As Congress debates the sweeping 2025 health care reconciliation bill, much of the attention has focused on high-profile items like Medicaid expansions and prescription drug pricing. But embedded in the House version is a low-key provision that could significantly broaden how Americans use their Health Savings Accounts (HSAs): the return of the PHIT Act.

If reinstated in the final bill, this provision could allow Americans to use pre-tax HSA (and FSA) dollars to pay for gym memberships, youth sports, fitness classes, and related physical activity expenses—up to $500 per individual or $1,000 per household annually.

The Senate draft, however, removed this language. Now, with negotiations intensifying, the future of the PHIT provision—and the way we think about preventive health—is up in the air.

What the PHIT Provision Would Do

The PHIT Act (Personal Health Investment Today), first introduced in earlier Congresses, was designed to modernize the tax code to recognize physical activity as a legitimate form of preventive care. If the House language is adopted in the final reconciliation bill, individuals could:

• Use HSA and FSA funds for fitness-related expenses
• Receive tax-free benefits of up to $500 (individual) or $1,000 (household) per year
• Apply funds to gym memberships, yoga or fitness classes, youth sports fees and equipment, and even home workout gear

Supporters argue that this change would align tax-advantaged accounts with a broader view of health—one that includes prevention, not just treatment.

Why HR and Finance Professionals Should Pay Attention

From a business perspective, this change could yield tangible returns:

1. Promotes Preventive Health – Physical inactivity contributes to chronic conditions that drive up health plan costs. The CDC estimates that inactivity is associated with $117 billion in annual healthcare costs in the U.S.1. Encouraging fitness through HSA-linked incentives could help reverse that trend.

2. Expands Access to Wellness – According to the Aspen Institute, cost is a top barrier to youth sports participation for nearly 60% of families2. Allowing families to use pre-tax funds removes financial friction, promoting equitable access to physical activity.

3. Boosts HSA Appeal – HSAs are already valued for their triple tax advantages. Adding lifestyle-oriented benefits could make them more attractive to younger, healthier employees—especially in high-deductible health plans.

4. Strengthens Employer Wellness Programs – If implemented, the provision could enhance existing wellness initiatives by giving employees financial support to engage in physical activity, improving morale, reducing absenteeism, and lowering claims.

Why the Senate Removed It

Despite bipartisan support for the concept, the Senate dropped the PHIT language, citing several concerns:

• Cost to the Treasury: The Joint Committee on Taxation has previously estimated the PHIT Act would cost more than $3 billion over 10 years3.
• Policy Scope Creep: Critics argue that HSAs should be used strictly for medical care, not discretionary or lifestyle expenses like gym fees.
• Equity Concerns: Higher-income individuals are more likely to benefit, as they’re more likely to have HSAs and the means to front fitness costs.
• Administrative Complexity: Defining eligible expenses would require IRS guidance and could lead to confusion.

What Happens Next?

The House passed its version of the bill—with PHIT included—in May 2025. Senate committees are currently reviewing the legislation, and markup is expected in early July. A final vote on a consolidated bill could occur later this summer or in early fall. That means there’s still time for the PHIT provision to be restored—or permanently cut.

What Employers Can Do Right Now

• Stay Informed: Monitor updates from the Senate Finance Committee and Congressional Budget Office.
• Model Scenarios: Illustrate how expanded HSA usage could lower long-term claims and improve engagement.
• Engage in Advocacy: Join coalitions like the Physical Activity Alliance or the Health & Fitness Association to voice employer support.
• Educate Your Workforce: Encourage employees to contact their senators if they value this provision. Templates and resources are available from industry groups.

A Balanced View for HR and Finance Leaders

Whether or not the PHIT provision makes it into law, its inclusion in the House bill signals growing recognition that prevention and wellness deserve tax-advantaged support. For HR and finance leaders, the potential to align tax policy with wellness goals is both a strategic and cultural opportunity.

Still, questions remain. Can the IRS effectively define eligible fitness expenses? Will the benefit disproportionately serve higher earners? And is this the best use of limited tax expenditure room?

If passed, the PHIT provision would mark a meaningful shift in health benefit design. If not, its momentum may still influence future policy and prompt new employer-led wellness initiatives in the meantime.

Bottom Line:

The PHIT Act provision in the House reconciliation bill could redefine how we use HSAs by embracing fitness as preventive care. It offers promise—but also raises valid policy questions. With a final vote expected by early fall, HR leaders have a critical opportunity to influence the outcome and prepare for either scenario.

Footnotes
1 Centers for Disease Control and Prevention. “Physical Activity: Health Benefits.” https://www.cdc.gov/physicalactivity/basics/pa-health/index.htm
2 Aspen Institute Project Play. “State of Play 2022.” https://www.aspenprojectplay.org/
3 Joint Committee on Taxation. “Estimated Budget Effects of H.R. 1267, the PHIT Act.” Prior estimates published in 2018.