The Personalized Care Act of 2025 expands Health Savings Account (HSA) eligibility to all health plan participants, significantly increases annual contribution limits, and allows HSA funds to cover direct primary care fees and health care sharing ministry costs.
Ted Cruz
Senator
TX
The Personalized Care Act of 2025 expands access to Health Savings Accounts (HSAs) by removing the requirement to be enrolled in a high-deductible health plan. The bill significantly increases annual contribution limits, allows HSA funds to cover insurance premiums and direct primary care fees, and lowers the tax penalty for non-qualified distributions. These reforms aim to provide individuals with greater flexibility and tax-advantaged options for managing their personal healthcare expenses.
Personalized Care Act of 2025 Expands HSA Eligibility to All Coverage Types and Increases Annual Limits to $29,500 Starting in 2026.
The Personalized Care Act of 2025 fundamentally changes how Americans can save for healthcare by decoupling Health Savings Accounts (HSAs) from high-deductible health plans. Starting in tax years after December 31, 2025, Section 2 of the bill allows almost anyone with health coverage—including those on Medicare, Medicaid, CHIP, VA benefits, or even short-term plans—to open and contribute to an HSA. This shift moves the HSA from a niche tool for specific insurance holders to a universal savings vehicle for medical costs across the board.
Supercharging Your Savings
One of the most dramatic changes is the massive jump in how much cash you can actually stash away tax-free. Under Section 3, the annual contribution limit for individuals with self-only coverage leaps from the current low thousands to $10,800. For families, the cap skyrockets to $29,500. To put that in perspective, a family could potentially shield nearly $30,000 of income from taxes every year to cover medical needs. While this is a huge win for high-earning families who can afford to set aside that much, it may not change much for a retail worker or a teacher living paycheck to paycheck who can't spare the extra cash to hit those new limits.
New Ways to Spend Your Health Dollars
The bill also gets creative with what counts as a 'medical expense.' Section 4 allows you to use your HSA funds to pay for health insurance premiums directly, which was previously a major restriction. Furthermore, Sections 5 and 6 officially recognize 'Direct Primary Care'—those arrangements where you pay a flat monthly fee to a doctor for unlimited visits—as a qualified expense. For a freelance graphic designer or a small business owner who prefers a more personal relationship with their doctor over traditional insurance bureaucracy, this means those monthly membership fees are now tax-deductible through their HSA.
Lower Stakes and Different Systems
If you find yourself in a pinch and need to pull money out of your HSA for something non-medical, the bill makes the 'oops' moment a bit less painful. Section 7 cuts the penalty for non-qualified distributions in half, dropping it from 20% to 10%. Additionally, Sections 8 and 9 bring health care sharing ministries into the fold, allowing members to use HSA funds for their monthly sharing costs and administrative fees. While this offers more choice for those in alternative health communities, it’s worth noting that these ministries don’t have the same consumer protections or coverage mandates as traditional insurance, so users should still read the fine print on what their 'sharing' actually covers.