Legislation Expanding HSA Access Clears Committee

The House Ways and Means Committee held a markup of two bills intending to expand access to Health Savings Accounts (HSAs). H. R. 5687, the HSA Modernization Act introduced by Beth Van Duyne (R-TX), and H.R. 5688, the Bipartisan HSA Improvement Act introduced by Lloyd Smucker (R-PA) and co-sponsor Earl Blumenauer (D-OR), were approved by the Ways and Means Committee.

According to a summary of the HSA Modernization Act, the bill would provide for the following.

  • Allow veterans without a service-connected disability but receiving certain veterans’ benefits to contribute to an HSA.
  • Allow working seniors eligible for Medicare Part A but enrolled only in a private high deductible health plan to continue to contribute to a plan-provided HSA.
  • Allow individuals who receive medical care under a program of the Indian Health Service or tribal organization to continue contributing to an HSA.
  • Allow health exchange plans qualified as bronze and catastrophic to be eligible plans for purposes of making HSA contributions.
  • Allow first dollar coverage of mental health services of up to $500 per family via HSA.
  • Allow medical expenses incurred within the previous 60 days of the establishment of the HSA account to be covered by HSA funds.
  • Allow both spouses to make catch-up contributions to the same HSA.
  • Allow HSA eligible individuals to contribute an amount equal to the combined annual limit on out-of-pocket and deductible expenses under their HSA-qualified insurance plan, which is $7,500 for an individual and $15,000 for a family in 2023.
  • Clarify that HSA funds can go toward diagnostic, preventative, therapeutic, curing, treating, mitigating, rehabilitation services, and maintenance or personal care services, for an individual that is unable to perform at least two of: eating, toileting, transferring, bathing, dressing, or continence as certified by a licensed health care practitioner.

Additionally, according to a summary from the Joint Council on Taxation, the Bipartisan HSA Improvement Act would make the following changes.

  • Allow continued eligibility to contribute to an HSA if such individual is provided medical care under a direct primary care service arrangement if the sole compensation for such care is a fixed periodic fee that does not exceed certain limits.
  • Permit HSA contributions where the individual’s spouse also has a Flexible Spending Arrangement (FSA) so long as the aggregate reimbursements for the year do not exceed expenses that would be eligible for reimbursement under the FSA.
  • Allow qualified HSA distributions from an employee’s health FSA or HRA contributed directly to the HSA if such distribution is made in connection with establishing coverage under an HDHP, and the individual was not covered under an HDHP for the four-year period preceding establishment of coverage.
  • The qualified HSA distribution may not exceed the total annual limit on FSA contributions ($3,050 for 2023), or twice this amount in the case of an eligible individual who has family coverage under an HDHP.