Health Savings Accounts (HSAs) offer individuals and families the ability to save and pay for medical expenses with tax-free benefits in the form of contributions, interest-earned, and withdrawals for qualified expenses. Employers and individuals have increasingly been turning to HSAs; however, reforms are needed to ensure that these accounts remain a valuable tool for the foreseeable future.
Congress should pass legislation to promote flexibility, encourage innovation and expand access to HSAs by aligning HSA regulations with the most effective cost-containment strategies that will help consumers save money and stay healthy.
Health Savings Accounts are tax-advantaged personal savings accounts used in conjunction with a qualified high-deductible health plan (HDHPs) to help pay for unreimbursed medical expenses. HSAs were authorized under the Medicare Prescription Drug and Modernization Act of 2003. Contributions to HSAs may be received from employers, individuals or any combination of both. Employer contributions are excludable from income and individual contributions are deductible, regardless of whether or not a taxpayer itemizes deductions. Employers may also offer HSAs as part of a section 125(d) cafeteria plan. Annual contributions are limited to the maximum annual federally established deductible amount, but individuals 55 an older can make additional contributions. HSAs are portable and belong to the individual; funds carry over to subsequent years.
Forthcoming legislation includes several provisions NAHU has advocated in recent years to address issues with HSAs and employer-sponsored coverage. The legislation seeks to promote flexibility, encourage innovation and expand access to HSAs by aligning HSA regulations with the most effective cost-containment strategies that will help consumers save money and stay healthy.
Specifically, the legislation would:
- allow HSA plans to offer pre-deductible coverage of health services at onsite employee clinics and retail health clinics.
- allow HSA plans to offer pre-deductible coverage for services and medication that manage chronic conditions.
- permit the use of HSA dollars toward wellness benefits, including exercise and other expenses associated with physical activity.
- clarify that employers can offer “excepted benefits” like telehealth and second-opinion services to employees with an HSA plan.
- correct the definition of “dependents,” streamline FSA conversion and fix the prohibition on a spouse using an HSA.
- HSAs are an excellent way for individuals to save for future health expenses, for employers to offer lower-cost coverage to their employees, and to improve access to affordable coverage for the uninsured.
- Legislation is needed to modernize HSAs to how healthcare and wellness services are currently used and that were not in use at the time HSAs became effective in 2004.