Senate Majority Leader Mitch McConnell (R-KY) on July 13 unveiled revised draft legislation to repeal and replace most of Obamacare. The new draft retains the provisions to expand and enhance health savings accounts (HSAs).
Following House passage in May of legislation to replace Obamacare, Senate leaders unveiled their draft legislation in late June, but they were quickly met with opposition from within their own party, forcing them to go back to the drawing board.
The House and Senate bills are essentially identical on the HSA expansion provisions with respect to contribution limits and catch-up contributions. The Senate bill provides other enhancements for HSAs, reducing the additional tax on distributions that are not used for qualified medical expenses from 20% to 10%. In addition, it broadens the current categories eligible for health care expenses from an HSA, including, for example, purchases of over-the-counter medications.
The revised bill also would add that qualified medical expenses may include amounts paid for an account holder’s children who are under the age of 27, according to a summary. In addition, the bill would allow HSA funds to be used to pay premiums for a high-deductible health plan (HDHP) for which no deduction is allowed under the tax code that is not an employer-sponsored plan to which the exclusion under Code Section 106 applies, and only for amounts that exceed any tax credit amounts allowed under Code Section 36B.
The ARA is supporting efforts to expand HSAs, and believes the triple tax advantages offered by the plans provide an excellent way to savers to set aside vital resources that will be needed to cover health care costs in retirement.
We should know in very short order whether the revised measure stands a chance or whether Senate leaders will need to continue negotiating. McConnell said earlier this week that he will delay by two weeks the Senate’s scheduled summer recess in order to complete work on the health care legislation. The Senate may begin consideration of the revised bill the week of July 17.
