Debate: Would This HSA Expansion Bill Help Taxpayers?

Legislation would increase contribution limits while also allowing employers to fund individual accounts in lieu of offering coverage.

Recent legislation has been introduced by Republicans in Congress to expand the use of health savings accounts.

The Simplify and Expand Health Savings Accounts Act would increase the maximum annual HSA contribution limit to $10,000 per individual and $20,000 for family coverage. Employers would also be permitted to contribute to an employee’s HSA and allow those funds to be used to purchase individual health coverage in order to satisfy the employer’s mandate under the Affordable Care Act. 

HSA funds would also be allowed to be used for direct primary care arrangements.

We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about the impact of recent proposals to expand the use of health savings accounts.

Below is a summary of the debate that ensued between the two professors.

Their Votes:

Byrnes
Bloink

Their Reasons:

Byrnes: Increasing the HSA contribution limits both gives workers greater control of their health care spending and is realistic in light of the ever-increasing costs of health services. We all know that Obamacare health plans come with sky-high deductibles and that every individual who funds an HSA must deal with those costs. The only real appeal of a high-deductible health plan is the HSA funding option, and this legislation would make the structure much more workable.

Bloink: These proposals do much more than merely raise the annual HSA contribution limit substantially. They also allow employers to avoid offering health coverage to employees when they otherwise would be legally mandated to do so. Instead, employers would be entitled to simply fund the individual’s HSA and allow those funds to be used to purchase health coverage in the individual market to satisfy the ACA employer mandate. 

Byrnes: It makes complete sense to raise the annual contribution limit so that it actually is likely to exceed the individual’s deductible, so that the individual then actually has the funds necessary to make their health insurance plan work for them — assuming that the individual is able to maximize pretax HSA contributions in the first place. 

Bloink: While giving the employee the choice to use HSA funds to buy marketplace coverage is a positive step, letting employers off the hook for offering health coverage at all circumvents important protections put into place under the ACA for a reason. It’s also likely to create confusion for individuals who must then evaluate health plans and determine whether the health plan qualifies for an HSA in the first place.

Byrnes: With low HSA contribution rates, it can take several years of funding (assuming the individual makes no actual withdrawals to cover health-related expenses over the funding period) to cover a single year’s plan deductible. Contribution limits at minimum must be high enough to allow employees who max out their contributions to satisfy their plan deductibles.

Bloink: By this point, we all should recognize that the Affordable Care Act, while not perfect, provides critical protections for millions of Americans. If this proposal became law in its full form, it would strip some of those important protections by giving large employers the option of not offering comprehensive health coverage in the first place — essentially placing the burden on the individual to find a qualifying plan. 

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