H.R. 6311, Increasing Access to Lower Premium Plans and Expanding Health Savings Accounts Act of 2018
Floor Situation
On Wednesday, July 25, 2018, the House will begin consideration of H.R. 6311, the Increasing Access to Lower Premium Plans and Expanding Health Savings Accounts Act of 2018, under a closed rule. H.R. 6311 was introduced on July 6, 2018 by Rep. Peter Roskam (R-IL) and was referred to the Committee on Ways and Means, which ordered the bill reported on July 11, 2018 by a vote of 23-16. The Rules Committee print includes the text of H.R. 6311 and H.R. 6313 as reported with modifications, H.R. 6306, H.R. 6309, and H.R. 6314 as reported, and based on H.R. 5963 as introduced.
Summary
H.R. 6311 expands access and use of Health Savings Accounts (HSAs) and lowers premiums on health care plans. A section-by-section of the bill is below:
Section 1. Short Title; Table of Contents
Sec. 2. Carryforward of Health Flexible Spending Arrangement Account Balances This provision allows Flexible Spending Account (FSA) balances to be carried over to the succeeding plan year so long as the balance in an account does not exceed three times the annual FSA contribution limit.
Sec. 3. Individuals Entitled to Part A of Medicare By Reason of Age Allowed to Contribute to Health Savings Accounts This provision allows working seniors that are covered by an HSA-eligible High Deductible Health Plan (HDHP) and enrolled in Medicare Part A to contribute to an HSA.
Sec. 4. Maximum Contribution Limit to Health Savings Account Increased to Amount of Deductible and Out-Of-Pocket Limitation Under current law, annual HSA contributions are limited. In 2018, the limit is $3,450 for an individual and $6,900 for family coverage. These limits are updated annually for inflation and are significantly less than the combined legal limit on annual out-of-pocket and deductible expenses. This provision would 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 $6,650 for an individual and $13,300 for a family in 2018.
Sec. 5. Allow Both Spouses to Make Catch-Up Contributions to the Same Health Savings Account Under current law, if both spouses are HSA-eligible and age 55 or older, they must open separate HSA accounts for their respective “catch-up” contributions (an extra $1,000 annually). This provision would allow both spouses to deposit their catch-up contributions into one account.
Sec. 6. Special Rule for Certain Medical Expenses Incurred Before Establishment of Health Savings Account Under current law, taxpayers may use HSA funds only for qualified medical expenses incurred after the establishment of the HSA, which might occur after the establishment of the associated HDHP. If, for example, the taxpayer purchases an HDHP and then immediately incurs medical expenses before opening the HSA, the taxpayer may not use tax-favored HSA funds to pay the expenses. This provision would treat HSAs opened within 60 days after gaining coverage under a HDHP as having been opened on the same day as the HDHP. This would allow for a reasonable grace period between the time coverage begins through an HDHP and the establishment of an HSA.
Sec. 7. Allowance of Bronze and Catastrophic Plans in Connection with Health Savings Accounts Under this provision, a new pathway for HSA eligibility is created by allowing health plans qualified as “bronze” and catastrophic or “copper” to be eligible plans for the purpose of making HSA contributions.
Sec. 8. Allowing All Individuals Purchasing Health Insurance in The Individual Market the Option to Purchase A Lower Premium Copper Plan Under current law, only those under age 30 or those that qualify for a hardship exemption are able to purchase catastrophic or “copper” health plans and the risk pool for catastrophic enrollees is segregated from the rest of the market. This section amends the law to allow anyone to purchase a lower-premium catastrophic plan and combines the risk pool with the rest of plans in the market.
Sec. 9. Delay of Reimposition Of Annual Fee on Health Insurance Providers The annual fee on health insurers shall not be in effect for calendar years 2020 and 2021.
Background
An individual may establish a health savings account (“HSA”) only if the individual is covered under a plan that meets the requirements for a high deductible health plan. In general, HSAs provide tax-favored treatment for current medical expenses as well as the ability to save on a tax-favored basis for future medical expenses. In general, an HSA is a tax-exempt trust or custodial account created exclusively to pay for the qualified medical expenses of the account holder and his or her spouse and dependents. Within limits, 2 contributions to an HSA made by or on behalf of an eligible individual are deductible by the individual. Contributions to an HSA are excludible from income and employment taxes if made by the employer. Earnings in HSAs are not taxable. Distributions from an HSA for qualified medical expenses are not includible in gross income. Distributions from an HSA that are not used for qualified medical expenses are includible in gross income and are subject to an additional tax of 20 percent. The 20-percent additional tax does not apply if the distribution is made after death, disability, or the individual attains the age of Medicare eligibility (age 65).
Qualified medical expenses generally are defined as under Code section 213(d) and include expenses for diagnosis, cure, mitigation, treatment, or prevention of disease, including prescription drugs, transportation primarily for and essential to such care, and qualified long term care expenses. Qualified medical expenses do not include expenses for insurance other than for (1) certain premiums paid for long-term care insurance, (2) premiums for health coverage during any period of continuation coverage required by Federal law, (3) premiums for health care coverage while an individual is receiving unemployment compensation under Federal or State law, and (4) premiums for individuals who have attained the age of Medicare eligibility, other than premiums for Medigap policies.
A high deductible health plan is a health plan that has an annual deductible which is not less than $1,350 (for 2018) for self-only coverage and twice this amount for family coverage, and for which the sum of the annual deductible and other annual out-of-pocket expenses (other than premiums) for covered benefits does not exceed $6,650 (for 2018) for self-only coverage and twice this amount for family coverage.
In addition to offering health insurance, employers often agree to reimburse medical expenses of their employees (and their spouses and dependents). These arrangements are commonly used by employers to pay or reimburse employees for medical expenses that are not covered by health insurance. These arrangements include health flexible spending arrangements (“health FSAs”) and health reimbursement arrangements (“HRAs”). Health FSAs typically are funded on a salary reduction basis under a cafeteria plan, meaning that employees are given the option to reduce their current cash compensation and instead have the amount made available for use in reimbursing the employee for his or her medical expenses. If the health FSA meets certain requirements, the compensation that is foregone is not includible in gross income or wages for payroll tax purposes. Health FSAs that are funded on a salary reduction basis are subject to the requirements for cafeteria plans, including a requirement that amounts remaining in a health FSA at the end of a plan year must be forfeited by the employee (referred to as the “use-it-or-lose-it rule”). HRAs operate in a manner similar to health FSAs, in that they are employer-maintained arrangements that reimburse employees and their dependents11 for medical expenses. Some of the rules applicable to HRAs and health FSAs are similar (e.g., the amounts in the arrangements can only be used to reimburse medical expenses and not for other purposes), but the rules are not identical. In particular, HRAs cannot be funded on a salary reduction basis and the use-it-or-lose it rule does not apply. Thus, amounts remaining at the end of the year may be carried forward to be used to reimburse medical expenses in following years. Unlike a health FSA, an HRA is permitted to reimburse an employee for health insurance premiums.
Amendments
A list of amendments may be found here.
Cost
A Congressional Budget Office (CBO) estimate is not currently available.
Staff Contact
For questions or further information please contact Jake Vreeburg with the House Republican Policy Committee by email or at 2-1374.