Congress has long considered the possibility of expanding access to HSAs and expanding the scope of how HSA funds can be used. Two pieces of legislation that would do just that passed the House in late July, and are now sitting with the Senate.
So, while we can't say if these bills will advance further in 2018, they do give us an understanding of potential future changes for HSAs. And even though these bills were sponsored by GOP members of the House, they did get some bipartisan support. H.R.6199, in particular, got "yes" votes from 46 Democrats in the House.
So what would it mean for HSA owners if these measures were to be put into place? Let's take a look at H.R.6199. If it were to pass the Senate and be enacted, H.R.6199 would take effect as of January 2019. Here's how it would change the rules as we know them:
Expanding the scope of HDHP coverage
To contribute to an HSA, you must have coverage under a high deductible health plan (HDHP), and those plans are regulated by the IRS. H.R.6199 would add increased flexibility by allowing an HDHP to provide up to $250 in pre-deductible coverage (up to $500 for a family plan) for non-preventive care.
Under current rules, the only thing that can be covered pre-deductible on an HDHP is preventive care.
Expanding the types of coverage beyond an HDHP
With very few exceptions, you can't contribute to an HSA if you have coverage in addition to your HDHP. The exceptions are detailed by the IRS under the definition of allowable "other health coverage."
But H.R.6199 would add direct primary care arrangements to the types of coverage that a person can have in addition to an HDHP and still remain eligible to contribute to an HSA. This is true as long as the direct primary care arrangement's monthly fee is no more than $150 (or $300 for family coverage).
Additionally, employers would be able to offer various free or discounted medical services, either onsite or at a retail clinic, and HDHP-covered employees who receive those services would still be HSA-eligible. The medical services provided would have to be non-significant, but could include things like physical exams, immunizations, hearing/vision screening, and treatment for job-related injuries.
Currently, an HDHP enrollee cannot contribute to an HSA if their spouse has a medical FSA, since the FSA funds can be used to reimburse expenses for spouses (and IRS rules count that as having other coverage that disqualifies a person from being HSA-eligible).
But H.R.6199 would let a person with HDHP coverage contribute to an HSA, even if their spouse has an FSA, as long as the FSA doesn't actually reimburse any expenses for the HDHP-covered spouse.
An additional option for funding an HSA
H.R.6199 would let employees transfer their HRA and/or FSA balances to an HSA, if the employee enrolls in an HDHP (after "a significant period" of not having HDHP coverage) and establishes an HSA. The length of that "significant" period has yet to be determined.
Employers would be able to decide whether or not to allow this transfer, and the total amount an employee could transfer would be capped at the annual FSA contribution amount, although an employee who enrolls in family HDHP coverage would be allowed to transfer up to twice that amount.
Allowing additional uses of HSA funds
- HSA funds cannot currently be used to purchase over-the-counter medications without a prescription (this rule is part of the ACA, and has been in place since 2011). H.R.6199 would once again allow HSA funds to be used to buy over-the-counter medications (and this would apply to FSAs, too!).
- H.R.6199 would also allow HSA funds to be used to purchase menstrual care supplies, including tampons, pads, liners, cups, sponges, or similar products. Under current rules\ menstrual products are not eligible.
- H.R.6199 would also allow people to use up to $500/year ($1,000/year for a family) in HSA funds to pay for gym memberships, as well as safety equipment and participation/instruction fees for "qualified physical activities."
- As noted above, H.R.6199 would allow people to have direct primary care coverage in addition to an HDHP, and remain HSA-eligible. And the direct primary care program fees would be considered qualified medical expenses, so they could be paid with HSA funds.
Please note, this article isn't meant to state our opinion on the legislation, but rather reinforce that we support HSA and FSA expansion in general. Check back next week, when we'll look at the HSA rule changes called for in H.R.6311.
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