December is undoubtedly the flexible spending account's (FSA) time to shine, but there is still plenty of health savings account (HSA) news to keep track of! As the fastest growing tax-free healthcare account in America today, HSAs don't have year-end spending deadlines to worry about, but they're still making waves in the news in their own right.
Last week, we examined a generation that has a unique opportunity to reap the benefits of an HSA before retirement, but this week we'll examine a rare public disclosure from the current administration that put itself firmly on the side of HSA expansion.
Treasury, Labor, HHS recommend bump in HSA contribution limits - Melanie Waddell, ThinkAdvisor
HSA contribution limits are set for 2019: $3,500 for those participating in the health plan as individuals, and a $7,000 family limit. That's a solid amount of cash to put toward upcoming healthcare expenses and to save for retirement, but if the current administration had its way, HSAs and many other consumer-directed healthcare accounts would be expanded dramatically in coming years.
The Department of Labor and Office of Health & Human Services recently released a 119-page report, which provides their recommendations to reform the overall U.S. healthcare system. This was spurred by the President's Executive Order 13813, which sought internal guidance to bring "high-quality care at affordable prices for the American people by promoting choice and competition."
At the center of these plans is an expansion of consumer-directed healthcare options, which echoes many of the reforms put forward in the bill that passed the House in July that aimed to expand HSAs. It's still not enacted into law, but it's inching closer.
Among the recommendations included in the report include an expansion of qualifying HSA-eligible health plans, an expansion of the current HSA contribution limits, and the ability to use HSA funds on low-cost preventative treatments for chronic conditions. The thinking in Washington is that HSAs are due for a major expansion, and reports like these show how these reforms could take shape in the future.
HSAs: A way to tame the biggest threat to your secure retirement - Robert C. Lawton, Forbes
We talk a lot about the retirement potential of HSAs on this blog, and while it's certainly great that HSA funds can be an additional nest egg for your retirement savings and can be withdrawn for non-medical expenses after age 65, covering medical expenses tax-free in your later years may be just as tempting.
According to a 2018 analysis from Fidelity, a couple retiring today at age 65 should expect to spend $280,000 on healthcare expenses in retirement. That sum is troublesome enough, but as the author states in the piece, it's not that 401(k)s are necessarily broken or won't be able to cover these expenses, it's that the biggest threat to 401(k) savings in our current environment is the ever-rising price of healthcare.
HSAs can do a lot to stem this tide of healthcare expenditures, but the author recommends more action being done on the governmental level. Interestingly enough, many of these suggestions are similar to what DOL/HHS advocate for in their aforementioned report, including an expansion of HSA contribution limits and qualifying medical expenses.
It remains to be seen if healthcare will be a primary issue when the new Congress is seated in January 2019, but there will certainly be a series of policy proposals waiting for them when they arrive!
HSA Headlines is a weekly roundup of the latest, most relevant news and conversations about your health savings. It appears every Friday, exclusively on the HSA Learning Center. And for more about your physical and financial well-being, be sure to follow us on Facebook and Twitter.