Finance News & Insights

5 changes to health savings accounts that could be a reality soon

Although Republicans couldn’t agree on a wholesale Obamacare repeal bill, they did have consensus on one very important healthcare issue: HSAs and the changes that need to be made to these insurance vehicles.

According to attorney and Associate Director at the International Foundation, Adam Abelson, the GOP’s common ground on HSAs could lead to the following changes:

1. Significantly increased limits

The limits for HSAs in 2018, which are set by federal regs, would be nearly doubled under GOP legislation to $6,550 for single coverage and $13,100 for family coverage.

2. Catch-up contributions for spouses

In an effort to help older Americans bolster contributions to HSAs and plan adequately for retirement, allowing spouses to make catch-up contributions was proposed.

Catch-up contributions allow individuals ages 50 and older to make additional HSA contributions.
Because HSAs are owned by a single individual under current law, only the owner can make catch-up contributions to the account – even if it is a family-coverage HSA.

3. An over-the-counter (OTC) prescription repeal

Under a minor ACA reg, OTC meds are currently only considered a covered expense for HSAs (and FSAs, HRAs) if they are prescribed by a doctor.

4. A decrease in the nonqualified HSA distribution penalty

Under the ACA, the penalty for using HSA funds for anything other than a qualified medical expense before the age of 65 doubled, from 10% to 20%. Both ACA repeal bills sought to lower that penalty back down to 10%.

5. Earlier reimbursement of medical expenses

Current regs prohibit HSAs from being used to pay for expenses incurred before the HSA was created. But proposals aimed to allow HSAs to reimburse medical expenses incurred within 60 days of plan coverage, but before the creation of the HSA.

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