The House Ways and Means Committee is holding a hearing this week about expanding Health Savings Accounts (HSAs). Americans for Tax Reform strongly supports the expansion of HSAs. You can read our full letter to Chairman Brady and Chairman Roskam in support of expanding HSAs here.
HSAs are vital for American families. They are used in conjunction with low premium, high-deductible health insurance plans and allow families to spend their own money on their own health needs. Since they were created 15 years ago, HSAs have become a popular vehicle toward promoting patient choice in health care. Today, an estimated 20 million American individuals and families utilize HSAs.
HSAs contribute to lower healthcare spending because they promote consumer directed health care. HSAs also cut taxes for American families because HSA contributions are tax free, interest and investment is earned tax free, and payments made to qualifying health expenses are made tax free.
ATR supports four provisions that should be included in any upcoming HSA bill:
1. Make an 80 percent Actuarial Value or less an alternative method to have an HSA Qualified Health Plan: Allow an 80 percent or lower Actuarial Value to be an alternative method to be able to open a Health Savings Account. The U.S. Treasury Department estimates that allowing HSAs for those with an 80 percent AV plan will quadruple the number of HSA qualified health plans available on the market leading to a dramatic expansion of patient centered healthcare and a significant tax cut for American families.
2. Increase the Maximum Allowable Contribution: Allow deposits equal to the out-of-pocket maximum for the HSA qualified health plan. Functionally, this would nearly double the maximum contribution limit of an HSA from $3,450 to $6,650 for an individual in 2018 and $6,850 to $13,300 for a family.
3. Allow Working Seniors to have an HSA while on Medicare: Allow working seniors to keep their employer-provided HSA while covered by Medicare, which is prohibited by current law. This will end the discrimination against working seniors who have large employer coverage and are allowed to have a PPO or HMO and Medicare coverage too but cannot be on Medicare if they choose to keep their HSA. HSAs should also be expanded so they can be used to pay for Medicare Advantage plans, an idea proposed by President Trump in his FY 2019 Budget.
4. Repeal Obamacare HSA tax increases: Obamacare contained several restrictions on HSAs that limited healthcare choice and increased taxes on middle class families. These should be repealed. Obamacare’s “medicine cabinet tax” prevents HSA users from spending funds on over-the counter medications. Obamacare also increased the penalty for non-qualified expense withdrawals. Combined, both provisions equate to a $6 billion tax increase over a decade.
You can read our full letter to Chairman Brady and Chairman Roskam in support of expanding HSAs here.