Legislative Update – House Action to Amend the Affordable Care Act
If you follow politics at all then you know that the Affordable Care Act, a.k.a. Obamacare, is still the law of the land. Despite numerous attempts, the majority Republican Congress either can’t (or won’t) repeal it in its entirety, but they have been slowly chipping away at parts of it. The individual mandate was repealed with the passage of the new tax law in late 2017. In 2018, Congress has been focused on increasing the benefits of both Flex Spending Accounts (FSAs) and Health Savings Accounts (HSAs) to at least make the ACA seem more attractive to its opponents.
In July, the House of Representatives passed two bills, both of which would drastically alter the FSA/HSA landscape. If passed by the Senate later this year, HR 6311 and HR 6199 will likely change not only who is eligible for HSA enrollment but change what HSA/FSA dollars can be spent on, how much one can contribute, and remove the dreaded “use-it-or-lose-it” clause from FSAs.
Under current law, only those covered under a “high-deductible plan” are eligible for HSAs. Annual contribution limits are currently $3450 for an individual and $6900 for a family (plus an additional $1000 if you’re over 55). Funds roll-over year to year, are pre-tax dollars, not taxed when used for qualifying medical costs, and are tax-deductible. FSAs on the other hand are eligible to anyone but are created/provided by an employer as a benefit. The maximum annual contribution is lower ($2650) and whatever goes unused is forfeited each year.
If passed, HR 6199 would increase the number of people eligible for HSAs by removing several disqualiers, allow coverage of OTC medications without a prescription, and allow certain sports and fitness expenses to be qualified medical expenses.
HR 6311 will essentially abolish the FSA “use-it-or-lose-it” clause, allowing for roll-over of up to three years’ worth of contributions before requiring a spend-down. It will also increase the number of people eligible for an HSA by changing what is defined as a “high deductible plan”, as well as increase the maximum annual contribution amount for HSAs.
These changes have the potential to benefit not only you and your family from a tax/savings plan standpoint, but you and your practice. With higher contribution limits, less money lost to the roll-over forfeit, and more people taking advantage of the HSA/FSA tax benefit, we should see an increase in treatment acceptance and production/collection.