It's been a few years since any large changes were made by the IRS to reimbursement accounts. Change may be on the horizon again. Several bills made their way through the House Ways and Means Committee in early July, and passed in the House on July 25. If passed by the Senate by the end of 2018, it would mean change for many who have FSAs, HSAs, and HRAs, starting in 2019.
- First Dollar Coverage Flexibility for HDHPs: This would allow health plans to cover services before the deductible is met, up to $250 per year for individuals and up to $500 for families.
- Treatment of Direct Primary Care Service Arrangements: A Direct Primary Care (DPC) arrangement would no longer be considered a health plan that would disqualify someone from contributing to an HSA. A DPC would be considered an arrangement where someone is provided primary care services by a primary care practitioner and the sole compensation for care is a fixed periodic fee, not exceeding an aggregate of $150/month for individuals or $300/month for more than one individual. The fees for the arrangement would be treated as qualified medical expenses.
- Certain Employment Related Services not Treated as Disqualifying Coverage for Purposes of HSAs: Employees taking advantage of their employer offering free or discounted services at on-site or retail pharmacy locations would no longer be considered a health plan that would disqualify someone from contributing to an HSA. This may include hearing/vision screenings, physical exams, immunizations, etc.
- Contributions Permitted if Spouse has Health Care FSA: If an individual is eligible to contribute to an HSA, except their spouse has a Health Care FSA, they would now still be able to contribute to their HSA. The spouse’s Health Care FSA would no longer be seen as a disqualifying health plan.
- FSA and HRA Terminations or Conversions to Fund HSAs: At the employer's discretion, this would allow employees to convert existing FSA or HRA balances into an HSA contribution when enrolling in an HDHP and establishing an HSA. The amount converted may not exceed the Health Care FSA annual maximum contribution limit ($2,650 for 2018) for individuals with self-only coverage, or twice that ($5,300 in 2018) for individuals with family coverage. The conversion would count as part of that year's HSA contributions for that taxable year.
- Inclusion of Certain OTC Medical Products as Qualified Medical Expenses: Menstrual care products would become eligible expenses, reimbursable with your FSA, HSA, or HRA.
- Certain Amounts Paid for Physical Activity, Fitness, and Exercise Treated as Amounts Paid for Medical Care: This would allow expenses for qualified sports and fitness to be considered eligible expenses. This includes membership at a fitness facility, participation in a program of qualified physical activity, or safety equipment for use in a program of qualified physical activity. There would be a limit of $500 a year for individuals, and $1,000 for a joint return or a head of household to spend on qualified physical activity expenses.
H.R. 6311 - Increasing Access to Lower Premium Plans and Expanding Health Savings Accounts Act of 2018
- Carryforward of Health Care FSA Balances: This would allow Health Care FSA holders to keep their balance for succeeding plan years, without losing any at the end of their Plan Year, as long as the balance does not exceed three times the annual Health Care FSA contribution limit.
- Individuals Entitled to Part A of Medicare by Reason of Age Allowed to Contribute to HSAs: Being eligible for Medicare Part A would no longer disqualify you to make HSA contributions.
- Max Contribution Limit to HSA Increased to Amount of Deductible and Out-of-Pocket Limitation: There would no longer be an "HSA Limit" announced annually. Instead, HSA accountholders could contribute the amount allowed for their high deductible health plan's annual deductible plus the other annual out-of-pocket expenses required to be paid under the plan. The amount would be doubled for families. For 2018, under subsection (c)(2)(A)(ii)(I) and (c)(2)(A)(ii)(II), the amount would be $5,000 for individuals, and $10,000 for families.
- Allow Both Spouses to Make Catch-Up Contributions to Same HSA: This would allow married individuals with family coverage to both (the HSA accountholder and spouse) make catch-up contributions to the same HSA each year starting at age 55.
- Special Rule for Certain Medical Expenses Incurred Before Establishment of HSA: If an HSA is established within 60 days of when that accountholder's HDHP was established, qualified medical expenses incurred during the time from when the HDHP was established to when the HSA was established could now be reimbursed, as if they had established an HSA on the same day as their HDHP.
- Allowance of Bronze and Catastrophic Plans in Connection with HSAs: Bronze and Copper/Catastrophic plans could now be considered HDHPs, thereby allowing contributions to an HSA.
- Allowing All Individuals Purchasing Health Insurance in the Individual Market the Option to Purchase a Lower Premium Copper Plan: This would allow anyone to purchase a lower premium plan, no matter their age and without qualifying for a hardship exemption. It would also combine the risk pool with the rest of the plans in the market.
These amendments may or may not be passed by the Senate, and if they are passed there may be changes in how they are structured. However, if they are passed, it will allow more people to be eligible to contribute to HSAs, and it would allow a wider range of products and services to be purchased with them. Keep an eye out for more updates!