How the HSA Became the Top 1%'s Ultimate Wealth-Building Loophole - Insurance Dimes

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Jul 27, 2026

Data, Insurance

How the HSA Became the Top 1%’s Ultimate Wealth-Building Loophole

The rise of the Health Savings Account (HSA) is inextricably linked to the rise of the high-deductible health plan (HDHP).

In 2006, just 4% of people with employer-sponsored insurance had an HDHP. By 2023, that number had surged to 30%.

On top of that, when pandemic-era federal subsidies expired, many Americans buying their own insurance were forced into high-deductible bronze or catastrophic plans simply to afford the monthly premiums.

Adoption of these plans, and the HSAs that come with them, varies wildly depending on where you live in the United States.

Percentage of Privately Insured Population Covered by an HSA

Hover or tap a state to see its value.

3%

62%

Note: Under current legislation, individuals enrolled in public health programs such as Medicare, Medicaid, TRICARE, Veterans Affairs health benefits, and Indian Health Services are ineligible to make contributions to a Health Savings Account.

Sources: Data is derived from the 2024 Devenir and HSA Council Demographic Survey, the Kaiser Family Foundation, and the U.S. Census Bureau 2023 American Community Survey.

(Note: Adoption spans from a low of 3% in Hawaii to a staggering 62% in Utah and 55% in Minnesota.)

The systemic flaw is that many consumers enter this ecosystem out of financial necessity rather than financial literacy.

Take the example of Madison Burgess, a 31-year-old teacher in San Diego. Seeking a cheaper monthly premium for her husband, she chose a high-deductible plan without understanding that their coverage wouldn't kick in until they had paid $5,800 out of pocket.

Like many Americans, she didn't even know she could open an HSA to prepare for this burden, and says, "I've never thought about having to put money away for a deductible."

The HSA as a Checking Account

For the people using an HSA as it was originally intended, to pay for current medical expenses, the system is highly unforgiving.

Most HSA users treat their account like a medical checking account.

Money goes in from payroll deductions and gets immediately wiped out by doctor visits and pharmacy bills.

In 2025, about 25 cents of every dollar contributed stayed in HSAs, while the remaining 75% flowed right back out through withdrawals.

You can see this hand-to-mouth pattern of healthcare survival most clearly in how account balances are distributed across the country.

Health Savings Account Balance Distribution

Hover or tap a bar to see its value.

Note: Values represent the percentage share of all HSA accounts falling within each balance range, as of the two dates shown.

Sources: Data is derived from the 2024 Devenir and HSA Council Demographic Survey, the Kaiser Family Foundation, and the U.S. Census Bureau 2023 American Community Survey.

Over 17.5% of HSA accounts sit at a zero balance, and another 30.8% hold less than $500.

In total, nearly half of all HSAs in America contain little to no money.

Ironically, younger generations are adopting HSAs at the highest rates, 56% of Gen Z and 50% of Millennials, even though these same younger Americans carry the heaviest economic burden and hold the lowest average balances.

The HSA as a "Super-IRA"

While the masses use HSAs to scrape by, a smaller group of elite users is exploiting the system's architecture to build immense, tax-free generational wealth.

If you have enough disposable income to pay your medical bills out-of-pocket, you never actually have to touch your HSA funds.

Instead, you can invest the balance in stocks and mutual funds.

Do that, and you unlock the "triple tax advantage." Contributions are tax-deductible, growth is tax-free, and medical withdrawals are tax-free.

On top of that, unlike traditional 401(k)s or IRAs, HSAs have no Required Minimum Distributions at age 73, so the money can compound indefinitely.

If you keep your medical receipts from decades prior, you can pull cash out of your HSA tax-free at any time in the future to reimburse yourself, a highly lucrative loophole known as the "HSA receipt trick."

Once an account holder turns 65, they can also withdraw funds for non-medical reasons penalty-free, paying only ordinary income tax, which mirrors a traditional 401(k) almost exactly.

HSA Investment Assets in Billions

Hover or tap a bar to see its value. 2026 through 2028 are estimated.

Swipe to see the full timeline.

Note: Deposits refers to cash held in HSAs. Investments refers to HSA assets allocated to investment vehicles such as mutual funds. Figures for 2026 through 2028 are projections.

Sources: Data is derived from the 2024 Devenir and HSA Council Demographic Survey, the Kaiser Family Foundation, and the U.S. Census Bureau 2023 American Community Survey.

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