Health Savings Accounts, or HSAs, came to the United States in 2004 with the 2003 passing of the Medicare Prescription Drug, Improvement, and Modernization Act. Health Savings Accounts are linked to ‘High Deductible Health Plans‘ – the first dollars of annual health spending come from the insured before insurance covers medical care. As an incentive, HSA deposits are tax-free, and withdrawals are tax-free when used for Medical Care.
In this post we track the history of the Health Savings Account limit, showing the allowed contributions over time. (Interested in the history of other retirement accounts? See the history of the IRA or 401(k) contribution).
History of the Health Savings Account limit, Catch-Up Contributions, and Deductibles Needed for a HDHP to Qualify
Following this is a table which shows the complete history of the Health Savings Account limit. On the right we’ve listed the qualifications for qualified plans.
(55 or older)
(Single and Family)
|Minimum High Deductible Health Plan Deductible to Qualify (Single)||Minimum High Deductible Health Plan Deductible to Qualify (Family)|
Here’s how the limits evolved in visual form:
How Health Savings Accounts Began
HSAs improve greatly on their predecessor, Medical Savings Accounts. They define how employers can contribute while expanding the amount allowed for contributions.
The Health Saving Account’s popularity has soared since the passing of the Patient Protection and Affordable Care Act. That law allowed greater access to high deductible health insurance plans, especially for people without traditional coverage through their employers. Devenir Research estimated HSA assets have crossed $30 Billion, with roughly 16.7 million accounts open at the end of 2015 – contrast that with an America’s Health Insurance Plans survey [PDF] pegging number of accounts at 8 million in 2008 and 13.5 million in 2012.
Health Saving Accounts have a very interesting feature, since the rate of contributions is often capped by an employer: medical expenses incurred while under a High Deductible and after the HSA was established can be reimbursed in any taxable year. This means HSA holders can hold medical care receipts for future reimbursement, a strategy we detail in our Health Savings Account Emergency Fund How-To article.
Key Dates in the History of the Health Savings Account in the United States
Medicare Prescription Drug, Improvement, and Modernization Act passed, allowing Health Savings Accounts to be created and setting the initial contribution limit of HSAs at $2,600 for a single or $5,150 for a family.
IRS clarifies that health spending incurred after an HSA is established can be reimbursed from a Health Savings Account at any point in the future.
The Patient Protection and Affordable Care Act disallows over the counter purchases of medicines and drugs from Health Savings Accounts.
In mid-2017, the IRS released guidance that the total family HSA contribution limit would be $6,900. They reversed that decision in early 2018, setting the limit to a lower $6,850. However, after a number of employers and plan administrators complained the IRS reversed their reversal and set the HSA limit to its current $6,900.