Recently, the U.S. House of Representatives passed two new bills that could have a significant impact on who qualifies for HSAs and how they are used. Both bills – H.R. 6199 and H.R. 6311 – were backed by the Republican Party, and both received crossover support from Democrats, allowing them to pass by significant majorities. However, both bills must still pass the Senate by the end of 2018 in order to become law. If they pass, both bills would take effect in January of 2019.
Here’s how these new healthcare bills could affect Health Savings Account (HSA) owners:
The Implications of H.R. 6199
H.R. 6199, also known as the “Restoring Access to Medication and Modernizing Health Savings Accounts Act,” aims to make HSA accounts more user-friendly and financially beneficial. One significant aspect of the bill is that it would make it easier to qualify for an HSA. Currently, participating in an HSA requires high deductible health plan (HDHP) enrollment, and the only HDHP expenses that can currently be covered pre-deductible are preventive care services.
Under H.R. 6199, individuals can apply up to $250 in pre-deductible coverage (up to $500 for families) for non-preventive care. As a result, HDHPs could cover certain expenses outside the deductible (on a limited basis) such as chronic-condition treatments and telehealth services.
Expanded Healthcare Coverage
If passed, H.R. 6199 would also expand the types of coverage allowed beyond an HDHP. Currently, most people who have supplemental health coverage in addition to their HDHP cannot have an HSA. (See other health coverage for exceptions to this rule.) H.R. 6199 would allow people to participate in direct primary care arrangements (DPCAs) and remain eligible to maintain an HSA as long as the DPCA’s monthly fee doesn’t exceed $150 for individuals or $300 for families.
HSA Eligibility and Contributions
Additionally, employers would be allowed to offer various free or discounted medical services, either onsite or at a retail clinic, to employees without jeopardizing employees’ HSA eligibility. The medical services would have to be “non-significant”; they could, however, include immunizations, vision and hearing screenings, physical exams and treatment for job-related injuries.
Perhaps most significant to consumers, H.R. 6199 would enable individuals with HDHP family coverage to contribute to an HSA even if their spouse is enrolled in a medical Flexible Spending Account (FSA). If passed, families could have both two tax-advantaged healthcare accounts at the same time.
Other Financial Benefits
Other financial benefits that would follow passage of H.R. 6199 include:
- Voiding the Affordable Care Act’s (ACA) ban on using HSAs to buy over-the-counter medical products.
- Treating menstrual care products as qualified medical expenses that can be purchased with all tax-advantaged healthcare accounts.
- Designating certain sports and fitness expenses – such as gym memberships and exercise program expenses – as qualified medical expenses ($500 annual limit for individuals; $1,000 for families).
The bill would also delay the “Cadillac Tax” for another two years.
What H.R. 6311 Means to Healthcare Consumers
H.R. 6311, otherwise known as the “Increasing Access to Lower Premium Plans and Expanding Health Savings Accounts Act,” includes a number of features that would positively impact healthcare consumers from a financial standpoint. One of the biggest benefits is the ability for low and moderate income individuals and families to apply the ACA’s premium tax credit when purchasing lower-premium, “catastrophic” Copper plans. The bill would also allow people age 30 and up to buy Copper plans. In addition, it would permit Copper and Bronze-level individuals and small-group market plans to qualify for HSA contributions – both of which are not allowed under current rules.
Expanded Contribution Limits and Expense Eligibility
H.R. 6311 would significantly increase annual HSA contributions. The bill proposes raising contributions from $3,450 to $6,650 for individuals and $6,900 to $13,300 for families, practically doubling the limit.
It also expands the period in which eligible expenses are allowed. People who open an HSA within 60 days after the start of HDHP coverage can pay for qualified medical expenses retroactive to the start of their HDHP coverage.
Changes for those 55 years and older
For Americans aged 55 years and older, H.R. 6311 expands HSA availability and eases contribution restrictions. First, it would allow working seniors who participate in Medicare Part A and have a qualifying high-deductible healthcare plan to contribute to an HSA. Second, it permits spouses age 55 and above to make additional “catch-up” contributions of $1,000 each year to an HSA that is linked to a family healthcare plan. Previously, only the account holder could make catch-up contributions.
Consumer Directed Healthcare Account Funding
H.R. 6311 could reach further than Health Savings Accounts. The bill allows employees with an FSA or Health Reimbursement Arrangement (HRA) to transfer balances from their FSA or HRA to an HSA, as long as they are enrolled in a qualified HDHP. These transfers are allowed at the employer’s discretion, and capped at $2,650 for individuals and $5,300 for families. It would also allow people to carry over health FSA balances up to three times the annual contribution limit to the following plan year.
These bills could have a drastic impact on healthcare consumers across the country. We will keep an eye on these developments and update as necessary. Contact your benefits administrator for more details.
DataPath, Inc. is a leading provider of cloud-based administrative solutions for Health Savings Accounts, Flexible Spending Accounts, Health Reimbursement Arrangements.