The current public health crisis and the coinciding economic hardships burdening every American taxpayer emphasize the need for creative solutions that lower healthcare costs. The Pandemic Eradication and Enhanced Prevention through Savings Act (PEEPS Act) introduced by Rep. Ken Buck (R-CO) and the Health Savings Accounts for All Act (HSAA Act) introduced by Sen. Rand Paul (R-KY) offer practical methods to make health insurance more affordable by expanding the use of Health Savings Accounts (HSAs).
HSAs are an increasingly popular device that empowers individuals to make their own health care decisions by contributing funds to a tax-free savings account designated for future health care expenditures. Currently, only individuals with high-deductible health plans (HDHPs) are allowed to contribute to these accounts, which can then be used to pay for specific qualified medical expenses.
The recently proposed legislation encompasses several concepts previously recommended by NTU, like eliminating contribution limits and expanding the definition of qualified care paid for by HSAs. As it currently stands, qualifying individuals and families may contribute up to $3,550 and $7,100 per year. The PEEPS Act extends contribution limits to 120 percent of the current total, while the HSAA Act eradicates the cap entirely.
Under both new bills, individuals would be allowed to spend HSA funds on insurance premiums. Additionally, the PEEPS Act ensures that HSA funds may be used to cover medical expenses for non-dependents, should the account holder choose to do so. It also waives the “use it or lose it” requirement that removes unused flexible spending account (FSA) funds from a person’s account at the end of the year. (FSAs are a separate but similar kind of tax-favored account.) The HSAA Act, meanwhile, establishes that an HSA account rolls over to the family after an account holder’s death. Policies like these diffuse powerful disincentives that prevent many individuals from enrolling in HSA programs.
Both proposed bills eliminate the requirement to be enrolled in an HDHP in order to make contributions to an HSA. This measure ensures individuals enrolled in Medicare, VA benefits, Tri-Care, and Indian Health Services qualify to contribute to an HSA. As of 2018, just 45.8 percent of Americans with “privately-held insurance under the age of 65” were enrolled in an HDHP, so the measure will significantly increase the number of qualifying Americans.
The PEEPS Act and HSAA Act expand a benefit that gives millions of Americans more autonomy over their health care. As some lawmakers propose expanding public insurance, at a high cost to taxpayers, identifying opportunities to cut costs and empower consumers becomes all the more important.