Healthcare by Enric Moreu is licensed under Unsplash

In February, the House of Representatives placed H.R.5688, the Bipartisan HSA Improvement Act, on the Union Calendar making it eligible for floor consideration. This recent movement marks the latest step for the bill since Rep. Lloyd Smucker (R-Penn.) and Rep. Earl Blumenauer (D-Ore.) introduced it to the Ways and Means Committee back in September of last year. 

A Health Savings Account (HSA) is a type of savings account that allows you to set aside money for qualified medical expenses. HSAs are designed to be used in conjunction with a high-deductible health plan (HDHP), which usually has lower monthly premiums than other types of plans.

Contributions made to an HSA are not subject to federal income tax at the time of deposit, and funds can be used tax-free when paying for eligible medical expenses, including deductibles and copayments. Additionally, the funds in an HSA roll over and accumulate year over year if not spent, offering an opportunity to save for future health care expenses or for retirement. 

HSAs provide a financial incentive to save for health care costs while offering flexibility and tax advantages, making them a valuable tool for managing health expenses and planning for long-term financial health. Since the program was created in 2004, almost 72 million taxpayers are now covered by an HSA according to a survey by Devenir.

This bill tackling HSA improvement aims to expand access and affordability of HSAs while also addressing bureaucratic barriers. Some key provisions include:

– Allowing people who use direct primary care arrangements or workplace clinics to be eligible to contribute to HSAs;

– Removing current prohibitions against individuals who want to start an HSA if their spouse has an existing flexible spending arrangement (FSA);

– and allowing converting any assets from an FSA or health reimbursement arrangement (HRA) into an HSA. 

HSA funds are superior to other medical saving accounts since they are completely controlled by the individual. Other accounts are often tied to a particular employer and won’t transfer between jobs. This creates an incentive for spending funds associated with an HSA more thoughtfully as individuals have more freedom over the plans they own.

According to the same Devenir survey on HSAs, over 75 percent of accountholders have a median household income less than $100,000. The average account balance is $4,642 at the end of 2022 as accountholders over 50 have saved up $56 billion total inside their HSA accounts.

Health saving accounts are also great for providing tax reductions for individual and family accountholders. There are 3 different levels of tax benefits; contributions made, interest earned, and payments made to qualifying medical expenses are all tax free. This means the more HSA adoptions happen, the more individuals will save on medical expenses.

All of these factors have led to increased adoption of HSA accounts. 

Millennials adoption of HSA accounts has grown to around 1 in every 5 for Americans under 30. Further, a 2023 Voya Consumer Insights and Research study investigated how general knowledge about HSAs has changed over time. They found that from 2020 to 2023, the knowledge that HSAs can be used to fund medical expenses in retirement increased from 43 percent to 55 percent. While this increase in awareness is important, this data means half of Americans still don’t know how HSAs could save them money. 

The Bipartisan HSA Improvement Act would help millions of individuals save more money by allowing them to open health savings accounts. This bill promises to broaden HSA accessibility, alleviate bureaucratic hindrances, and bolster financial preparation for healthcare needs. 

With the backdrop of increasing HSA adoption and the evident need for greater awareness about their benefits, H.R.5688 emerges as a pivotal step towards empowering Americans to navigate their healthcare financing more effectively and efficiently.