In February of 2024, I reviewed health insurance options for employees and employers in the construction trades. In that article, titled “Health Insurance Basics” (11/24), I emphasized the importance of health insurance for construction professionals. Construction work is dangerous, to say the least, making insurance that much more important to the industry. The article reported that 24% of construction workers have no insurance, which is down from 33% in 2012, due to better access, affordability, and discounts from the passage of the Affordable Care Act (ACA). Unfortunately, as of now (May 2026), health insurance is less affordable than when I wrote that article, thanks in part to an important insurance subsidy expiring.
That subsidy was the ACA pandemic-enhanced premium tax credits, established in 2021 and available to consumers on the ACA marketplace. These credits were not funded during the government shutdown negotiations of October/November 2025, so they expired on December 31, 2025. As a result, health insurance premiums for more than 20 million Americans getting their insurance through the marketplace, many in the construction trades, have doubled.
During the government shutdown negotiations, health savings accounts (HSA) were offered as an alternative to the expiring enhanced ACA subsidies. The One Big Beautiful Bill Act made millions more ACA enrollees eligible for health savings accounts by making all Bronze and Catastrophic plans HSA-qualified. In late 2025, the administration proposed giving money to people to pay for health costs via cash deposits in a health savings account in lieu of ACA-enhanced subsidies. This proposal failed to pass Congress by year-end. However, new rules for 2026 did allow more marketplace plans to be paired with HSAs.
What Exactly Is an HSA?
Health savings accounts were signed into law by President George W. Bush in 2003. They are personal savings accounts used to pay eligible health care expenses. They are tethered to high-deductible health insurance plans (HDHP). If you have a high-deductible plan identified as HSA-eligible, you can open a health savings account and make tax-free contributions as long as you are not covered by a family member’s plan, you are not covered by Medicare, or you are not claimed as a dependent on someone else’s tax return.
For reasonably healthy individuals, an HSA becomes a retirement vehicle with tax-free dollars accumulating until retirement.
Once opened, you and basically anyone else can contribute to your health savings account, including family members, your employer, and friends. (That’s a good friend.) You can use your HSA to pay medical expenses for a spouse or other family members even if they are not covered by your HDHP. Contribution limits to a HSA for 2026 are $4,400 for an individual and $8,750 for a family. If you are over 55, you can make a catch-up contribution of $1,000 each year.
HSAs can be used to pay for doctor’s visits, dental services, and drugstore purchases, including over-the-counter medications. They can be used for copays, coinsurance, vision services, family planning expenses, COBRA coverage, health insurance premiums if unemployed, acupuncture, psychiatrists, alcohol and drug addiction treatment, and chiropractor services. If you change jobs, a health savings account travels with you.
HSAs offer some attractive tax benefits. Contributions are deducted from gross income via your paycheck or on your 1040 tax return, lowering your taxable income and total income tax due. If you can have contributions payroll-deducted, the amount deducted is free from both income taxes and FICA (Social Security and Medicare taxes). HSA contributions are allowed to be invested and grow tax-free. They are allowed to be withdrawn tax-free for eligible medical expenses. Taxes will never be due if the money is always used for qualified expenses. If withdrawn for nonmedical expenses before retirement, income taxes are due and a penalty applies; if withdrawn for nonmedical expenses after retirement, just income taxes are due. HSAs are considered triple tax advantaged: tax deductible contributions, tax-free growth, and tax-free withdrawals. They provide a greater tax shelter than traditional IRA accounts.
To qualify for a health savings account, you must be covered by a high-deductible health plan (HDHP). As long as you maintain an HDHP before retiring, you can continue making contributions to the HSA and can continue using it to pay medical expenses. However, the HSA cannot be used to pay the HDHP premium.
Once you retire and go on Medicare, you can keep your health savings account, but you can no longer make contributions. However, along with paying qualified medical expenses, you can use HSA funds to pay for long-term-care insurance premiums and other long-term-care costs. You can also use it to pay Medicare premiums for Part B (doctor’s visits), Part D (drugs), and Part C (Medicare Advantage) after retirement. For additional qualified expenses, see IRS Publications 502 and 969. And remember, if used for medical expenses, these withdrawals are still tax-free unlike tax-deferred traditional IRA withdrawals.
High-Deductible Health Plans
The U.S. Bureau of Labor Statistics reported in April of 2025 that 50% of private industry workers having insurance in 2024 had high-deductible health plans. A high-deductible health plan that is health-savings-account-eligible for 2026 is one with a deductible that is at least $1,700 for an individual and at least $3,400 for a family. Most plans have even higher deductibles.
An insurance deductible is the amount you pay out of pocket for medical expenses before coverage by the insurance company begins. Coverage, however, may be only 60% to 80% of the total due, leaving the rest as a co-pay for the insured. Total out-of-pocket costs for an HDHP in 2026 has been capped at $8,500 for an individual and $17,000 for a family. The advantage of an HDHP is that it comes with a lower premium than a low-deductible plan. These plans are best suited to people who are healthy and who hope to only pay the premium each year while maintaining a catastrophic plan just in case. A person in need of extensive medical services may find it less expensive in the long run to buy a lower-deductible, higher-premium plan, although such a plan would make them ineligible for a health savings account.
HSA Pros and Cons
Proponents of health savings accounts state that consumers will be more careful with healthcare costs when paying part of their medical bills themselves: that they won’t go to see a medical professional for minor issues and will be less wasteful. Critics argue that people will delay going to see medical professionals and will possibly lose valuable time against a condition more serious than expected, leading to higher costs later. Critics also warn that children of low-income families may suffer.
What’s clear is that health savings accounts, established to benefit all Americans, are a luxury for those who need them most. Many of the 20 million Americans losing health insurance subsidies will no longer be able to afford a high-deductible plan, so for them, having an HSA becomes impossible. A health savings account combined with a high-deductible health plan works best for healthy people and high-income individuals. In a healthy year, you only pay the low premium. In a year with significant medical expenses, you could be liable to pay up to the total out-of-pocket maximum (again, capped by the IRS at $8,500 for an individual and $17,000 for a family). A high-income individual or family can purchase an HDHP, open an HSA, maximize HSA tax-free contributions, pay all medical expenses for the year from out-of-pocket taxable funds, and let the health savings account funds compound year after year until retirement.
HSAs are a meaningful retirement vehicle for those who are healthy and have extra cash. Fidelity Investments estimates that the average retiree will need $172,500 for health care expenses in retirement, while a couple will need $345,000. Those numbers do not include long-term assisted living expenses. For reasonably healthy individuals, an HSA becomes a retirement vehicle with tax-free dollars accumulating until retirement, at which time the funds can be withdrawn tax-free for medical expenses. For example, someone who contributes $8,750 a year ($729 a month) into an HSA for 30 years, invested in an S&P 500 exchange-traded fund returning 6% a year compounded semi-annually, will accumulate $713,195 on $262,440 of contributions.
Retirement withdrawals for nonmedical expenses are subject to income taxes. (Pre-retirement withdrawals for nonqualifying expenses are taxable as income and subject to a 20% penalty.) Upon death, an HSA can be transferred to a spouse’s account tax-free. Children inheriting an account will have to pay income taxes on the account’s holdings.
HSAs are not a substitute for the ACA insurance premium subsidies that expired in 2025. If a significant number of American families, including construction professionals, lose health insurance, it once again puts the healthcare debate front and center. How do we care for our citizens? Until the debate is settled, those of us who can afford to benefit from health savings accounts should take advantage of this government program that incentivizes planning for present and future medical expenses.
