Are You Ready for HSA Expansion?

Expanding consumer directed healthcare (CDH), especially the use of health savings accounts (HSAs), will be a large part of the eventual ACA replacement legislation. HSAs have been a key component in every healthcare reform proposal that Republicans have sponsored. Leadership in both Houses of Congress and within the incoming President Trump administration have all introduced or sponsored HSA expansion bills.

Administration support

The incoming administration’s healthcare platform includes expanded HSA availability, flexibility, and protections as part of its top list of priorities and praises “the flexibility and security provided by HSAs.” Vice President-elect Pence, who is heading the Republican healthcare reform effort, enacted the Healthy Indiana Plan (HIP) 2.0 while Gov. of Indiana and co-sponsored nine HSA expansion bills while in Congress.

Additionally, the nomination of Rep. Tom Price (R-GA) to head the Department of Health and Human Services (HHS), underscores the strong HSA/CDH support within the administration. Rep. Price’s Empowering Patients First Act repeals the ACA and is centered on expanding the use of HSAs and reforming state and federal programs to include HSA pilot programs, like the HIP 2.0.

It is expected that the Department of Labor Fiduciary ruling – effectively treating TPAs as fiduciaries with respect to HSA investment selection – will be reversed with an Executive Order.

Congressional support

Both House Speaker, Paul Ryan, and Senate Finance Committee Chair, Orrin Hatch, are sponsors of legislation that strongly favors the expansion of tax-advantaged savings accounts in general, and HSAs in particular. Because Ryan’s bill, A Better Way, passed Congress last summer it is considered to be the blueprint for changes to the Affordable Care Act (ACA). Page 13 proposes the following improvements to CDH and HSAs:

• Broadened flexibility: Allows spouses to make catch-up contributions to the same HSA account.
• Expanded use: Allows qualified medical expenses incurred before HSA-qualified coverage begins to be reimbursed from an HSA account if the account is established within 60 days.
• Increased contributions: Limits HSA contributions at the maximum combined and allowed annual deductible and out-of-pocket expense limits – likely to considerably exceed the current maximum contribution amounts of $3,400 for single member accounts and $6,750 for families.
• Market expansion: Makes HSAs available to certain groups, like those who get services through federal programs, such as the Indian Health Service and TRICARE.

There are even more targeted HSA administrative provisions included in Senator Hatch’s comprehensive HSA legislation, the Health Savings Act of 2016. As Chairman of the Senate Finance Committee with jurisdiction over healthcare legislation, he is well positioned to advance his HSA proposals:

• Market expansion: Makes Medicare Part A (hospital insurance benefits) beneficiaries eligible to participate in an HSA and amends the Social Security Act to reauthorize the use of Medicaid health opportunity accounts.
• Broadened protections: Amends the federal bankruptcy code to exempt HSAs from creditor claims in bankruptcy.
• Increased usage: Allows HSA funds for to be used for 1) exercise equipment, physical fitness programs, and membership at a fitness facility; (2) nutritional and dietary supplements; (3) periodic fees paid to a primary care physician and amounts paid for pre-paid primary care services; and (4) purchase of health insurance coverage.