HealthEquity: Riding Legislative Tailwinds to HSA Market Dominance

The Health Savings Account (HSA) market is undergoing a transformative period, fueled by legislative changes that are expanding access, contribution limits, and eligible expenses. Among the beneficiaries of this shift is HealthEquity (HQY), the nation's largest HSA custodian, which stands to capitalize on a regulatory environment designed to boost consumer-driven healthcare. Here's why investors should take notice now.

Legislative Tailwinds: A Gold Mine for HSAs

Recent bipartisan and partisan legislation has dramatically expanded the HSA universe, creating a multi-billion-dollar opportunity for companies like HealthEquity. Key changes include:

1. Expanded Eligibility:
2. Medicare Part A enrollees (ages 65+) can now contribute to HSAs, even if not enrolled in Part B.
3. Individuals with bronze/catastrophic ACA plans or direct primary care (DPC) arrangements qualify for HSAs, provided fees stay below $150/month.

4. Gym memberships and fitness expenses are now eligible HSA expenses, with annual caps of $500 (individual) or $1,000 (family).

5. Higher Contribution Limits:

6. For 2025, contribution limits doubled for lower-income individuals (under $75k single or $150k married), reaching up to $8,600 annually for individuals and $17,100 for families.

7. FSA/HRA Roll-Overs:

8. Funds from FSAs or HRAs can now be rolled into HSAs, a move that opens up $billions in untapped savings.

These changes are projected to add $44.3 billion in federal costs over a decade, but for HealthEquity, this means millions of new customers and billions in new assets under management (AUM).

Operational Resilience: Dominance Through Scale and Innovation

HealthEquity isn't just riding the wave—it's shaping it. Its operational strength and strategic moves position it to capture the bulk of this growth:

1. Market Leadership:
2. 9.9 million HSA accounts by early 2025 (up 14% YoY), with total AUM soaring to $32.1 billion (a 27% increase).

3. Acquired BenefitWallet's 616,000 HSAs in early 2025, adding $2.7 billion in assets and strengthening its infrastructure.

4. Financial Performance:

5. Revenue hit $1.20 billion in 2025 (up 20% YoY), with net income surging 74% to $96.7 million.

6. Adjusted EBITDA margins expanded to 39% of revenue, reflecting strong cost discipline.

7. Technology and Customer Experience:

8. Invested in its "3Ds strategy" (Deepen partnerships, Deliver experiences, Drive outcomes), prioritizing mobile-first solutions to retain users.
9. Safely managed $32.1 billion in assets with robust cybersecurity protocols, critical as digital adoption accelerates.

Why Invest Now?

The convergence of legislative tailwinds and operational excellence creates a compelling case for HealthEquity:

1. Addressable Market Growth:
   The HSA market is projected to more than double in the next decade as new eligibility rules and higher contribution limits take effect. HealthEquity's scale and brand loyalty give it a first-mover advantage to capture this growth.

2. Margin Expansion Potential:
   With AUM up 27% in 2024 and $2.3 billion of HSA cash set to reprice at higher yields by 2026, the company's margins could expand further.

3. Strategic Acquisitions:
   The BenefitWallet deal not only boosted assets but also provided cross-selling opportunities for its broader consumer-directed health (CDH) platform, which now manages 17 million accounts across HSAs, FSAs, and HRAs.

Risks to Consider

• Regulatory Rollbacks: While bipartisan support exists, some provisions (e.g., gym memberships) may face scrutiny.
• Cybersecurity Threats: Managing $30+ billion in assets makes HealthEquity a high-value target for hackers.

However, the company's $471.8 million in EBITDA (2025) and $177.8 million remaining in share repurchases suggest strong financial flexibility to mitigate these risks.

Conclusion: A Buy Signal for the Next Decade

HealthEquity is uniquely positioned to profit from the $44 billion legislative windfall and its own operational excellence. With a 9.9 million HSA base, $32 billion in assets, and a track record of growth, it's not just a beneficiary of HSA trends—it's the kingmaker of the consumer-driven healthcare revolution.

Investors ignoring this opportunity may find themselves behind the curve as HSAs become the default savings vehicle for millions of Americans. Act now.