How The Recently Passed House Bill Would Impact HSAs
The American Health Care Act recently passed in the House would be good news for health savings account (HSA) owners; however, as written, the bill may not provide the help some had hoped for.
One change would be that spouses could now make their catch-up contributions into one HSA, saving the expense of opening a second HSA just to make the $1,000 catch-up contribution. While this will help some spouses save the annual administration fee, the average savings would be in the neighborhood of $35 to $40 per year.
Currently, HSA dollars cannot be used for any medical expenses incurred prior to the opening of the HSA. The new law would permit a 60-day look-back period for reimbursement of medical expenses prior to the establishment of the HSA, and over-the-counter medications would again be considered an eligible expense. Again, this would be an improvement but certainly not a game changer.
The biggest change is the increase in the contribution limits. The bill would increase the annual HSA contribution limits to as much as $6,550 for individuals and $13,100 for families beginning next year. According to the 2014 study by Alegeus, only 15% of HSA owners currently contribute the maximum to their HSAs; however, this could be a huge opportunity for HSA owners moving forward.
So with all the talk of HSAs expanding, it appears that the House bill won’t do much for the average citizen, but could be a bonus for those who are currently maximizing their contributions. A better solution would be to relax the eligibility rules and make HSAs available to more of the 150 million policy holders currently ineligible to contribute to an HSA, rather than only making them available to High Deductible Health Plan participants.