Compound It! Policy changes that could impact tax-free health accounts in 2019
As the cost of healthcare continues to rise, saving Americans money has become a critical bipartisan issue. Last July, Congress passed a few bills to expand and improve tax-free healthcare benefits.
Tip: You can track the progress of these bills — and others — by visiting https://www.congress.gov/. It's easy to see the status by searching by bill name or "health savings accounts." The tracker under each result highlights how far along each bill has come:
- Passed the House
- Passed the Senate
- To the President
- Becomes law
These bills are only the tip of the iceberg. Although they haven't cleared the Senate, they're worth keeping an eye on as lawmakers get back to work. Many of these provisions came from letters from employment organizations, so it's possible we'll see them resurface in the future.
Before we get started, please note that FSA Store and HSA Store are not expressing any political views or opinions by covering this information below. This article is simply providing a summary view of the potential changes in store for tax-free healthcare benefits.
That said, here's a closer look at the current version of each one — and how they could impact your family's benefits. Let's start with H.R. 6199 the 'Restoring Access to Medication and Modernizing Health Savings Accounts Act of 2018."
- Coverage flexibility - According to the IRS, your HSA-qualified high deductible health plan (HDHP) can't offer most benefits before you hit the annual deductible. This provision would allow benefits up to $250 for you or $500 for your family. These changes could make primary care visits or telehealth an easier choice.
- Direct Primary Care (DPD) services - As the law stands, if you enroll in supplemental health care coverage, you lose HSA eligibility. This provision allows DPD services, as long as monthly fees stay below $150 for you or $300 for your family.
- Employer healthcare services onsite - Currently, if your employer offers free or discounted onsite healthcare services, it could impact your HSA eligibility. This provision loosens these restrictions, as long as you don't receive "significant medical care benefits."
- Spouse flexible spending accounts (FSAs) - Right now, if your spouse has an FSA, it can impact their ability to contribute to an HSA. This provision allows your spouse to make limited HSA contributions, too.
- FSA and HRA terminations or conversions - This provision could allow you to convert your FSA or HRA balances into HSA contributions. This would only be an option if are enrolled in an eligible high-deductible health plan.
- Over-the-counter (OTC) medical products - As you may know, not all medical products qualify for favorable tax savings. This provision would expand what's allowed — particularly OTC items like "menstrual care products."
- Physical fitness expenses - This provision could treat a limited amount of physical fitness expenses as qualified medical expenses. The limits are $500 for you or $1,000 for your family.
H.R.6311 is better-known as the "Increasing Access to Lower Premium Plans and Expanding Health Savings Accounts Act of 2018." And it's directly related to a lot of potential changes for your tax-free healthcare in 2019.
- Carry forward FSA balances - Although it varies by employer, most FSAs have a "use-it-or-lose-it" policy every year. Some companies give you a limited carryover or grace period, but both are limited to $500. This provision could allow you to carry over up to three times your annual contribution limit.
- Contribute to your HSA with Medicare Part A - Once you enroll in Medicare, you can no longer make HSA contributions. This provision changes the rule for working seniors. As long as you have an eligible high-deductible health plan, you can still contribute.
- Increase HSA contribution limits - There's an annual cap on how much you can contribute to your HSA as an individual or family. This provision could increase the limit up to your combined out-of-pocket limit and deductible.
- HSA catch-up contributions for spouses - Currently, if you're 55 or older and want to make catch-up contributions to your HSA, you need separate accounts. This provision could let you both contribute to the same account.
- Medical expenses before your HSA is open - As it stands, you can't reimburse yourself for medical expenses before your HSA was active. This provision could offer a "reasonable grace period" for these expenses.
- Bronze and catastrophic plans - As you may have noticed, not all Marketplace plans are HSA-eligible. This provision could expand eligibility to include bronze and catastrophic plans.
Why these bills matter
When it comes to paying for health care, you know every dollar counts. If you are one of the millions enrolled in a high-deductible health plan, an HSA is one way to ease the burden. While HSAs do offer tax savings, rules and restrictions make it difficult to take full advantage.
Even if these two bills don't pass, it's possible you'll see a slew of new HSA bills crop up in 2019. These bills may include some of these provisions or even better improvements — aimed at putting money back into your family's pockets.
Compound It! is your weekly update of achievable, effective, no-nonsense HSA saving and investment advice, delivered by people who make it work in their own lives. For the latest info about your health and financial wellness, be sure to check out the HSA Learning Center, and follow us on Facebook and Twitter.