HSA Rule Changes Continue To Be Proposed in Congress

In March 2018, U.S. Representative Mike Kelly (R-PA) introduced the Bipartisan HSA Improvement Act which would have amended the current law governing Health Savings Accounts (HSAs) and improve access to healthcare for those currently enrolled in HSA-qualified high-deductible health plans.  When this legislation was first proposed, I wrote this blog detailing the provisions of the legislation and the impact it would have for those with HSAs.  While the proposed changes would have provided enhancements that would allow qualified plans to cover more up-front costs, there was no action on the bill prior to the close of the 2017-2018 congressional session.

However, a new bill was introduced in January 2019 that, if considered in congressional committee, may gain some traction.  The Health Savings Account Expansion Act of 2019 was introduced by U.S. Representative Mike Gallagher (R-WI) and amends some of the current HSA rules.  A few of the highlights of the proposed legislation include:

  • an increase in the annual contribution limits to $9,000 for those with single coverage and $18,000 for those with family coverage (currently $3,500 single and $7,000 family);
  • the allowance of over-the-counter medications to be qualified purchases again (prohibited under the Patient Protection and Affordable Care Act (PPACA));
  • the ability for consumers to use HSA funds for direct primary care expenses.

If this bill passes into law, the biggest impact to employer-sponsored health plans would likely be the annual contribution limit increases, as they provide two significant advantages for employees.  First, the contribution increase allows employees to now cover more of their healthcare costs with pre-tax dollars during the course of the plan year.  Many health plans have out of pocket limits that exceed the current contribution limits.  The second advantage would be for those looking to maximize pre-tax contributions for their long-term savings.  Most HSA banks allow participants to invest the dollars in their accounts once they have reached a certain balance.  This contribution limit increase would allow members to put more pre-tax money away while reducing their annual taxable exposure. Since the HSA rules eliminate penalties for non-qualified expenses after the age of 65, this would function similar to a traditional Individual Retirement Account (IRA).  More employers would likely feel pushed to offer an HSA-qualified health plans, as employee populations seeking to maximize these tax advantages would seek to take advantage of these savings.

It is important for employers to stay on top of legislative changes like this that could have significant impacts for them and their employees.  Adopting HSA-qualified plans may result in lower medical premiums and help employers maintain the affordability of their plans.

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