Proposed Expansion of Health Savings Accounts Garners Bipartisan Support

Proposed Expansion of Health Savings Accounts Garners Bipartisan Support

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With the cost of health insurance continuing to rise and the ACA barely hanging on, the Trump administration and many in Congress have been looking at new ways to make coverage more affordable to employers that sponsor group health plans and their employees. For the last 10-15 years, this desire has caused legislators, employers, and benefits professionals to consider moving to a consumer-driven health care model, most notably Health Savings Accounts (HSAs).
As you probably know, HSAs are a type of tax-preferred savings account for employees, similar to a Health Flexible Spending Account (FSA). In short, employees enroll in a high deductible health plan (HDHP) under which they are required to pay 100 percent of their deductible out-of-pocket. In return, they have the opportunity to contribute to an HSA and then subsequently use that account to pay for medical expenses that aren’t covered by their group health policy.
Because HSAs grant special tax benefits to individuals (in return for placing more responsibility on them to be better consumers of health care), the rules regarding who can and can’t contribute to them have historically been very strict. Over the past couple of years, however, as HSAs increased in popularity and employees have become more comfortable with them, there have been increasing calls from legislators and health care/insurance industry professionals to loosen those rules.Last week, the House of Representative passed legislation that proposes to do just that. Here’s an overview of the biggest proposed changes.

Expanding who can contribute to an HSA.

Under current law, to contribute to an HSA an individual must meet two basic requirements.

1. They must have coverage through an “HSA-qualifying” HDHP. The proposed legislation would expand this by:

  • Allowing individuals to contribute to an HSA if they have coverage under a “bronze” or “catastrophic” plan, including through the Health Insurance Marketplace; and
  • Allowing up to $500 in medical expenses to be paid through a qualifying HDHP before the deductible is met.

2. They can’t have other “disqualifying” coverage. That generally means any other coverage (such as Medicare) or account (such as an FSA) that could be used to pay expenses that apply to their deductible. The legislation would loosen this rule as follows:

  • Medicare Part A would no longer be treated as a type of disqualifying coverage. This would allow employees who work past the age of 65 to both participate in Medicare Part A and contribute to an HSA (if they have HDHP coverage).
  • The FSA of an employee’s spouse would not be treated as disqualifying coverage unless it can actually be used to reimburse the employee’s medical expenses.
  • Employers that offer an HSA would be allowed to provide basic health services to their employees through an on-site health clinic.
  • Employees who are otherwise eligible to contribute to an HSA would be allowed to make “direct primary care” arrangements, under which you would pay a fixed periodic fee in exchange for access to a primary care physician.
Enhancing HSA contributions.

The proposed legislation would also:

  • Increase HSA contribution limits from $3,450 for individual coverage and $6,900 for family coverage to $6,750 for singles and $13,500 for families (in 2019). This would allow participating employees to fully fund their out-of-pocket medical expenses through their HSA.
  • Allowing employers to offer employees a chance to transfer Health FSA and Health Reimbursement Arrangement (HRA) balances to an HSA.
Allowing more expenses to be paid from HSAs.

In addition to other tweaks, individuals could be reimbursed through an HSA (and other similar accounts such as a Health FSA) for specified over-the-counter drugs and other health-related expenses (such as fitness activities) without a prescription.

Final Thoughts

While it’s unclear whether any or all of the proposed changes will actually become law, the passage of this legislation is newsworthy for two reasons:

  1. A good number of Democrats in Congress joined Republicans to vote for it, a sign of continuing bipartisan support for consumer-driven health care. In this day and age, any legislation that garners bipartisan support is noteworthy!
  2. It’s a sign of the enduring and increasing popularity of HSAs and an indicator of where things are likely to go in the future. Even if this particular piece of legislation should fail, similar efforts should be anticipated in the near future.

The Miller Group has a number of HSA options, as well as support tools for our clients who wish to offer one but are concerned about how it will go over with their employees. Feel free to contact a benefits advisor if you’d like to learn more.

By Julie Athey, Director of Compliance, The Miller Group






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