House Republicans narrowly passed the American Health Care Act (AHCA), a significant overhaul of the Affordable Care Act (ACA) that significantly expands health savings accounts (HSAs).
HSAs are triple tax-advantage accounts that eligible individuals can use for current and future health care expenses. Individuals must maintain a qualifying high deductible health plan to qualify for an HSA. Under current law, the 2017 maximum HSA contribution is $3,400 for employees with single coverage and $6,750 for family coverage.
The AHCA nearly doubles the current contribution limits for HSAs to $13,100 for a household with family health insurance coverage (with a $2,000 catch-up contribution for households age 55 or older), for a maximum annual contribution of $15,100. The bill also broadens how households can use their HSA dollars for purchases of over-the-counter medications and for paying health insurance premiums in addition to prescription drugs, co-pays, deductibles and other out-of-pocket health care expenses.
The AHCA now moves to the Senate for consideration. As of this writing, the Senate has not set a schedule to act, but when they do, it is likely the Senate will also include HSA expansions in their proposal. HSAs are a key component of Republican health care reform plans.
Expanded HSAs will motivate HSA sellers and administrators to develop education and advice tools that will help employees allocate their savings across health and retirement savings more tax efficiently. Indeed, the HSA and its triple tax benefits may well divert contribution dollars away from retirement plans. NAPA is exploring ways to better integrate health savings with retirement savings assuming expanded HSAs are part of any final health reform legislation.
We will continue to provide updates on the development of HSAs when the Senate takes up health care reform.
Other HSA Legislation
This year has seen a number of legislative actions in support of HSAs. The Health Savings Act of 2017 (S. 403) was introduced Feb. 15 in the Senate by Finance Committee Chairman Orrin Hatch (R-Utah) and Sen. Marco Rubio (R-Fla.). A companion bill (H.R. 35) was introduced in the House on Jan. 3 by Rep. Michael Burgess, M.D. (R-Texas), Chairman of the House Energy and Commerce Committee’s Subcommittee on Health.
Also in February, Sens. Bill Cassidy, MD (R-LA) and Susan Collins (R-ME), and joined by cosponsors Lindsey Graham (R-SC), Shelley Moore Capito (R-WV) and Johnny Isakson (R-GA), introduced the Patient Freedom Act (PFA) of 2017 that would, among other things, allow HSAs to pay for health insurance premiums, for family members to pool dollars to pay for increased expenses, and to allow insurance companies to offer HSA/HDHP policies that cover all inpatient services.
Doug Fisher is the American Retirement Association’s Director of Retirement Policy.
