As part of an ongoing effort to unwind the Affordable Care Act, three Republican lawmakers yesterday introduced a piece of legislation intended to expand eligibility for health savings accounts.
The Health Savings Act of 2017 immediately drew praise from the American Bankers Association’s HSA Council. The bill was introduced by Sens. Orrin Hatch and Marco Rubio, and Rep. Erik Paulsen.
“The goal of healthcare reform is to provide better coverage to all Americans at more affordable prices. Expanding the utility of HSAs, increasing the amount Americans can contribute to them and solving the technical issues related to their administration will help accomplish this goal,” the council’s executive director Kevin McKenchie said in a statement. “This legislation increases the maximum HSA contribution limit, allowing Americans to save more for medical expenses each year. It would also allow individuals to use their HSA funds for over-the-counter health care items. We look forward to working with Congress to see this legislation signed into law.”
Among other things, the bill would rename high-deductible health plans as “HSA-qualified health plans” and would increase the maximum contribution individuals and families could make to those accounts from $2,250 and $4,500, respectively, to the amount of the plan’s deductible and out-of-pocket limitation. The bill would also treat certain exercise equipment, fitness programs, and nutritional and dietary supplements as medical care.
“Health savings accounts and flexible spending accounts are critical to providing Americans with flexibility and control over their personal health spending,” Hatch said in a statement. “These plans have been in place for over a decade and while they’ve grown in popularity, they are in need of crucial updates. This bill provides those necessary updates and, as we work to repeal and replace Obamacare, sets a marker for how we can make it easier for American families and workers to grow and access tax-free savings for future medical costs.”
While the main driving factor of the increasing popularity of the HSA is the market shift toward high-deductible health plans, its proponents argue that HSAs encourage consumers to take a more proactive approach to their own health and to use medical care more judiciously.
The Rand Health Insurance Experiment, which launched in 1971, tracked the behaviors of nearly 6,000 people randomly assigned to insurance plans with varying levels of cost-sharing, or no cost-sharing whatsoever. The experiment found that medical cost-sharing reduced unnecessary medical care (also known as overutilization), though it also reduced necessary medical care.
Many consumers may find their community banks don’t offer HSAs, however, because the investment in training and technology can be difficult for smaller banks that haven’t yet achieved scale in that product.