ACA Alternatives Explained
The government shutdown has ended, and the extension of enhanced premium tax credits is put off for a possible December vote. As part of the ongoing healthcare discussion, some Republicans have offered an alternative proposal to extending the tax credits which would attempt to meet basic healthcare needs through health savings accounts (HSA) and flexible spending accounts (FSA). These proposals are being framed as an alternative to comprehensive care available through the ACA Marketplace, and as a way for Americans to save money. Beyond health insurance, the ACA still remains a critical piece of legislation for supporting healthcare access for all, especially those with higher healthcare needs, which includes people with disabilities.
What is a Health Savings Account?
“HSAs are accounts in which people enrolled in high-deductible health plans can elect to transfer pre-tax dollars into an account that they can withdraw from tax-free to pay for certain out-of-pocket health expenses. Enrollees cannot pay premiums using HSA funds. HSAs provide the biggest benefits to people who can afford to contribute large sums into the accounts and who are in higher marginal income tax brackets. The accounts are triple tax advantaged: contributions lower taxable income, people can invest HSA funds and accrue earnings tax-free, and withdrawals are not taxable if used for “qualified” medical expenses. Enrollees can roll over HSA funds year-to-year and use any remaining funds for non-medical expenses after age 65.” – Center on Budget and Policy Priorities (CBPP)
In our newest blog, we urge Congress to extend the enhanced tax subsidies and explain the limitations of HSA/FSA for people with disabilities, and the impacts it would have on those who remain on Marketplace coverage:
[I]t is unlikely that the amount that would be provided (toward HSA accounts) would be sufficient to meet the healthcare costs of anyone who has any sort of ongoing health issues. As a result, this would only be attractive to those individuals who are healthy and are willing to take the risk of not needing insurance. The result of this would be the departure of healthy individuals from the health insurance marketplace which would leave only those who can’t afford to live without some type of health coverage. If all the healthy people leave the marketplace, this will result in a risk pool which will only include those who utilize health insurance more frequently and cause the overall cost per enrollee to increase significantly. This will only cause health insurance to be more unaffordable for those with health conditions, including people with disabilities and chronic conditions. The whole concept of insurance and risk management is to spread the cost for the unexpected among many individuals and this type of proposal will result in a collapse of the system when the healthy people leave and those who really need coverage will find maintaining coverage unaffordable.
The Center on Budget and Policy Priorities outlines in dollars and cents how HSAs fail as a sufficient alternative to traditional health insurance:
To understand the accounts’ insufficiency, especially as a replacement for high-quality, affordable coverage, we need only look at a few examples. One proposal would create health savings account deposits of up to $2,000, enough to cover only two months of care for a typical person with diabetes. People who become sick or have an accident could run through their accounts immediately: the average cost for a single day as an inpatient in a hospital is over $3,000, and the average overall cost for an inpatient hospital stay is roughly $17,000. The cash account would barely make a dent in the cost of starting or growing a family, as the cost of pregnancy, delivery, and postpartum care averages over $20,000. Cash accounts to pay for health services will never provide the kind of access to health care that people who become ill, get into an accident, or have pre-existing conditions need or the kind of financial protection that health insurance provides.
Health savings accounts alone would not provide the comprehensive coverage needed to support the health of people with disabilities. Insurance coverage provides a critical source of stable funding for local health systems too. When health coverage rates decline, the downstream effect is greater health system instability. In fact, low insured rates in rural America are contributing to the crisis in rural primary care delivery, disproportionately affecting healthcare access for disabled individuals. The loss of enhanced premium tax credits is expected to dramatically reduce rural hospital revenues, with over $2.2 billion in uncompensated care costs anticipated for 2026. Steady health coverage for all supports providers to offer consistent services nationwide.
Open Enrollment Reminders
- Important Upcoming Date: Dec. 15, 2025: Deadline for Jan. 1 Coverage
- Make sure to notify enrollees to check their plan if they typically auto-renew. People may be charged a $5 monthly fee this year if they do not update their account information manually and with the changing tax credits, they may be unaware how much their monthly premiums could have increased.
Archives of our weekly updates are available on the NDNRC website. Follow AAHD’s other newsletters to stay current on research opportunities and policy developments supporting people with disabilities.