[House Report 115-848]
[From the U.S. Government Publishing Office]
115th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 115-848
======================================================================
THE ``HEALTH SAVINGS ACT OF 2018''
_______
July 19, 2018.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Brady of Texas, from the Committee on Ways and Means, submitted the
following
R E P O R T
[To accompany H.R. 6314]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 6314) to amend the Internal Revenue Code of 1986 to
treat catastrophic and bronze plans (as defined in the Patient
Protection and Affordable Care Act as high deductible health
plans, report favorably thereon with an amendment and recommend
that the bill as amended do pass.
115th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 115-848
======================================================================
HEALTH SAVINGS ACT OF 2018
_______
July 19, 2018.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Brady of Texas, from the Committee on Ways and Means, submitted the
following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 6314]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 6314) to amend the Internal Revenue Code of 1986 to
allow bronze and catastrophic plans in connection with health
savings accounts, having considered the same, report favorably
thereon with an amendment and recommend that the bill as
amended do pass.
CONTENTS
Page
I. SUMMARY AND BACKGROUND............................................3
II. EXPLANATION OF THE BILL...........................................4
A. Allowance of Bronze and Catastrophic Plans in
Connection with Health Savings Accounts.............. 4
III.VOTES OF THE COMMITTEE............................................6
IV. BUDGET EFFECTS OF THE BILL........................................7
A. Committee Estimate of Budgetary Effects............... 7
B. Statement Regarding New Budget Authority and Tax
Expenditures Budget Authority........................ 9
C. Cost Estimate Prepared by the Congressional Budget
Office............................................... 9
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE........9
A. Committee Oversight Findings and Recommendations...... 9
B. Statement of General Performance Goals and Objectives. 9
C. Information Relating to Unfunded Mandates............. 9
D. Applicability of House Rule XXI 5(b).................. 10
E. Tax Complexity Analysis............................... 10
F. Congressional Earmarks, Limited Tax Benefits, and
Limited Tariff Benefits.............................. 10
G. Duplication of Federal Programs....................... 10
H. Disclosure of Directed Rule Makings................... 10
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED............11
B. Changes in Existing Law Proposed by the Bill, as
Reported............................................. 11
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Health Savings Act of 2018''.
SEC. 2. ALLOWANCE OF BRONZE AND CATASTROPHIC PLANS IN CONNECTION WITH
HEALTH SAVINGS ACCOUNTS.
(a) In General.--Section 223(c)(2) of the Internal Revenue Code of
1986 is amended by adding at the end the following new subparagraph:
``(E) Bronze and catastrophic plans treated as high
deductible health plans.--
``(i) In general.--The term `high deductible
health plan' shall include any plan described
in subsection (d)(1)(A) or (e) of section 1302
of the Patient Protection and Affordable Care
Act.
``(ii) Certain rules not applicable.--
Subparagraphs (C) and (D) shall not apply with
respect to any plan described in clause (i).''.
(b) Effective Date.--The amendment made by this section shall apply
to months beginning after December 31, 2018, in taxable years ending
after such date.
I. SUMMARY AND BACKGROUND
A. Purpose and Summary
The bill H.R. 6314, as reported by the Committee on Ways
and Means, expands eligibility and access to Health Savings
Accounts (HSAs) by allowing plans categorized as catastrophic
and bronze in the individual and small group markets to qualify
for HSA contributions.
B. Background and Need for Legislation
Individuals and families who enroll in a high-deductible
health plan (HDHP) that meet certain requirements, including a
minimum deductible and a maximum amount of out-of-pocket
exposure, are able to make contributions to an HSA. The law
prohibits coverage of any benefit that is not preventative
below the deductible. These accounts allow for pre-tax
contributions, tax-free investment earnings, and tax-free
distributions for future qualified medical expenses.
The Affordable Care Act's (ACA) catastrophic plans are
required to provide coverage for at least three primary care
visits below the deductible but no other benefits until the
consumer has incurred cost-sharing expenses equal to
Obamacare's annual limit. Though consumers enrolled in
catastrophic plans face significant deductibles and cost-
sharing, the coverage of three doctor visits automatically
disqualifies their plan from HSA eligibility.
In addition, bronze plans, which have an actuarial value of
60 percent, often times have out-of-pocket limits that exceed
what is allowed for plans to be HSA-eligible. The average
deductible of a bronze plan in 2018 is around $6,000.
C. Legislative History
Background
H.R. 6314 was introduced on July 6, 2018, and was referred
to the Committee on Ways and Means.
Committee action
The Committee on Ways and Means marked up H.R. 6314, the
``Health Savings Act of 2018,'' on July 12, 2018, and ordered
the bill, as amended, favorably reported (with a quorum being
present).
Committee hearings
The policy issues associated with Health Savings Accounts
(HSAs) and need for legislative response were discussed at the
following Ways and Means hearings during the 114th and 115th
Congress:
Full Committee Hearing on the Tax Treatment
of Health Care (April 14, 2016)
Subcommittee on Health Member Day Hearing on
Tax-Related Proposals to Improve Health Care (May 17,
2016)
Subcommittee on Health Hearing on Rising
Health Insurance Premiums Under the Affordable Care Act
(July 12, 2016)
Subcommittee on Health Hearing on Lowering
Costs and Expanding Access to Health Care through
Consumer-Directed Health Plans (June 6, 2018)
II. EXPLANATION OF THE BILL
A. Allowance of Bronze and Catastrophic Plans in Connection with Health
Savings Accounts
PRESENT LAW
Health savings accounts
An individual may establish a health savings account
(``HSA'') only if the individual is covered under a plan that
meets the requirements for a high deductible health plan, as
described below. In general, HSAs provide tax-favored treatment
for current medical expenses as well as the ability to save on
a tax-favored basis for future medical expenses. In general, an
HSA is a tax-exempt trust or custodial account created
exclusively to pay for the qualified medical expenses of the
account holder and his or her spouse and dependents.
Within limits,\1\ contributions to an HSA made by or on
behalf of an eligible individual are deductible by the
individual. Contributions to an HSA are excludible from income
and employment taxes if made by the employer. Earnings in HSAs
are not taxable. Distributions from an HSA for qualified
medical expenses are not includible in gross income.
Distributions from an HSA that are not used for qualified
medical expenses are includible in gross income and are subject
to an additional tax of 20 percent. The 20-percent additional
tax does not apply if the distribution is made after death or
disability, or after the individual attains the age of Medicare
eligibility (age 65).
---------------------------------------------------------------------------
\1\For 2018, the basic limit on annual contributions that can be
made to an HSA is $3,450 in the case of self-only coverage and $6,900
in the case of family coverage. (The 2018 limitation for family
coverage was revised by the IRS to permit taxpayers to disregard the
$6,850 limitation under the modified inflation adjustment of Pub. L.
No. 115-97. Rev. Rul. 2018-27, 2018-20 I.R.B. 591, May 14, 2018.) The
basic annual contributions limits are increased by $1,000 for
individuals who have attained age 55 by the end of the taxable year
(referred to as ``catch-up'' contributions).
---------------------------------------------------------------------------
High deductible health plans
A high deductible health plan is a health plan that has a
minimum annual deductible of $1,350 (for 2018) for self-only
coverage and twice this amount for family coverage, and for
which the sum of the annual deductible and other annual out-of-
pocket expenses (other than premiums) for covered benefits does
not exceed $6,650 (for 2018) for self-only coverage and twice
this amount for family coverage.\2\ These dollar thresholds are
subject to inflation adjustment, based on chained CPI.\3\
---------------------------------------------------------------------------
\2\Sec. 223(c)(2).
\3\Sec. 223(g).
---------------------------------------------------------------------------
An individual who is covered under a high deductible health
plan is eligible to establish an HSA, provided that while such
individual is covered under the high deductible health plan,
the individual is not covered under any health plan that (1) is
not a high deductible health plan and (2) provides coverage for
any benefit (subject to certain exceptions) covered under the
high deductible health plan.\4\
---------------------------------------------------------------------------
\4\Sec. 223(c)(1).
---------------------------------------------------------------------------
Various types of coverage are disregarded for this purpose,
including coverage of any benefit provided by permitted
insurance, coverage (whether through insurance or otherwise)
for accidents, disability, dental care, vision care, or long-
term care, as well as certain limited coverage through health
flexible savings accounts.\5\ Permitted insurance means
insurance under which substantially all of the coverage
provided relates to liabilities incurred under workers'
compensation laws, tort liabilities, liabilities relating to
ownership or use of property, or such other similar liabilities
as specified by the Secretary under regulations. Permitted
insurance also means insurance for a specified disease or
illness, and insurance paying a fixed amount per day (or other
period) of hospitalization.\6\
---------------------------------------------------------------------------
\5\Sec. 223(c)(1)(B).
\6\Sec. 223(c)(3).
---------------------------------------------------------------------------
Plans in the Health Benefit Exchanges\7\ are defined by
reference to various metal categories including bronze
plans.\8\ Catastrophic plans\9\ have low monthly premiums and
very high deductibles and are only available to individuals
under 30 or individuals of any age with a hardship exemption.
Currently catastrophic and bronze plans as defined under the
PPACA are not treated as high deductible health plans.
---------------------------------------------------------------------------
\7\See secs. 1311 and 1321 of PPACA.
\8\See sec. 1302 of PPACA.
\9\See sec. 1302(e) of PPACA.
---------------------------------------------------------------------------
REASONS FOR CHANGE
The Committee believes connecting consumers to their health
care dollars through consumer-directed health plans, including
high deductible health plans, reduces health care costs. The
Committee further believes that HSAs are an important tool used
in conjunction with high deductible health plans to permit
consumers to set aside funds and provide such consumers the
choice on how to spend those funds to pay for medical care.
However, in the individual and small group markets, certain
bronze plans and all catastrophic plans have design features
that render enrollees ineligible to contribute to an HSA
despite having to face high levels of out-of-pocket costs. The
Committee is adding catastrophic and bronze plans to the
definition of high deductible health plans to allow thee plans
to qualify for HSA contributions.
The Committee believes that treating catastrophic and
bronze health plans (as defined under PPACA) as high deductible
health plans and permitting individuals who are participating
in such plans to be eligible to contribute to health savings
accounts will further drive consumer choice, allow these
individuals to save for health care costs on a pre-tax basis,
and result in further health cost containment.
EXPLANATION OF PROVISION
Under the provision, the term high deductible health plan
shall include bronze and catastrophic plans\10\ but the special
rules for network plans (with respect to the annual out-of-
pocket limitation and annual deductible) and the safe harbor
for the absence of a preventive care deductible (that would
otherwise apply to high deductible health plans) will not
apply.
---------------------------------------------------------------------------
\10\See sec. 1302(d)(1)(A) and (e) of PPACA.
---------------------------------------------------------------------------
EFFECTIVE DATE
The provision is applies to months beginning after December
31, 2018, in taxable years ending after that date.
III. VOTES OF THE COMMITTEE
In compliance with clause 3(b) of rule XIII of the House of
Representatives, the following statement is made concerning the
vote of the Committee on Ways and Means during the markup
consideration of H.R. 6314, the ``Health Savings Act of 2018,''
on July 12, 2018.
H.R. 6314 was ordered favorably reported to the House of
Representatives as amended by an amendment in the nature of a
substitute offered by Chairman Brady by a roll call vote of 23
yeas to 13 nays. The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representative Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady...................... X ........ ......... Mr. Neal......... ........ X .........
Mr. Johnson.................... X ........ ......... Mr. Levin........ ........ X .........
Mr. Nunes...................... ........ ........ ......... Mr. Lewis........ ........ X .........
Mr. Reichert................... X ........ ......... Mr. Doggett...... ........ X .........
Mr. Roskam..................... X ........ ......... Mr. Thompson..... ........ X .........
Mr. Buchanan................... X ........ ......... Mr. Larson....... ........ X .........
Mr. Smith (NE)................. X ........ ......... Mr. Blumenauer... X ........ .........
Ms. Jenkins.................... X ........ ......... Mr. Kind......... X ........ .........
Mr. Paulsen.................... X ........ ......... Mr. Pascrell..... ........ ........ .........
Mr. Marchant................... X ........ ......... Mr. Crowley...... ........ X .........
Ms. Black...................... ........ ........ ......... Mr. Davis........ ........ X .........
Mr. Reed....................... X ........ ......... Ms. Sanchez...... ........ X .........
Mr. Kelly...................... X ........ ......... Mr. Higgins...... ........ X .........
Mr. Renacci.................... ........ ........ ......... Ms. Sewell....... X ........ .........
Ms. Noem....................... X ........ ......... Ms. DelBene...... ........ X .........
Mr. Holding.................... X ........ ......... Ms. Chu.......... ........ X .........
Mr. Smith (MO)................. X ........ .........
Mr. Rice....................... X ........ .........
Mr. Schweikert................. X ........ .........
Ms. Walorski................... X ........ .........
Mr. Curbelo.................... X ........ .........
Mr. Bishop..................... X ........ .........
Mr. LaHood..................... X ........ .........
Mr. Wenstrup................... X ........ .........
----------------------------------------------------------------------------------------------------------------
IV. BUDGET EFFECTS OF THE BILL
A. Committee Estimate of Budgetary Effects
In compliance with clause 3(d) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the bill, H.R. 6314, as
reported.
The bill, as reported, is estimated to have the following
effect on Federal fiscal year budget receipts for the period
2019-2028:
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Fiscal Years [Millions of Dollars]
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Item 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2019-23 2019-28
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Allowance of Bronze and Catastrophic Plans in Connection -2 -15 -15 -15 -15 -15 -14 -14 -16 -16 -61 -137
with Health Savings Accounts1..............................
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
NOTE: Details do not add to totals due to rounding.
1Estimate provided by the staff of the Joint Committee on Taxation and the Congressional Budget Office.
Pursuant to clause 8 of rule XIII of the Rules of the House
of Representatives, the following statement is made by the
Joint Committee on Taxation with respect to the provisions of
the bill amending the Internal Revenue Code of 1986: The gross
budgetary effect (before incorporating macroeconomic effects)
in any fiscal year is less than 0.25 percent of the current
projected gross domestic product of the United States for that
fiscal year; therefore, the bill is not ``major legislation''
for purposes of requiring that the estimate include the
budgetary effects of changes in economic output, employment,
capital stock and other macroeconomic variables.
B. Statement Regarding New Budget Authority and Tax Expenditures Budget
Authority
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
bill involves no new or increased budget authority. The
Committee further states that the revenue-reducing tax
provision involves no new tax expenditure.
C. Cost Estimate Prepared by the Congressional Budget Office
In compliance with clause 3(d) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the bill, H.R. 6138, as
reported. As of the filing of this report, the Committee had
not received an estimate prepared by the Congressional Budget
Office (CBO).
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
A. Committee Oversight Findings and Recommendations
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee advises that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated into
the description portions of this report.
B. Statement of General Performance Goals and Objectives
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill contains no measure that authorizes funding, so no
statement of general performance goals and objectives for which
any measure authorizes funding is required.
C. Information Relating to Unfunded Mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
D. Applicability of House Rule XXI 5(b)
Rule XXI 5(b) of the Rules of the House of Representatives
provides, in part, that ``A bill or joint resolution,
amendment, or conference report carrying a Federal income tax
rate increase may not be considered as passed or agreed to
unless so determined by a vote of not less than three-fifths of
the Members voting, a quorum being present.'' The Committee has
carefully reviewed the bill and states that the bill does not
involve any Federal income tax rate increases within the
meaning of the rule.
E. Tax Complexity Analysis
Section 4022(b) of the Internal Revenue Service
Restructuring and Reform Act of 1998 (``IRS Reform Act'')
requires the staff of the Joint Committee on Taxation (in
consultation with the Internal Revenue Service and the Treasury
Department) to provide a tax complexity analysis. The
complexity analysis is required for all legislation reported by
the Senate Committee on Finance, the House Committee on Ways
and Means, or any committee of conference if the legislation
includes a provision that directly or indirectly amends the
Internal Revenue Code of 1986 and has widespread applicability
to individuals or small businesses.
Pursuant to clause 3(h)(1) of rule XIII of the Rules of the
House of Representatives, the staff of the Joint Committee on
Taxation has determined that a complexity analysis is not
required under section 4022(b) of the IRS Reform Act because
the bill contains no provisions that amend the Internal Revenue
Code of 1986 and that have ``widespread applicability'' to
individuals or small businesses, within the meaning of the
rule.
F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
G. Duplication of Federal Programs
In compliance with Sec. 3(c)(5) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes: (1) a
program of the Federal Government known to be duplicative of
another Federal program, (2) a program included in any report
from the Government Accountability Office to Congress pursuant
to section 21 of Public Law 111-139, or (3) a program related
to a program identified in the most recent Catalog of Federal
Domestic Assistance, published pursuant to section 6104 of
title 31, United States Code.
H. Disclosure of Directed Rule Makings
In compliance with Sec. 3(i) of H. Res. 5 (115th Congress),
the following statement is made concerning directed rule
makings: The Committee advises that the bill requires no
directed rule makings within the meaning of such section.
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
B. Changes in Existing Law Proposed by the Bill, as Reported
In compliance with clause 3(e)(1)(B) of rule XIII of the
Rules of the House of Representatives, changes in existing law
proposed by the bill, as reported, are shown as follows
(existing law proposed to be omitted is enclosed in black
brackets, new matter is printed in italic, existing law in
which no change is proposed is shown in roman):
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (new matter is
printed in italic and existing law in which no change is
proposed is shown in roman):
INTERNAL REVENUE CODE OF 1986
* * * * * * *
Subtitle A--Income Taxes
* * * * * * *
CHAPTER 1--NORMAL TAXES AND SURTAXES
* * * * * * *
Subchapter B--Computation of Taxable Income
* * * * * * *
PART VII--ADDITIONAL ITEMIZED DEDUCTIONS FOR INDIVIDUALS
* * * * * * *
SEC. 223. HEALTH SAVINGS ACCOUNTS.
(a) Deduction allowed.--In the case of an individual who is
an eligible individual for any month during the taxable year,
there shall be allowed as a deduction for the taxable year an
amount equal to the aggregate amount paid in cash during such
taxable year by or on behalf of such individual to a health
savings account of such individual.
(b) Limitations.--
(1) In general.--The amount allowable as a deduction
under subsection (a) to an individual for the taxable
year shall not exceed the sum of the monthly
limitations for months during such taxable year that
the individual is an eligible individual.
(2) Monthly limitation.--The monthly limitation for
any month is \1/12\ of--
(A) in the case of an eligible individual who
has self- only coverage under a high deductible
health plan as of the first day of such month,
$2,250.
(B) in the case of an eligible individual who
has family coverage under a high deductible
health plan as of the first day of such month,
$4,500.
(3) Additional contributions for individuals 55 or
older.--
(A) In general.--In the case of an individual
who has attained age 55 before the close of the
taxable year, the applicable limitation under
subparagraphs (A) and (B) of paragraph (2)
shall be increased by the additional
contribution amount.
(B) Additional contribution amount.--For
purposes of this section, the additional
contribution amount is the amount determined in
accordance with the following table:
------------------------------------------------------------------------
The additional contribution amount
For taxable years beginning in: is:
------------------------------------------------------------------------
2004 $500
2005 $600
2006 $700
2007 $800
2008 $900
2009 and thereafter $1,000.
------------------------------------------------------------------------
(4) Coordination with other contributions.--The
limitation which would (but for this paragraph) apply
under this subsection to an individual for any taxable
year shall be reduced (but not below zero) by the sum
of--
(A) the aggregate amount paid for such
taxable year to Archer MSAs of such individual,
(B) the aggregate amount contributed to
health savings accounts of such individual
which is excludable from the taxpayer's gross
income for such taxable year under section
106(d) (and such amount shall not be allowed as
a deduction under subsection (a)), and
(C) the aggregate amount contributed to
health savings accounts of such individual for
such taxable year under section 408(d)(9) (and
such amount shall not be allowed as a deduction
under subsection (a)).
Subparagraph (A) shall not apply with respect to any
individual to whom paragraph (5) applies.
(5) Special rule for married individuals.--In the
case of individuals who are married to each other, if
either spouse has family coverage--
(A) both spouses shall be treated as having
only such family coverage (and if such spouses
each have family coverage under different
plans, as having the family coverage with the
lowest annual deductible), and
(B) the limitation under paragraph (1) (after
the application of subparagraph (A) and without
regard to any additional contribution amount
under paragraph (3))--
(i) shall be reduced by the aggregate
amount paid to Archer MSAs of such
spouses for the taxable year, and
(ii) after such reduction, shall be
divided equally between them unless
they agree on a different division.
(6) Denial of deduction to dependents.--No deduction
shall be allowed under this section to any individual
with respect to whom a deduction under section 151 is
allowable to another taxpayer for a taxable year
beginning in the calendar year in which such
individual's taxable year begins.
(7) Medicare eligible individuals.--The limitation
under this subsection for any month with respect to an
individual shall be zero for the first month such
individual is entitled to benefits under title XVIII of
the Social Security Act and for each month thereafter.
(8) Increase in limit for individuals becoming
eligible individuals after the beginning of the year.--
(A) In general.--For purposes of computing
the limitation under paragraph (1) for any
taxable year, an individual who is an eligible
individual during the last month of such
taxable year shall be treated--
(i) as having been an eligible
individual during each of the months in
such taxable year, and
(ii) as having been enrolled, during
each of the months such individual is
treated as an eligible individual
solely by reason of clause (i), in the
same high deductible health plan in
which the individual was enrolled for
the last month of such taxable year.
(B) Failure to maintain high deductible
health plan coverage.--
(i) In general.--If, at any time
during the testing period, the
individual is not an eligible
individual, then--
(I) gross income of the
individual for the taxable year
in which occurs the first month
in the testing period for which
such individual is not an
eligible individual is
increased by the aggregate
amount of all contributions to
the health savings account of
the individual which could not
have been made but for
subparagraph (A), and
(II) the tax imposed by this
chapter for any taxable year on
the individual shall be
increased by 10 percent of the
amount of such increase.
(ii) Exception for disability or
death.--Subclauses (I) and (II) of
clause (i) shall not apply if the
individual ceased to be an eligible
individual by reason of the death of
the individual or the individual
becoming disabled (within the meaning
of section 72(m)(7)).
(iii) Testing period.--The term
``testing period'' means the period
beginning with the last month of the
taxable year referred to in
subparagraph (A) and ending on the last
day of the 12th month following such
month.
(c) Definitions and special rules.--For purposes of this
section--
(1) Eligible individual.--
(A) In general.--The term ``eligible
individual'' means, with respect to any month,
any individual if--
(i) such individual is covered under
a high deductible health plan as of the
1st day of such month, and
(ii) such individual is not, while
covered under a high deductible health
plan, covered under any health plan--
(I) which is not a high
deductible health plan, and
(II) which provides coverage
for any benefit which is
covered under the high
deductible health plan.
(B) Certain coverage disregarded.--
Subparagraph (A)(ii) shall be applied without
regard to--
(i) coverage for any benefit provided
by permitted insurance,
(ii) coverage (whether through
insurance or otherwise) for accidents,
disability, dental care, vision care,
or long-term care, and
(iii) for taxable years beginning
after December 31, 2006, coverage under
a health flexible spending arrangement
during any period immediately following
the end of a plan year of such
arrangement during which unused
benefits or contributions remaining at
the end of such plan year may be paid
or reimbursed to plan participants for
qualified benefit expenses incurred
during such period if--
(I) the balance in such
arrangement at the end of such
plan year is zero, or
(II) the individual is making
a qualified HSA distribution
(as defined in section 106(e))
in an amount equal to the
remaining balance in such
arrangement as of the end of
such plan year, in accordance
with rules prescribed by the
Secretary.
(C) Special rule for individuals eligible for
certain veterans benefits.--An individual shall
not fail to be treated as an eligible
individual for any period merely because the
individual receives hospital care or medical
services under any law administered by the
Secretary of Veterans Affairs for a service-
connected disability (within the meaning of
section 101(16) of title 38, United States
Code).
(2) High deductible health plan.--
(A) In general.--The term ``high deductible
health plan'' means a health plan--
(i) which has an annual deductible
which is not less than--
(I) $1,000 for self-only
coverage, and
(II) twice the dollar amount
in subclause (I) for family
coverage, and
(ii) the sum of the annual deductible
and the other annual out-of-pocket
expenses required to be paid under the
plan (other than for premiums) for
covered benefits does not exceed--
(I) $5,000 for self-only
coverage, and
(II) twice the dollar amount
in subclause (I) for family
coverage.
(B) Exclusion of certain plans.--Such term
does not include a health plan if substantially
all of its coverage is coverage described in
paragraph (1)(B).
(C) Safe harbor for absence of preventive
care deductible.--A plan shall not fail to be
treated as a high deductible health plan by
reason of failing to have a deductible for
preventive care (within the meaning of section
1861 of the Social Security Act, except as
otherwise provided by the Secretary).
(D) Special rules for network plans.--In the
case of a plan using a network of providers--
(i) Annual out-of-pocket
limitation.--Such plan shall not fail
to be treated as a high deductible
health plan by reason of having an out-
of-pocket limitation for services
provided outside of such network which
exceeds the applicable limitation under
subparagraph (A)(ii).
(ii) Annual deductible.--Such plan's
annual deductible for services provided
outside of such network shall not be
taken into account for purposes of
subsection (b)(2).
(E) Bronze and catastrophic plans treated as
high deductible health plans.--
(i) In general.--The term ``high
deductible health plan'' shall include
any plan described in subsection
(d)(1)(A) or (e) of section 1302 of the
Patient Protection and Affordable Care
Act.
(ii) Certain rules not applicable.--
Subparagraphs (C) and (D) shall not
apply with respect to any plan
described in clause (i).
(3) Permitted insurance.--The term ``permitted
insurance'' means--
(A) insurance if substantially all of the
coverage provided under such insurance relates
to--
(i) liabilities incurred under
workers' compensation laws,
(ii) tort liabilities,
(iii) liabilities relating to
ownership or use of property, or
(iv) such other similar liabilities
as the Secretary may specify by
regulations,
(B) insurance for a specified disease or
illness, and
(C) insurance paying a fixed amount per day
(or other period) of hospitalization.
(4) Family coverage.--The term ``family coverage''
means any coverage other than self-only coverage.
(5) Archer MSA.--The term ``Archer MSA'' has the
meaning given such term in section 220(d).
(d) Health savings account.--For purposes of this section--
(1) In general.--The term ``health savings account''
means a trust created or organized in the United States
as a health savings account exclusively for the purpose
of paying the qualified medical expenses of the account
beneficiary, but only if the written governing
instrument creating the trust meets the following
requirements:
(A) Except in the case of a rollover
contribution described in subsection (f)(5) or
section 220(f)(5), no contribution will be
accepted--
(i) unless it is in cash, or
(ii) to the extent such contribution,
when added to previous contributions to
the trust for the calendar year,
exceeds the sum of--
(I) the dollar amount in
effect under subsection
(b)(2)(B), and
(II) the dollar amount in
effect under subsection
(b)(3)(B).
(B) The trustee is a bank (as defined in
section 408(n)), an insurance company (as
defined in section 816), or another person who
demonstrates to the satisfaction of the
Secretary that the manner in which such person
will administer the trust will be consistent
with the requirements of this section.
(C) No part of the trust assets will be
invested in life insurance contracts.
(D) The assets of the trust will not be
commingled with other property except in a
common trust fund or common investment fund.
(E) The interest of an individual in the
balance in his account is nonforfeitable.
(2) Qualified medical expenses.--
(A) In general.--The term ``qualified medical
expenses'' means, with respect to an account
beneficiary, amounts paid by such beneficiary
for medical care (as defined in section 213(d))
for such individual, the spouse of such
individual, and any dependent (as defined in
section 152, determined without regard to
subsections (b)(1), (b)(2), and (d)(1)(B)
thereof) of such individual, but only to the
extent such amounts are not compensated for by
insurance or otherwise. Such term shall include
an amount paid for medicine or a drug only if
such medicine or drug is a prescribed drug
(determined without regard to whether such drug
is available without a prescription) or is
insulin.
(B) Health insurance may not be purchased
from account.--Subparagraph (A) shall not apply
to any payment for insurance.
(C) Exceptions.--Subparagraph (B) shall not
apply to any expense for coverage under--
(i) a health plan during any period
of continuation coverage required under
any Federal law,
(ii) a qualified long-term care
insurance contract (as defined in
section 7702B(b)),
(iii) a health plan during a period
in which the individual is receiving
unemployment compensation under any
Federal or State law, or
(iv) in the case of an account
beneficiary who has attained the age
specified in section 1811 of the Social
Security Act, any health insurance
other than a medicare supplemental
policy (as defined in section 1882 of
the Social Security Act).
(3) Account beneficiary.--The term ``account
beneficiary'' means the individual on whose behalf the
health savings account was established.
(4) Certain rules to apply.--Rules similar to the
following rules shall apply for purposes of this
section:
(A) Section 219(d)(2) (relating to no
deduction for rollovers).
(B) Section 219(f)(3) (relating to time when
contributions deemed made).
(C) Except as provided in section 106(d),
section 219(f)(5) (relating to employer
payments).
(D) Section 408(g) (relating to community
property laws).
(E) Section 408(h) (relating to custodial
accounts).
(e) Tax treatment of accounts.--
(1) In general.--A health savings account is exempt
from taxation under this subtitle unless such account
has ceased to be a health savings account.
Notwithstanding the preceding sentence, any such
account is subject to the taxes imposed by section 511
(relating to imposition of tax on unrelated business
income of charitable, etc. organizations).
(2) Account terminations.--Rules similar to the rules
of paragraphs (2) and (4) of section 408(e) shall apply
to health savings accounts, and any amount treated as
distributed under such rules shall be treated as not
used to pay qualified medical expenses.
(f) Tax treatment of distributions.--
(1) Amounts used for qualified medical expenses.--Any
amount paid or distributed out of a health savings
account which is used exclusively to pay qualified
medical expenses of any account beneficiary shall not
be includible in gross income.
(2) Inclusion of amounts not used for qualified
medical expenses.--Any amount paid or distributed out
of a health savings account which is not used
exclusively to pay the qualified medical expenses of
the account beneficiary shall be included in the gross
income of such beneficiary.
(3) Excess contributions returned before due date of
return.--
(A) In general.--If any excess contribution
is contributed for a taxable year to any health
savings account of an individual, paragraph (2)
shall not apply to distributions from the
health savings accounts of such individual (to
the extent such distributions do not exceed the
aggregate excess contributions to all such
accounts of such individual for such year) if--
(i) such distribution is received by
the individual on or before the last
day prescribed by law (including
extensions of time) for filing such
individual's return for such taxable
year, and
(ii) such distribution is accompanied
by the amount of net income
attributable to such excess
contribution.
Any net income described in clause (ii) shall
be included in the gross income of the
individual for the taxable year in which it is
received.
(B) Excess contribution.--For purposes of
subparagraph (A), the term ``excess
contribution'' means any contribution (other
than a rollover contribution described in
paragraph (5) or section 220(f)(5)) which is
neither excludable from gross income under
section 106(d) nor deductible under this
section.
(4) Additional tax on distributions not used for
qualified medical expenses.--
(A) In general.--The tax imposed by this
chapter on the account beneficiary for any
taxable year in which there is a payment or
distribution from a health savings account of
such beneficiary which is includible in gross
income under paragraph (2) shall be increased
by 20 percent of the amount which is so
includible.
(B) Exception for disability or death.--
Subparagraph (A) shall not apply if the payment
or distribution is made after the account
beneficiary becomes disabled within the meaning
of section 72(m)(7) or dies.
(C) Exception for distributions after
medicare eligibility.--Subparagraph (A) shall
not apply to any payment or distribution after
the date on which the account beneficiary
attains the age specified in section 1811 of
the Social Security Act.
(5) Rollover contribution.--An amount is described in
this paragraph as a rollover contribution if it meets
the requirements of subparagraphs (A) and (B).
(A) In general.--Paragraph (2) shall not
apply to any amount paid or distributed from a
health savings account to the account
beneficiary to the extent the amount received
is paid into a health savings account for the
benefit of such beneficiary not later than the
60th day after the day on which the beneficiary
receives the payment or distribution.
(B) Limitation.--This paragraph shall not
apply to any amount described in subparagraph
(A) received by an individual from a health
savings account if, at any time during the 1-
year period ending on the day of such receipt,
such individual received any other amount
described in subparagraph (A) from a health
savings account which was not includible in the
individual's gross income because of the
application of this paragraph.
(6) Coordination with medical expense deduction.--For
purposes of determining the amount of the deduction
under section 213, any payment or distribution out of a
health savings account for qualified medical expenses
shall not be treated as an expense paid for medical
care.
(7) Transfer of account incident to divorce.--The
transfer of an individual's interest in a health
savings account to an individual's spouse or former
spouse under a divorce or separation instrument
described in clause (i) of section 121(d)(3)(C) shall
not be considered a taxable transfer made by such
individual notwithstanding any other provision of this
subtitle, and such interest shall, after such transfer,
be treated as a health savings account with respect to
which such spouse is the account beneficiary.
(8) Treatment after death of account beneficiary.--
(A) Treatment if designated beneficiary is
spouse.--If the account beneficiary's surviving
spouse acquires such beneficiary's interest in
a health savings account by reason of being the
designated beneficiary of such account at the
death of the account beneficiary, such health
savings account shall be treated as if the
spouse were the account beneficiary.
(B) Other cases.--
(i) In general.--If, by reason of the
death of the account beneficiary, any
person acquires the account
beneficiary's interest in a health
savings account in a case to which
subparagraph (A) does not apply--
(I) such account shall cease
to be a health savings account
as of the date of death, and
(II) an amount equal to the
fair market value of the assets
in such account on such date
shall be includible if such
person is not the estate of
such beneficiary, in such
person's gross income for the
taxable year which includes
such date, or if such person is
the estate of such beneficiary,
in such beneficiary's gross
income for the last taxable
year of such beneficiary.
(ii) Special rules.--
(I) Reduction of inclusion
for predeath expenses.--The
amount includible in gross
income under clause (i) by any
person (other than the estate)
shall be reduced by the amount
of qualified medical expenses
which were incurred by the
decedent before the date of the
decedent's death and paid by
such person within 1 year after
such date.
(II) Deduction for estate
taxes.--An appropriate
deduction shall be allowed
under section 691(c) to any
person (other than the decedent
or the decedent's spouse) with
respect to amounts included in
gross income under clause (i)
by such person.
(g) Cost-of-living adjustment.--
(1) In general.--Each dollar amount in subsections
(b)(2) and (c)(2)(A) shall be increased by an amount
equal to--
(A) such dollar amount, multiplied by
(B) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in
which such taxable year begins determined by
substituting for ``calendar year 2016'' in
subparagraph (A)(ii) thereof--
(i) except as provided in clause
(ii), ``calendar year 1997'', and
(ii) in the case of each dollar
amount in subsection (c)(2)(A),
``calendar year 2003''.
In the case of adjustments made for any taxable year
beginning after 2007, section 1(f)(4) shall be applied
for purposes of this paragraph by substituting ``March
31'' for ``August 31'', and the Secretary shall publish
the adjusted amounts under subsections (b)(2) and
(c)(2)(A) for taxable years beginning in any calendar
year no later than June 1 of the preceding calendar
year.
(2) Rounding.--If any increase under paragraph (1) is
not a multiple of $50, such increase shall be rounded
to the nearest multiple of $50.
(h) Reports.--The Secretary may require--
(1) the trustee of a health savings account to make
such reports regarding such account to the Secretary
and to the account beneficiary with respect to
contributions, distributions, the return of excess
contributions, and such other matters as the Secretary
determines appropriate, and
(2) any person who provides an individual with a high
deductible health plan to make such reports to the
Secretary and to the account beneficiary with respect
to such plan as the Secretary determines appropriate.
The reports required by this subsection shall be filed at such
time and in such manner and furnished to such individuals at
such time and in such manner as may be required by the
Secretary.
* * * * * * *
DISSENTING VIEWS
H.R. 6314 Health Saving Act of 2018
H.R. 6314 (Burgess, R-TX) defines bronze and catastrophic
Affordable Care Act (ACA)-compliant plans as high-deductible
health plans (HDHPs) for the purposes of health savings account
(HSA) eligibility.
H.R. 6314 does not undo Republican sabotage, premium hikes,
and benefit cuts they have caused over the past 18 months. This
bill was one in a series of 11 bills marked up that Republicans
claim will help lower health care costs for consumers. This
legislation does not undo the disruption and sabotage the
Republicans have continued to inflict on the American health
care system. Instead of focusing on expansion of HSAs and
HDHPs, Democrats encourage the Committee to redirect its
attention to legislation that could actually ensure that
uninsured, low-income, and vulnerable people have real access
to care. For example H.R. 5155, sponsored by Reps. Pallone,
Neal, and Scott would protect people with pre-existing
conditions, help lower premiums for Americans, and improve
affordability of health coverage.
HDHPs and HSAs do not promote healthy behavior. It is
widely acknowledged that HSAs and HDHPs lead consumers to delay
care. They do not encourage individuals to make better health
care decisions, as Republicans' ``skin in the game'' talking
points assert. Decades of research show that exposure to high
out-of-pocket costs leads consumers to delay or forgo both
necessary and unnecessary care. Delaying care and increasing
costs run counter to Democratic policy goals of better
coordinated, high-value affordable care for the American
family. This legislation demonstrates why HDHPs in their
current format do not allow consumers to see value in their
health insurance.
According to the American Hospital Association, ``Hospitals
and health systems report that increased enrollment in HDHPs
over the past several years has reduced access to care and
subjected patients to costs they cannot afford. In addition,
patients enrolled in HDHPs appear to delay care until they have
reached their deductible or are in an emergency situation,
which could lead to poorer health outcomes.''
HSAs mostly benefit high-income taxpayers while doing
little to help moderate-income families or the uninsured. High-
income people can best afford to save for health care expenses
and are therefore the most likely to contribute to HSAs. Higher
income filers are much more likely to establish HSAs than lower
income filers--70 percent of HSA contributions come from
households with incomes over $100,000, according to the Joint
Commission on Taxation (JCT)--and they are also likelier to max
out their contributions. Additionally, high-income people
receive the biggest tax benefit for each dollar contributed to
an HSA, because the value of a tax deduction rises with an
individual's tax bracket. More than 44 percent of Americans
can't afford a $400 emergency. For these families, it is
unlikely that they have excess income to devote to a tax-
preferred account.
With specific respect to this legislation, over 85 percent
of individuals enrolled in an ACA marketplace plan receive tax
credits to help with the cost of health insurance premiums. The
average financial assistance is $371, bringing the average cost
to the consumer to about $100 per month. Put another way, the
vast majority of individuals enrolled need help affording
coverage much less have the ability to save in a tax-preferred
account.
Legislation busts the deficit to benefit the wealthy while
putting Medicare, Social Security, and Medicaid at risk.
Altogether, the 11 marked up in committee would add another $92
billion in unoffset tax cuts to the deficit. Republican
attempts to expand HSAs (and encourage more enrollment in plans
with high deductibles, covering very few up-front health costs)
are a continuation of their platform of shifting families into
health plans that provide fewer health benefits and higher out-
of-pocket costs--while providing greater tax benefits for
higher-income individuals and corporate-special interests.
JCT estimates the cost of this bill to be $137 million over
10 years. With this bill Republicans are adding more tax cuts
and increasing the deficit. Republicans are using the deficit,
which they keep making larger with cuts for the wealthy, to
justify the deep cuts they plan to make to Medicare and
Medicaid. Republicans already are proposing to cut Medicare and
Medicaid by nearly a trillion dollars to try to pay for the tax
cuts they've already enacted. This bill will only increase
Republicans' call for further cuts to these critical programs.
Richard E. Neal,
Ranking Member.
[all]