It's been a big week for HSA owners. As you might have heard, a series of bills are currently being discussed on Capitol Hill that could expand the reach of tax-free healthcare accounts well beyond what we've come to know.
But this discussion isn't just about adding new items to tax-free eligibility lists (though the expansions in those areas is awesome) -- it's about turning HSAs into even more powerful savings tools, retirement assets and healthcare spending resources.
Let's take a closer look at what's on the table -- and what these proposed changes might mean for your tax-free savings.
Increasing HSA contribution limits
As of right now, the 2019 annual HSA contribution limits are $3,500 if you participate in the health plan as an individual and $7,000 if you participate in the health plan as a family.
Why it's important: This would effectively double the current HSA contribution limits for 2019 to match the out-of-pocket plan maximums at $6,750 for individual health plan enrollment and $13,500 for family. In fact, not only will this let people use twice the amount of tax-free funds for healthcare expenses, it'll dramatically expand an HSA's utility for long-term investing and long-term retirement potential.
Expanding product and service eligibility
To contribute to an HSA, an individual can't have medical expenses covered before the deductible has been met. But, there are a number of potential expenses that are now being considered to be outside of that restriction.
The proposed legislation would let a high-deductible health plan (HDHP) pay up to $250 for certain specified services before the deductible has been satisfied while maintaining their HSA-qualified HDHP status.
This will allow for coverage of certain high-value, low-cost services like chronic disease management, primary care visits, and others.
Why it's important: One of the major requirements of an HSA is that you have to enroll in a qualified HDHP in order to contribute to an account. As such, you'll have to exhaust a larger deductible than other plans in order for insurance coverage to kick in. For those with chronic medical conditions, this can be a major financial burden. These changes would allow certain necessary medical expenses to be covered by the HDHP while still maintaining it's HSA-qualified status, providing individuals with additional coverage and making these plans far more attractive for prospective consumers.
Lifting current Medicare restrictions for HSA owners
Currently, if you are enrolled in Medicare A, you can't contribute to an HSA. By eliminating this restriction, HSA contributions would be possible for potentially millions of new users.
Why it's important: For millions of retirees, HSAs are a fantastic way to cover both medical and non-medical expenses -- especially since non-medical expense taxes are waived after age 65. This change would open up HSAs to a much larger market of users who can directly benefit from these long-term tax savings.
This package of bills may be voted on before the end of the year, but considering the speculated $92 billion dollar price tag, it may face an uphill battle in the U.S. House of Representatives and the Senate.
It remains to be seen whether these new regulations become law, but they are a promising step forward to give tax-free healthcare accounts more versatility, and account owners more ways to stay healthy year-round.
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