House Passes HSA Bills to Expand Access, Boost Contribution Limits

The full House late Wednesday passed bills to expand the use of health savings accounts, which industry officials say will make the plans more palatable to employers, and also increases the maximum contribution limits that can be made to an HSA.

“Health care has evolved,” Paul Fronstin, director of the Health Research and Education Program at the Employee Benefit Research Institute, told ThinkAdvisor on Thursday. “HSA plans have had these restrictions on them that may not make sense anymore.”

(Related: Insurers Give Congress 3 Ideas for Making HSAs Work Better)

The two bills are: The Increasing Access to Lower Premium Plans and Expanding Health Savings Accounts Act of 2018, H.R. 6311, sponsored by Health Subcommittee Chairman Peter Roskam, R-Ill., and the Restoring Access to Medication and Modernizing Health Savings Accounts Act of 2018, H.R. 6199, sponsored by Rep. Lynn Jenkins, R-Kansas.

H.R. 6199 allows certain over-the-counter medicines, menstrual care products and some physical fitness-related costs to be counted as qualified medical expenses.

The bill gives employers “more flexibility on what is subject to the deductible,” Fronstin said.

The bill “would allow flexibility around first-dollar coverage,” which means that “the service is covered in full, and patients wouldn’t have to pay a deductible, co-payment or coinsurance,” he explained. “This provision would allow employers to provide first-dollar coverage for various health care services without subjecting them to the high deductible.”

When the HSAs law passed, it said that “everything other than certain preventive services had to be subject to the high deductible.”

The bill will likely make HSAs more palatable to employers, which would likely mean “more people covered by these plans,” Fronstin continued.

“One thing holding [employers] back is they don’t love the inflexibility of the [HSA] plan design,” Fronstin added, noting a Kaiser Family Foundation survey which found that only 17% of employers offer an HSA.

The bill also provides that an HSA-eligible (high-deductible) health plan can provide certain coverage up to a dollar threshold ($250 for an individual and $500 for a family) for each plan year without satisfaction of the plan’s minimum deductible, according to the American Benefits Council.

Spousal contributions to an HSA would also be allowed if a spouse has a health flexible spending account “and narrowly permits employers to offer pre-deductible services at on-site or retail medical clinics,” ABC explains.

Over-the-counter medical products — including feminine or menstrual care products — would also be considered qualified medical expenses for the purpose of distributions from health flexible spending accounts (FSAs) and Archer medical savings accounts, according to the Benefits Council.

A limited amount of qualified sports and fitness expenses could also be treated as medical care for the purposes of health FSAs and health reimbursement accounts (HRAs).

Further, employees, at the employer’s discretion, could convert their FSA and HRA balances (up to $2,650 for an individual or $5,300 for a family) into an HSA contribution upon enrolling in a high-deductible health plan with an HSA.

H.R. 6311 would increase the HSA maximum contribution limit to the amount of the deductible and out-of-pocket limitation; allow both spouses to make catch-up contributions to the same HSA; and permit distributions from an HSA for medical expenses incurred after enrollment in a HSA-eligible health plan, even if an HSA was not yet established at the time the expenses were incurred.

The bill would also do the following, ABC states:

• Permit individuals entitled to Medicare Part A (by reason of being over age 65) to contribute to health savings accounts;
• Allow health FSA amounts to be carried forward each year;
• Allow all individuals purchasing health insurance in the individual market to purchase a lower premium “copper” plan;
• Delay the annual fee on health insurance providers (commonly known as the Health Insurer Tax or HIT) until 2022; and
• Allow plans categorized as catastrophic and bronze in the individual and small group markets to qualify for HSA contributions.

House Ways and Means Committee Chairman Kevin Brady stated after the bills’ passage that “as Republicans continue to work towards comprehensive health care reform, the House is taking action to enact targeted policies that expand access to HSAs, lower costs and premiums through increasing choices.” Brady urged the Senate to take up the bills soon.

A spokesperson for Senate Finance Committee Chairman Orrin Hatch, R-Utah, told ThinkAdvisor on Thursday that Hatch, who has introduced legislation to simplify and expand HSAs, “is currently talking to members on the Senate Finance Committee to see how they would like to move forward on this issue.”