.

The changes, while giving individuals greater control over healthcare spending, could significantly shift the balance in the healthcare market, potentially favoring certain types of care and benefiting those with higher incomes more substantially.