Congress has been unable to pass a new healthcare bill as of yet. We believe that HSAs should play a big part in giving consumers more control over how their healthcare dollars are spent, and judging by the GOP proposals so far, there are some potential changes that will have a good impact on Health Savings Accounts and consumer-directed health care.
Here are six specific impacts that the House proposal has on Health Savings Accounts and consumer-directed health care and how it could affect you.
- Increase in 2018 Health Savings Accounts (HSA) Contribution limits to the high-deductible health plan (HDHP) out-of-pocket maximum. Starting January 1, 2018, the annual maximum contribution level for HSAs will increase for both individual and family coverage. The individual HSA limit would increase from $3,400 to $6,550, and the family contribution limit would rise from $6,750 to $13,100. This is a very positive change that will allow people to put aside more pre-tax money to cover future potential medical expenses.
- Repeals the ACA contribution limit on FSAs (currently $2,600 for 2017). According to reports, approximately 20% of Americans insured by private insurance can contribute to an HSA since they are enrolled in a qualified high-deductible plan. For those not covered by an HDHP, this change effectively allows for significantly higher contributions to help cover large out-of-pocket expenses.
- Allows both spouses make catch-up contributions to one HSA. If you and your spouse are both over age 55 and you both plan on making “catch-up” contributions to your HSAs, you must open a second HSA account for the second catch-up contribution. This change will lower your administration costs and simplify the contribution process.
- Repeals the prohibition on over-the-counter medication as certified medical cost distributions from FSAs, HSAs, and health reimbursement arrangements (HRAs). The ACA increases the cost of over-the-counter medications in comparison to prescription drugs for anyone who wants to pay from their HSA. With this repeal, the cost of healthcare would reduce for people that use HRAs, HSAs, and FSAs to purchase the products, according to report.
- Lower the penalty for non-qualified HSA distributions made before age 65 from 20% to 10%. The reason for the punishment is to ensure that an individual uses HSAs for its purpose which is as health care saving tools, and not as tax shelters. The report says that with a lower penalty, HSAs would be more attractive because the fear of the 20% penalty may have scared people from using HSAs as a saving account
- Allows qualified distributions to reimburse medical cost incurred within 60 days of HDHP coverage. Individual may not be permitted to claim their medical expenses as qualified distributions until they met the legal requirements used in creating their HSA even though an HSA-qualified health plan may cover them. This condition would give individuals 60 days to cover these instances according to the report.
To this, I’d like to had a couple more suggestions. First, why not let anyone contribute to an HSA. Incentivizing people to put aside money to cover future medical expenses would be a great benefit to society.
I’d also like to see contribution limits even higher, so that if people accumulate, say $30,000 in their HSA, they could have the option of choosing a very low-cost, very high deductible catastrophic plan, with their HSA funds as a back-up to cover their deductible.
HSAs allow consumers to control their healthcare expenses, including paying for expenses like acupuncture or chiropractic care, that might not be covered under most health insurance plans. Whatever changes Congress makes to our healthcare system, it is important that they continue to expand the availability and functionality of HSAs.