HSAs: Saving for health care or investing for retirement?

In 2026, the Affordable Care Act saw a surge in bronze plan enrollment, with about 40% of consumers choosing these plans — a 10 percentage point increase from last year.

Bronze and catastrophic plans typically have lower premiums but higher deductibles, meaning consumers pay less each month but more out-of-pocket before hitting a yearly cap on costs.

As enhanced premium tax credits phase out, many consumers are opting for these lower-cost plans — even if it means higher out-of-pocket expenses. That shift is driving growth in Health Savings Accounts, or HSAs, with millions of new accounts opening alongside high-deductible plans.

According to the Centers for Medicare & Medicaid Services, about 43% of all enrolled customers chose to sign up for HSA-eligible plans in 2026. These accounts are paired with savings features that allow individuals to set aside money for medical expenses.

But in recent years, those accounts have taken on a new role: investment tools.

HSAs were created in 2003 to help consumers manage rising health care costs. The accounts allow individuals to save money tax-free for qualified medical expenses, often with employer contributions. After age 65, funds can be withdrawn for non-medical purposes without penalty, making HSAs function in some ways like a retirement account.

But researchers say the original goal of lowering health care spending has largely fallen short.

"And so the idea was if people had more skin in the game, they would become more careful and more educated and health care spending would slow down," said Jake Spiegel of the Employee Benefit Research Institute. "It's pretty safe to say that did not end up happening."

HSAs are also tied to a broader shift in employer health coverage. Rising insurance premiums have made traditional plans such as preferred provider organizations and health maintenance organizations increasingly expensive for companies to offer. Some employers now face a choice — continue offering more comprehensive plans or switch to lower-cost, high-deductible options that shift more costs to workers.

As a result, there has been a gradual shift toward lower-premium plans.

Health savings or tax advantages?

HSAs were initially used as savings or checking accounts. Investment features began emerging shortly after, with early adopters beginning to invest between 2005 and 2008.

"HSA adoption at the employer group level in the Midwest was well above average when it came to the movement to a high-deductible health plan and an HSA-eligible plan," said Brian Hutchin, director of health care services at Kansas City based UMB Bank. "The Midwest, including Missouri, were early adopters."

Hutchin said about 4 million accounts — roughly 10% of all HSAs — currently include investments. Many providers, including UMB, offer investment options such as mutual funds, stocks and exchange-traded funds instead of keeping balances in cash. Account holders can choose to invest their funds or keep them in cash. If the money is used for qualified medical expenses, it remains tax-free.

In the last quarter of 2025, UMB reported it had $3 billion in HSA deposits, with roughly $1.8 billion invested.

That has led financial institutions and social media influencers to promote HSAs for their so-called "triple tax advantage" — tax-deductible contributions, tax-free growth and tax-free withdrawals for qualified medical expenses.

"Because if they don't spend it on health care, they get to keep it," said University of Wisconsin public affairs professor Anthony Lo Sasso. "When it reaches a certain size, it can grow. It is a very good tax optimization strategy to max out your HSA."

Financial institutions are increasingly targeting younger consumers as a key demographic. A 2025 report of Devenir, a financial firm specializing in HSA investment solutions, found that one-in-five Americans in their 30s had an HSA at the end of that year.

"There was an expectation that older workers would be the primary users of these tools," Hutchin said. "But our data shows millennials continue to be a major user of HSAs. What's interesting is that younger generations are often the earliest adopters and are taking advantage of the technology and investment options available."

While older account holders still tend to have higher balances and are more likely to invest, Hutchin said usage is expected to shift over time toward younger, more financially and technologically savvy consumers.

Is medical expense becoming secondary?

The original purpose of HSAs was to help people cover medical expenses. But the growing focus on investing raises questions about whether that goal is shifting.

Devenir's study also found withdrawals are growing faster than contributions. In the first half of the year, contributions totaled more than $33 billion, up 6% year-over-year, while withdrawals reached nearly $23 billion, up 11%.

Spiegel said HSAs tend to benefit individuals who can afford to pay medical expenses out of pocket while allowing their savings to grow.

"If you're in a position where you have a high-deductible plan but still have ongoing medical expenses, investing that money is probably not a good idea," he said.

For individuals with chronic conditions or frequent medical needs, HSAs are often used to cover ongoing expenses rather than build investment savings — Spiegel said. Younger, healthier individuals and those with predictable high expenses may benefit more, while others must weigh the financial trade-offs.

Most HSA custodians require a minimum cash balance — typically between $1,000 and $2,000 — before allowing investments. Hutchin said this requirement ensures funds are available for immediate medical expenses, although investments can be sold in emergencies.

A significant share of people in high-deductible health plans still do not open or contribute to HSAs.

"We're still in our infancy from an education perspective," he said. "It's a natural evolution."

For now, HSA investing remains a niche strategy — one that may offer long-term benefits for some, but carries risks for others who need immediate access to their health care savings.