The Expansion of HSA Eligibility in 2026

Filed under: Benefits

Effective January 1, 2026, new provisions included in last summer’s One Big Beautiful Bill Act (OBBBA) have expanded Health Savings Account (HSA) eligibility. The HSA is not just an effective plan to help manage healthcare costs; it is also a vehicle for tax-free savings and an investment opportunity.

The OBBBA authorized the following new features for Health Savings Accounts.

1. Bronze and Catastrophic Plans Treated as HDHPs

In the past, people could contribute to an HSA only if they were concurrently enrolled in a high-deductible healthcare plan (HDHP). The OBBBA expanded HSA-eligible health plans to include Catastrophic plans and Bronze plans available via the Health Insurance Marketplace exchanges or the individual market.

• Bronze plans tend to have the lowest monthly premiums but higher out-of-pocket expenses for services beyond preventive care, with or without a deductible.
• Catastrophic plans feature low monthly premiums and cover a limited number of  primary care visits per year. However, they feature a high deductible and are primarily designed to cover an expensive catastrophic event, such a major accident or serious illness. A catastrophic plan is generally considered “emergency insurance.” Being HSA-eligible now enables members to set aside pre-tax money to pay for the high deductible (or grow long term if not used).

 These plans are available only for people under age 30, or over 30 if they qualify for a hardship or affordability exemption. Interestingly, people who do not qualify for a premium tax credit due to higher income are automatically qualified for a hardship exemption to enroll in a catastrophic plan (where available).

2. Direct Primary Care Service Arrangements

Also starting this year, those who pay for a Direct Primary Care (DPC) service arrangement may contribute to an HSA. DPC is a healthcare model in which the enrollee pays a flat monthly subscription fee to a specific physician practice. That fee covers unlimited access to most primary care services and the doctor does not bill insurance.

However, to qualify for HSA eligibility, the DPC’s monthly fee must be $150 or less for an individual or up to $300 for a family, as well as meet other requirements. DPC fees are also eligible expenses for HSA payments.

One strategy is to pair a low-cost DPC with a high-deductible or catastrophic health plan. This way the patient pays a set fee for unlimited primary care services but also has insurance coverage for a major event.

3. Telehealth and Remote Care Services

As a way of encouraging affordable and convenient virtual healthcare, the OBBBA made permanent the ability to receive telehealth and other remote care services prior to meeting an HDHP’s deductible – and remain HSA eligible. The provision is retroactive to the 2025 plan year.

HSA Overview

The HSA enables workers to contribute income to a savings account designated to pay for qualified healthcare expenses. HSA funds may be used to pay for eligible, out-of-pocket expenses such as a health plan deductible, copayments, coinsurance, mental health, dental, vision, prescription and over-the-counter medications, alternative therapies (e.g., chiropractic, acupuncture, massage therapy), rehab, and substance use treatment programs.

In 2026, the annual HSA contribution limit was increased to $4,400 for self-only coverage and $8,750 for family coverage. The catch-up contribution for account holders age 55 and older remains $1,000 a year.

One of the key benefits of an HSA is that funds saved through these accounts enjoy a triple tax advantage:

• Contributions are not subject to federal income or state taxes (except in CA and NJ) or – when deferred through employer payroll deductions – Social Security and Medicare (FICA) taxes. This means that a worker’s taxable income is reduced dollar-for-dollar by the amount he contributes to an HSA.
• Withdrawals used to pay for qualified health expenses are not taxed.
• Contributions may be invested for growth opportunity via an investment account in which withdrawals and earnings are not taxed (unless used for non-qualified expenses).

HSA Investment Option

A health savings account is not affiliated with a health insurance plan. They are offered by banks, credit unions, and other financial institutions. Moreover, the custodial bank does not manage HSA investments but may refer members to an allied partner that offers a variety of investment options. There is generally a requirement that the account owner retain a minimum balance (i.e., $1,000 to $2,500) in the HSA in order to transfer assets to an investment account.

Note that investment options may be changed and funds can be transferred between the investment account and the health savings account at will. HSA investors should understand that investment returns and principal value will fluctuate and, when redeemed, may be worth more or less than their original cost. Even though the bank is the custodian of the savings account, any assets placed in investment options are not FDIC-insured or guaranteed by the bank that administers the health savings account.

The purpose of the investment account is to give HSA assets the opportunity to compound earnings tax-free. When the account is held for a long period of time, assets may grow into a substantial nest egg – particularly if the worker continues to make contributions and transfer them to the investment account, and limits withdrawals. Once the account owner enrolls in Medicare, he can no longer make contributions to the health savings account. However, he may continue to use the money accumulated to pay for qualified healthcare expenses.

Once the account owner turns age 65, she is allowed to use HSA funds for non-healthcare expenses, but will need to include those amounts as taxable income for that year. However, she will no longer be subject to the 20 percent penalty associated with early withdrawals for a non-qualified expense.

Yours To Keep

One of the key features of the HSA is that all monies contributed and investment earnings belong to the account owner. It is not a “use it or lose it” account, and the worker retains the account even if he leaves the company that sponsors his HSA-eligible health plan.

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