How do expanded HSAs affect low‑income and chronically ill people compared with direct premium tax credits?
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Executive summary
Expanded health savings accounts (HSAs) and direct premium tax credits (PTCs) are different levers: PTCs directly lower monthly premiums and broaden eligibility for comprehensive marketplace plans, while HSA expansions steer federal dollars into accounts that subsidize out‑of‑pocket spending tied to high‑deductible plans (HDHPs) [1] [2]. The practical effect is that low‑income and chronically ill people fare better under enhanced PTCs — which improve affordability of comprehensive coverage and have demonstrably increased enrollment — and worse under HSA‑first schemes that favor healthier and wealthier people and concentrate sicker people in higher‑cost plans [1] [3] [4].
1. How the subsidies work: cash to premiums vs. deposits to accounts
Premium tax credits are paid in advance to insurers to lower monthly premiums for specific marketplace benchmark plans and are calculated on a sliding scale based on household income and local premiums [5] [6], whereas HSAs are tax‑advantaged accounts that hold pre‑tax or government contributions to be spent tax‑free on qualified out‑of‑pocket expenses but cannot be used to pay premiums in traditional rules [3] [7]. Proposals under discussion would convert enhanced PTC dollars into HSA deposits tied to bronze or catastrophic plans, fundamentally changing how assistance reaches consumers [2].
2. Immediate affordability for low‑income people
Enhanced PTCs have been credited with making zero‑premium or very low‑premium benchmark plans available to millions, particularly those under about 150% of the federal poverty level, driving enrollment increases and reducing upfront barriers to care [1] [8]. By contrast, a modest HSA deposit — often described in proposals as $1,000–$1,500 — would not cover monthly premiums that can run hundreds to thousands of dollars, nor would it eliminate the need for people to pay premiums to access care; thus low‑income households face higher net premium burdens if PTCs are removed and replaced with HSA contributions [4] [2].
3. Effects on people with chronic illness and high expected costs
Chronically ill people depend on plans with lower deductibles and more comprehensive cost‑sharing; premium subsidies make those plans affordable by lowering monthly premiums and keeping them in broad risk pools [1] [6]. HSAs are tied to high‑deductible bronze/catastrophic plans, which in 2026 had average deductibles near $7,500 — far above typical HSA deposit proposals — meaning chronically ill enrollees would face much higher out‑of‑pocket risk and likely unaffordable care under an HSA‑first system [4].
4. Risk pools, premiums, and insurer responses
When subsidies target silver benchmark premiums, insurers respond via “silver loading,” which increased silver premiums and thereby raised PTC amounts, ultimately reducing net premiums for more comprehensive plans under enhanced credits [4]. Redirecting those subsidies into HSAs tied to bronze plans would tend to pull healthier people into lower‑value, high‑deductible plans and concentrate sicker enrollees in comprehensive plans, destabilizing risk pools and — according to nonpartisan CBO modeling cited by advocates — potentially causing coverage losses (the CBO projection cited is 300,000 fewer people insured by 2034 under comparable reforms) [4].
5. Who gains and who loses — distributional evidence
Analyses find that HSA expansions disproportionately benefit higher‑income and higher‑wealth households that can contribute substantial pre‑tax dollars and realize larger tax advantages; in contrast, the majority of marketplace enrollees are low‑ and moderate‑income and rely on premium credits rather than HSA tax breaks [3] [1]. Advocates for HSAs frame them as consumer‑directed savings, while critics note the implicit agenda: shifting federal support toward tax‑preferred accounts that confer larger absolute benefits to wealthier people and reduce immediate coverage affordability for poorer and sicker populations [3] [2].
6. Tradeoffs, political framing, and unanswered operational questions
Supporters of converting PTCs to HSA contributions argue for consumer choice and savings incentives, and some proposals (e.g., Scott’s accounts) would allow paying premiums with the account — a material difference that could change impacts — but details remain sparse and legislative designs vary [2]. Independent observers and policy shops urge caution: PTC extensions have a clear, measurable history of reducing uninsurance and premium burden [1], while HSA conversions raise questions about adequacy of deposits, eligibility rules, and whether accounts can substitute for the breadth of protection currently achieved by premium subsidies [2] [3].
7. Bottom line
Empirical and policy analyses in the reporting converge: enhanced premium tax credits directly improve access to and affordability of comprehensive plans for low‑income and chronically ill people and have driven large enrollment gains, whereas expanding HSAs — especially as a replacement for PTCs and tied to bronze/HDHP plans — would mainly help wealthier, healthier people, increase out‑of‑pocket risk for the chronically ill, and could destabilize marketplace premiums and coverage [1] [3] [4].