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PSCA Executive Reports

July 31, 2018

Health Savings Account (“HSA”) and other Health Legislation

On Wednesday, July 25, the House passed two HSA bills, H.R. 6199 and H.R. 6311 [Congress.gov does not yet have the engrossed versions up], aimed at increasing access to HSAs and high deductible health plans (“HDHPs”). The bills include provisions drawn from a number of bills that were approved by the Ways and Means Committee on July 11. The House-passed legislation does not include a Cadillac tax delay or retroactive relief from the employer mandate. 

H.R. 6199 contains the following provisions:

  • Provides that high deductible health plans may provide certain services specified under the plan (e.g., chronic disease management, such as diabetes testing strips)  with first dollar coverage, up to $250 for self-only coverage/$500 for family coverage without being disqualified as an HSA-compliant high deductible health plan;
  • Provides that direct primary care service arrangements – i.e., primary care services provided by primary care practitioners compensated solely by a fixed periodic fee that does not exceed certain limits – are not treated as health plans that make an individual ineligible to make HSA contributions;
  • Amends the HSA rules to provide that certain services (e.g., physicals, drug testing, vision or hearing screenings) at employment-related, on-site or retail clinics are not treated as medical care or coverage under a health plan that disqualifies an individual for HSA contributions;
  • Permits HSA contributions for an individual regardless of whether the individual’s spouse has coverage under a health flexible spending arrangement (“FSA”) for the year if certain reimbursement limits are satisfied;
  • Permits certain FSA and health reimbursement arrangement (“HRA”) terminations or conversions to fund HSAs;
  • Amends the Code to include certain over-the-counter medical products that have not been prescribed, including certain menstrual care products, as qualified medical expenses eligible for HSA, Archer Medical Savings Account, health FSA or HRA distributions; and
  • Allows certain amounts paid for certain qualified sports and fitness expenses to be treated as amounts paid for medical care eligible for HSA distributions. Generally, this includes amounts (annually up to $500/$1,000 for joint returns or head of households; $250 limit for a single item of safety equipment) paid for membership at a fitness facility, participation or instruction in a program of  physical exercise or physical activity, or safety equipment for use in a program of qualified physical activity; qualified physical activity does not include golf, hunting, sailing and horseback riding and fitness facilities do not include private member-owned clubs.

H.R. 6311 contains the following provisions:

  • Permits the carryforward of health FSA account balances (up to 3 times the annual FSA contribution limit) to the next plan year, with possible reductions in the health FSA salary reduction contribution limit for the next plan year;
  • Allows individuals entitled to Medicare part A by reason of being over age 65 to contribute to HSAs;
  • Increases the maximum contribution limit to HSAs to the aggregate deductible and out-of-pocket limitation (for 2018, $6,650 for self-only coverage and $13,300 for family coverage);
  • Allows both spouses to make catch-up contributions to the same HSA; 
  • Permits HSA distributions for certain medical expenses incurred before the establishment of the HAS;
  • Amends the HSA definition of a high deductible health plan to include Affordable Care Act (“ACA”) bronze and catastrophic plans;
  • Allows all individuals purchasing health insurance in the individual market the option to purchase a lower premium copper (catastrophic) plan; and
  • Delays the effective date of the excise tax on insurers so that it does not apply for 2020 and 2021.

It is notable that the bills received support from some Democrats: H.R. 6199 had 46 Democratic votes, while H.R. 6311 had 12. However, the prospects for enactment of these bills remains dim as there is no indication that the Senate is interested in considering the bills.

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