House Passes Enhanced Health Savings Bills

On July 25, 2018, the House passed two separate bills that seek to expand access and use of Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs) and accessibility to lower premium plans. The Republican favored bills also gained support from several Democrats. Both bills will now advance to the Senate. 

Health Care Bills 

H.R. 6199 – “Restoring Access to Medication Act of 2018,” would reverse the ACA prohibition on using tax-favored health accounts to purchase certain over-the-counter medical products and would include feminine products to the list of qualified medical expenses. Other items that the bill would allow participants to include are gym memberships, certain sports equipment. There would be a limit for such items of $500 a year for individuals or $1000 a year for Family. H.R. 6199 would also permit spouses to contribute to their spouse’s HSA when they have a Flexible Spending Account (FSA), which under current regulations is not permitted. 

H.R. 6311 – “Increasing Access to Lower Premium Plans and Expanding Health Savings Account Act” expands access and use of HSAs and would amend ACA to modify the definition of qualified health plan for purposes of health insurance premium tax credit and allow individuals in the individual market to purchase a lower premium copper plan.

The house passed bill would also: 

• Creates a new path for HSA eligibility that would allow bronze and catastrophic plans to be eligible plans for the HSA contributions.

• Carry forward remaining FSA balances at the end of the plan year

• Allow working seniors to contribute to HSAs.

• Increase the maximum HSA contribution to the amount of the deductible and out-of-pocket limits. In 2018, the HSA contribution limit is $3,450 for an individual and $6,900 for family coverage. The bill would allow HSA-eligible individuals to contribute an amount equal to the combined annual limit on out-of-pocket and deductible expenses under their HSA-qualified insurance plan, which is $6,650 for an individual and $13,300 for a family in 2018.

• Establish a special rule for certain medical expenses incurred before the establishment of HSA. This would treat HSAs opened within 60 days after gaining HDHP coverage as having been opened on the same day as the HDHP.

• Allow both spouses to make catch-up contributions to the same health savings account. Under current law, if both spouses are HSA-eligible and age 55 or older, they must open separate HSA accounts for their respective “catch-up” contributions (an extra $1,000 annually). H.R. 6311 would allow both spouses to deposit their catch-up contributions into one account.

• Delay the Affordable Care Act’s health insurance tax on health insurance providers until 2022.

It is not clear if either of these bills will pass a Senate vote and President Trump’s final approval, however should one or both bills pass employers will need to take a number of steps to ensure a smooth implementation of the enhanced HSA benefits, including providing notifications to employees and updating plan documents. If the changes become law employers can expect to see an increase of employee interest in participating in High Deductible Health Plans (HDHPs) and HSAs. We will monitor the progress of each of these bills and will provide additional details should the either bills pass in the Senate.

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This information is provided as a courtesy, may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.