Benefits Buzz

HSA Bills Advance Through the House

Posted on August 2nd, 2018

Last week, the House of Representatives (House) passed two bills which would expand Health Savings Accounts (HSAs) and make other changes to the healthcare industry. Below is a summary of key HSA provisions included:

HR 6311

  • Medicare Part A would not eliminate HSA eligibility. This provision allows working seniors that are covered by an HSA-eligible HDHP and enrolled in Medicare Part A to contribute to an HSA.
     
  • HSA maximum contribution limit increased to the amount of the deductible and out-of-pocket maximum. Under current law, annual HSA contributions are limited. In 2018, the limit is $3,450 for an individual and $6,900 for family coverage. These limits are updated annually for inflation and are significantly less than the combined legal limit on annual out-of-pocket and deductible expenses. This provision would allow HSA-eligible individuals to contribute an amount equal to the combined annual limit on out-of-pocket and deductible expenses under their HSA-qualified insurance plan, which is $6,650 for an individual and $13,300 for a family in 2018.
     
  • Allows for both spouses to make catch-up contributions to the same HSA. Under current law, if both spouses are HSA-eligible and age 55 or older, they must open separate HSA accounts for their respective “catch-up” contributions (an extra $1,000 annually). This provision would allow both spouses to deposit their catch-up contributions into one account.
     
  • Special rule for certain medical expenses incurred before the establishment of the HSA. This provision would treat HSAs opened within 60 days after gaining coverage under an HDHP as having been opened on the same day as the HDHP. This would allow for a reasonable grace period between the time coverage begins through an HDHP and the establishment of an HSA.
     
  • Allowance for Bronze and Catastrophic Plans. This provision allows health plans classified as bronze and catastrophic to be considered HSA-eligible.

 

HR 6199

  • First dollar coverage flexibility for High Deductible Health Plans. Health plans can provide coverage for services before the deductible is met up to $250 a year for an individual and $500 a year for family coverage. This change will allow insurers to provide coverage for and incentivize the use of services that can reduce health care costs more broadly, such as primary care visits and telehealth services.
     
  • Treatment of Direct Primary Care service arrangements. HSA accountholders could receive care through a direct primary care (DPC) arrangement without disqualifying eligibility for an HSA, and DPC expenses could be paid tax -free from the HSA (up to $150/month for an individual and $300/month for a family).
     
  • Certain employment-related services not treated as disqualifying coverage. This section allows employers to offer free or discounted services at on-site or retail medical clinics without disqualifying an HDHP enrollee from contributing to an HSA so long as significant medical care benefits are not provided.
     
  • HSA contributions permitted if a spouse has a Health Flexible Spending Account. This provision allows an otherwise eligible FSA enrollee’s spouse to maintain an HSA, so long as the aggregate expenses reimbursed from the FSA are limited exclusively to what the FSA enrollee would have been entitled to absent the spouse.
     
  • FSA and HRA terminations or conversions to fund HSAs. Employees are able, at the employer’s discretion, to convert their FSA and HRA balances into an HSA contribution upon enrolling in a high deductible health plan with an HSA. The conversion amount is capped at $2,650 for an individual and twice that for family coverage. Any conversion taking place during the same year as the FSA or HRA contribution was made will count towards an enrollees’ HSA contribution for that taxable year.
     
  • The inclusion of certain over-the-counter medical products as qualified medical expenses. Removes the ACA restriction on over-the-counter medicines for all tax-favored health accounts and adds “menstrual care products” as a qualified medical expense for the purposes of these accounts.
     
  • Certain amounts paid for physical activity, fitness, and exercise treated as amounts paid for medical care. Qualified sports and fitness expenses are treated as qualified medical expenses up to a limit of $500 a year for an individual and $1,000 a year for a joint return. This includes amounts paid for membership at a fitness facility, participation or instruction in a program of physical exercise or physical activity, or safety equipment for use in a program of physical exercise or physical activity.

The next step is that these bills will move onto the Senate where 60 votes will be needed. This may be a difficult challenge. While most, if not all the 51 Senate Republicans would likely vote in favor of these bills, the Democratic leadership is likely to oppose the two bills. Many Democrats believe that expanding HSAs and other types of free-market healthcare are an attack on the Affordable Care Act (ACA). There’s also the upcoming midterm elections which may delay any swift action on these bills. At the same time, there was some bipartisan support from House members. Twelve Democrats voted to pass HR 6311 and 46 Democrats voted for HR 6199. 

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