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House may vote on big HSA deduction increase

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The U.S. House could vote this week on H.R. 1270, a legislative package that could lead to a big increase in health savings account deduction limits and require more moderate-income health insurance exchange users to send excess premium subsidy money back to the government.

Related: EBRI: High deductibles make patients talk

The original version of H.R. 1270, the Restoring Access to Medication Act of 2015, would let taxpayers use money in health savings accounts, flexible spending arrangements and health reimbursement arrangements to pay for over-the-counter drugs without a prescription.

The House Rules Committee has combined H.R. 1270 with H.R. 5445, the Health Care Security Act of 2016 bill, and H.R. 4723, the Protecting Taxpayers by Recovering Improper Obamacare Subsidy Overpayments Act bill.

The provision based on H.R. 5445 would increase the health savings account contribution limit. The provision based on H.R. 4723 would change the Affordable Care Act premium tax credit clawback rules.

Members of the House Rules Committee are preparing to vote Tuesday on the procedures for bringing the package to the House floor.

House Majority Leader Kevin McCarthy, R-Calif., says on his website that the House could vote on the H.R. 1270 package as early as Wednesday.

In recent years, Republicans have had trouble rounding up enough votes to get most other health insurance bills to the Senate floor. In some cases, Republicans have gotten health bills signed into law by putting them in must-pass budget measures.

The details

If implemented as written, the health savings account deduction section of the H.R. 1270 package could increase the health savings account deduction limit to an amount equal to the sum of an eligible health insurance policy’s deductible and the policy’s out-of-pocket spending maximum. That could increase the maximum deduction to more than $7,800 for an individual and more than $15,000 for a family.

The health savings account program lets an individual with an eligible high-deductible health plan deduct contributions to a health savings account from taxable income and use cash from the account to pay medical bills without paying taxes on the withdrawals.

In 2016, to use a health savings account, an individual taxpayer must have individual coverage with a deductible of at least $1,300 and a cap of $6,550 on spending on deductibles, co-payments and coinsurance amounts. That individual can deduct a maximum of $3,350 in health savings account contributions.

A family must have a policy with a deductible of at least $2,600 and an annual out-of-pocket spending maximum of $13,100 or less. A family can deduct up to $6,750 in health savings account contributions.

The Congressional Budget Office has estimated the health savings account deduction increase would cost the federal government about $20.5 billion in revenue over a 10-year period.

The Affordable Care Act premium tax credit clawback provision would affect consumers who buy health coverage from the ACA public health insurance exchange system.

Exchange users with incomes under 400 percent of the federal poverty level, or about $46,000 per year for an individual and about $94,000 per year for a family of four, can use an ACA “advanced premium tax credit” subsidy system to pay for part of the premiums. An exchange user can use an estimate of what the user’s income will be in the year ahead to get the premiums.

At the end of the year, the taxpayer is supposed to work with the exchange and the Internal Revenue Service to find out whether the amount of tax credits received during the benefit year was too low, too high or just right. 

Under current law, tax credit users who end up earning more than 400 percent of the federal poverty level are supposed to pay back all of the excess premium tax credit help received.

The premium tax credit clawback provision in H.R. 1270 would require tax credit users with incomes over 300 percent of the federal poverty level to pay back the full amount of any excess tax credits received. 


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