House Committee OKs HSA Reform Measures

September 28, 2006 ( - A House Committee voted Wednesday to approve a bill that would allow employers and employees put more money toward health savings accounts, as well as other incentives to make the plans more attractive.

In a 24-14 vote, the House Ways and Means Committee approved H.R. 6134, a measure that would allow employers to contribute $2,700 for single coverage and $5,450 for family coverage, with those amounts being adjusted for inflation, according to Business Insurance. This would change the current law, in which the maximum contribution level is the lesser of the deductible in the high-deductible plan to which the HSA is linked, or $2,700 for single coverage and $5,450 for family coverage.

HSAs are a type of consumer-driven health plan (CDHP) meant to increase employees’ participation in their medical care decisions by getting them to share in the cost burden of coverage. The thought behind this increasingly popular health care trend is that if people are paying for their own health care and shopping around for the best prices, it will lead to a gradual decline in the cost of health care (See  Study: Employers See CDHPs as Course to Lower Health Costs ).

The bill would also allow employers and employees to make the maximum permitted contribution to an HSA regardless of when in the year an employee became covered under the arrangement, Business Insurance reported. Instead of prorating contributions, employees can join a company late in the year and still contribute the maximum amount to their HSAs.

Additionally, the bill would give employees a one-time opportunity to make tax-free rollovers of unused flexible spending account and health reimbursement arrangement balances to their HSAs. The rollover would have to be completed by the end of 2011. The legislation would allow for a one-time opportunity to roll over individual retirement account (IRA) balances into HSAs, giving workers the opportunity to withdraw the transferred funds tax-free to pay for health expenses.