Health savings accounts (HSAs) are a valuable tool for millions of Americans that enable them to save for medical expenses with great tax advantages. But with a new administration and the start of the 119th Congress, major changes could be on the horizon.
In a recent webinar, HSA expert Roy Ramthun, also known as “Mr. HSA,” examined possible HSA expansions being discussed, realistic timelines, and what these changes could mean for employers and HSA holders. This article summarizes their conversation.
The political landscape shifted dramatically as Republicans now control the White House and both houses of Congress. For the first time since 2018, HSAs are at the forefront of legislative discussions. Key proposals to expand HSAs have gained momentum, creating a buzz among policymakers, health care industry experts, and employers alike.
From eliminating restrictive eligibility requirements to expanding the uses for HSAs, these potential changes could make HSAs more flexible, accessible, and beneficial – transforming how both employees and employers approach health benefits and savings plans.
Currently, HSA contributions are tied to enrollment in rigidly defined “high-deductible health plans” (HDHPs). Discussions are underway on how to "decouple" HSAs from HDHPs, meaning in the future Americans might be able to contribute to an HSA regardless of their health insurance plan. This could also include allowing employees to use job-site health clinics and telehealth services that may disqualify them from contributing to an HSA. This would open the door for many individuals, such as Medicare participants, to start saving using an HSA.
Proposals are being introduced to broaden what HSAs can cover. Some ideas include allowing HSA funds to pay for services such as direct primary care arrangements or exercise and fitness programs and equipment. Additionally, many experts anticipate expanded coverage for mental health services and chronic disease management services.
Currently, couples face additional administrative hurdles when both spouses wish to make catch-up contributions to an HSA. Simplifying this by allowing contributions to a single account would make the process more user-friendly for married couples.
A common frustration with HSAs is that medical expenses incurred before the account was opened are not eligible for reimbursement. Lawmakers are considering a provision to allow retroactive reimbursement for some of these expenses, providing further financial relief to account holders.
The pathway for achieving these expansions depends on legislative priorities and processes. One key legislative tool in play is a process known as "budget reconciliation," which allows Congress to pass budget-related laws with a simple majority, bypassing the Senate filibuster.
Given the current political environment, many experts expect HSA expansions to be part of comprehensive tax reform efforts later this year. Proposed timeline estimates indicate that meaningful changes could take effect as early as 2026, though some measures may be implemented sooner depending on bipartisan support.
For employers, potential HSA changes could mean new opportunities to enhance benefits packages and attract top talent. Offering contributions to expanded HSAs or hosting onsite health clinics becomes more appealing if such measures pass. Simplified eligibility rules and expanded usage increase participation, creating a competitive edge in employee offerings.
For HSA holders, these changes could greatly increase the utility of their accounts. The ability to use HSAs for additional services and include some retroactive reimbursements may provide greater financial flexibility and improved access to health care options.
While nothing is set in stone, the potential HSA expansions could revolutionize the current health benefits landscape. Whether you’re an employer aiming to provide better benefits or an HSA holder maximizing your savings, staying informed is essential.
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