Hatch, Paulsen Introduce Bill to Enhance HSA, FSA
In March, Senate Finance Committee Chairman Orrin Hatch (R-UT) and House Ways and Means Committee member, Rep. Erik Paulsen (R-MN) introduced the Health Savings Act of 2016. The Health Savings Act is a piece of legislation that contains a number of provisions to simplify and expand Health Saving Accounts (HSA) and Flexible Savings Accounts (FSA). For those who may be unfamiliar with HSA and FSA, these are health care related accounts that some insurance plans offer into which individuals and employers are allowed to make tax-free contributions to pay for future medical costs. Congress and the Internal Revenue Service determine the types of medical expenses that are eligible for reimbursement through HSA and FSA funds.
Of significance to AAHP members, the Hatch-Paulsen bills (S. 2499 and H.R. 4469) would allow individuals to use their account dollars to pay for over-the-counter medications—which includes homeopathic OTC products—without a doctor’s prescription. The legislation would also allow dietary supplements to be reimbursable expenditures from HSA and FSA funds.
The over-the-counter eligibility provision in the Hatch-Paulsen measure would reverse the Affordable Care Act (a.k.a. Obamacare) language which disallowed over-the-counter medication expenditures from HSA and FSA without a prescription. While non-prescription OTC drugs were reimbursable through HSA/FSA prior to the Affordable Care Act, dietary supplements have never been eligible medical expenses through these accounts.
Separate legislation was introduced last year by Rep. Lynn Jenkins (R-KS) and Sen. Ron Johnson (R-WI) that focuses only on reinstituting the eligibility of OTC drugs as reimbursable medical expenditures through HSA and FSA. The legislation sponsored by Rep. Jenkins (H.R. 1270) passed through the House Ways and Means Committee last September. The Obama Administration is opposed to both the Hatch-Paulsen and Jenkins-Johnson legislation because it believes it will result in a significant cost to the federal government. If Congress considers a larger tax-related measure later this year in a post-November election session, it is possible that the OTC provision could be considered as part of that package. However, most Congressional observers believe the likelihood of passage this year is slim.
As it relates to the merits, restoring OTC medications to full tax-preferred status within HSA and FSA is an essential issue from both an access and cost-effectiveness perspective. Allowing coverage for OTC drugs without a prescription would return much-needed efficiency and consumer-empowerment in the treatment of easily managed conditions. In short, putting consumers in charge of their health choices and allowing them to make informed decisions about their healthcare makes good policy sense. If the OTC provision associated with both the Hatch-Paulsen and Jenkins-Johnson bills are not enacted this year, given the level of support for this initiative, I’m certain we will see similar legislation re-surface again in the next Congress.