House Ways & Means Committee Issues Report on Veterans TRICARE Choice Act

Targeted News Service

WASHINGTON, Nov. 22 -- The House Ways and Means Committee issued a report (H.Rpt. 114-809) on legislation (H.R. 5458) to provide for coordination between the TRICARE program and eligibility for making contributions to a health savings account. The report was advanced by Rep. Kevin Brady, R-Texas, on Nov. 14.

Excerpts of the report follow:

I. SUMMARY AND BACKGROUND

A. Purpose and Summary

The bill, H.R. 5458, as reported from the Committee on Ways and Means, allows eligible individuals covered by TRICARE to elect out of that coverage and thus, during that period, be eligible to make contributions to their Health Savings Account ("HSA").

B. Background and Need for Legislation

Those who enroll in qualified high-deductible health plans ("HDHP") are permitted to open an HSA. These accounts allow for pre-tax contributions, tax-free investment earnings, and tax-free distributions for future qualified medical expenses.

TRICARE is the primary program by which the military health system provides active and retired members of the armed forces and their families with medical coverage. An individual who is covered by an HDHP for a month and also covered under TRICARE for the month is not eligible to make HSA contributions for the month.

According to a 2015 census conducted by America's Health Insurance Plans (AHIP), as of January 2015, 19.7 million people were covered by an HDHP/HSA, a 2.3 million-person increase from 2014 levels. HDHPs/HSAs are an increasingly popular option for workers--only four percent of workers were enrolled in such coverage in 2005 compared to 24 percent in 2015. The current inability for certain non-active duty, TRICARE-eligible individuals to contribute to their HSAs limits their choices and ability to save in a tax-preferred way for their health care. The Committee believes those who have served this country should have expanded options when it comes to financing their health insurance.

C. Legislative History

Background

H.R. 5458 was introduced on June 13, 2016, and was referred to the Committee on Ways and Means.

Committee action

The Committee on Ways and Means marked up H.R. 5458, the Veterans TRICARE Choice Act of 2016, on June 15, 2016, and ordered the bill, as amended, favorably reported (with a quorum being present).

Committee hearings

The policy issues surrounding access to consumer-directed health care accounts, like HSAs, have been discussed at two Ways and Means hearings during the 114th Congress:

Full Committee Hearing on the Tax Treatment of Health Care (April 14, 2016); and

Subcommittee on Health Member Day Hearing on Tax-Related Proposals to Improve Health Care (May 17, 2016).

II. EXPLANATION OF THE BILL

A. Coordination Between TRICARE Program and Eligibility To Make Contributions to Health Savings Accounts (Sec. 2 of the Bill and Sec. 223 of the Code)

PRESENT LAW

Health savings accounts

An individual with a high deductible health plan and no other health plan (other than a plan that provides certain permitted insurance or permitted coverage) is generally eligible to make deductible contributions to a health savings account ("HSA"), subject to certain limits (an "eligible individual"). HSA contributions made on behalf of an eligible individual by an employer are excludible from income and wages for employment tax purposes. Eligibility for HSA contributions is generally determined monthly, based on the individual's status and health plan coverage as of the first day of the month.

An individual with other coverage in addition to a high deductible health plan is still eligible to make HSA contributions if such other coverage is permitted insurance or permitted coverage. Permitted insurance is: (1) insurance if substantially all of the coverage provided under such insurance relates to (a) liabilities incurred under worker's compensation law, (b) tort liabilities, (c) liabilities relating to ownership or use of property (e.g., auto insurance), or (d) such other similar liabilities as the Secretary of the Treasury may prescribe by regulations; (2) insurance for a specified disease or illness; and (3) insurance that provides a fixed payment per day (or other period) for hospitalization. Permitted coverage is coverage (whether provided through insurance or otherwise) for accidents, disability, dental care, vision care, or long-term care. Coverage under certain health flexible spending arrangements or health reimbursement arrangements is also permitted.

TRICARE program

The Military Health System provides active duty and retired members of the armed forces and their families (including certain survivors and former spouses) with medical coverage, primarily through the TRICARE program.1 The TRICARE program offers various health plans, including a managed care option and fee-for-service options. An individual may be covered by TRICARE automatically without having to enroll in TRICARE. An individual who is covered by a high deductible health plan for a month and also covered under TRICARE for the month is not eligible to make HSA contributions for the month.

110 U.S.C. chapter 55.

REASONS FOR CHANGE

The Committee continues to believe that high deductible health plans and the related HSAs will help reduce health care costs. In some cases, an individual covered by a high deductible health plan may become covered by TRICARE automatically, ending his or her eligibility to make HSA contributions. The individual may prefer to decline TRICARE coverage in order to continue to make HSA contributions; however, declining TRICARE coverage is not an option under present law. The Committee wishes to provide individuals with that option.

EXPLANATION OF PROVISION

HSA eligibility

Under the provision, for any period with respect to which an individual has made an election of TRICARE ineligibility, as described below, TRICARE coverage is disregarded in determining whether the individual is eligible to make HSA contributions for the period.

TRICARE program

The provision amends the provisions of the TRICARE program to allow a TRICARE-eligible individual to elect to be ineligible to enroll in and receive benefits under the TRICARE program (referred to herein as an "election of TRICARE ineligibility"). For this purpose, a TRICARE-eligible individual is an individual who is eligible to be a covered beneficiary entitled to health care benefits under the TRICARE program (determined without regard to an election of TRICARE ineligibility) and is not serving on active duty. An election of TRICARE ineligibility is in effect for the period beginning on the date of the election and ending on the date the individual makes an election to be eligible to enroll in the TRICARE program, as described below.

If a TRICARE-eligible individual makes an election of TRICARE ineligibility, the individual may later elect to be eligible to enroll in the TRICARE program, but only during a special enrollment period. A special enrollment period is defined as the period in which a beneficiary under the Federal Employees Health Benefits program2 may enroll in or change plans by reason of a qualifying event or during an open enrollment season. The Secretary of Defense is directed to ensure that a TRICARE-eligible individual who makes an election of TRICARE ineligibility may later efficiently enroll in the TRICARE program, including by maintaining the individual, as appropriate, in the TRICARE enrollment system in inactive status.

2Provisions governing the Federal Employees Health Benefits program are contained in 5 U.S.C. chapter 89 and provide special enrollment periods in the case of certain events, such as marriage or the birth of a child. The provision allows the Secretary of Defense to include additional events, including events relating to a member of the armed forces being ordered to active duty.

The Secretary of Defense is directed also to ensure that a TRICARE-eligible individual who makes an election of TRICARE ineligibility is maintained on the Defense Enrollment Eligibility Reporting System (or a successor system), regardless of whether the individual is eligible for the TRICARE program during the period of the election.

Under the provision, the Secretary of Defense is required to provide certain information to the Commissioner of Internal Revenue (the "Commissioner") and to a TRICARE-eligible individual seeking to make an election of TRICARE ineligibility. Specifically, not later than 90 days after an election of TRICARE ineligibility, there must be provided to the Commissioner the name of the TRICARE-eligible individual who makes the election and any other information that the Commissioner may require with respect to the individual for purposes of determining the individual's eligibility for an HSA. There must be provided to each TRICARE-eligible individual seeking to make an election of TRICARE ineligibility information regarding (1) HSAs in connection with coverage under a high deductible health plan, including a comparison of HSAs and the health care benefits the individual is eligible to receive under the TRICARE program, and (2) changing an election of TRICARE ineligibility later in order to be eligible to enroll in the TRICARE program, as described above.

In addition, not later than 60 days after the end of each fiscal year, the Secretary of Defense is required to submit to the congressional defense committees a report on elections of TRICARE ineligibility and subsequent elections to be eligible to enroll in the TRICARE program, which includes (1) the number of TRICARE-eligible individuals, as of the date of the submission of the report, who are ineligible to enroll in and receive any benefits under the TRICARE program pursuant to an election of TRICARE ineligibility, and (2) the number of TRICARE-eligible individuals who made an election of TRICARE ineligibility and, as of the date of the submission of the report, are enrolled in the TRICARE program pursuant to a later election to be eligible to enroll in the TRICARE program.

EFFECTIVE DATE

The provision applies to months beginning after December 31, 2016.

III. VOTES OF THE COMMITTEE

In compliance with clause 3(b) of rule XIII of the Rules of the House of Representatives, the following statement is made concerning the vote of the Committee on Ways and Means in its consideration of H.R. 5458, the "Veterans TRICARE Choice Act of 2016," on June 15, 2016.

The bill, H.R. 5458, as amended, was ordered favorably reported to the House of Representatives by a voice vote (with a quorum being present).

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. 5458, as reported.

The bill, as reported, is estimated to have the following effect on Federal fiscal year budget receipts for the period 2017-2026:

FISCAL YEARS

[Millions of dollars]

To view the table, click this link: https://www.congress.gov/congressional-report/114th-congress/house-report/809/1?r=5

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 provisions of the bill involve increased tax expenditures. See amounts shown in the table in Part IV.A above.

C. Cost Estimate Prepared by the Congressional Budget Office

In compliance with clause 3(c)(3) of rule XIII of the Rules of the House of Representatives, requiring a cost estimate prepared by the CBO, the following statement by CBO is provided.

June 20, 2016.

Hon. Kevin Brady,

Chairman, Committee on Ways and Means,

House of Representatives, Washington, DC.

Dear Mr. Chairman: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 5458, the Veterans TRICARE Choice Act of 2016.

If you wish further details on this estimate, we will be pleased to provide them. The CBO staff contact is Peter Huether.

Sincerely,

Keith Hall.

Enclosure.

H.R. 5458--Veterans TRICARE Choice Act of 2016

H.R. 5458 would allow certain individuals who are automatically eligible for TRICARE, which is the health benefits program of the Department of Defense, to elect to be temporarily ineligible for that benefit. Making that election would allow those individuals to contribute to health savings accounts (HSAs), which are tax-advantaged accounts used to pay health expenses. Under current law, individuals eligible for TRICARE cannot make contributions to HSAs. The new election allowed under H.R. 5458 would not apply to individuals serving on active duty.

The staff of the Joint Committee on Taxation estimates that the legislation would reduce revenues by $97 million over the 2017-2026 period. That change in revenues includes a reduction of $41 million that would result from changes in off-budget revenues (from Social Security payroll taxes). CHO estimates that effects on direct spending and spending subject to appropriation would be insignificant in any year and in total over the 2017-2026 period.

The Statutory Pay-As-You Go Act of 2010 establishes budget- reporting and enforcement procedures for legislation affecting revenues and direct spending. The estimated net increase in the federal deficit is shown in the following table. Only on-budget changes to revenues or outlays are subject to pay-as-you-go procedures.

JCT and CHO estimate that enacting the bill would not increase net direct spending or on-budget deficits by more than $5 billion in any of the four consecutive 10-year periods beginning in 2027.

JCT has determined that the bill contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act.

The CBO staff contact for this estimate is Peter Huether. The estimate was approved by Mark Booth, Unit Chief, Revenue Estimating.

CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR HR 5458, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON WAYS AND MEANS ON JUNE 15, 2016

To view the table, click this link: https://www.congress.gov/congressional-report/114th-congress/house-report/809/1?r=5.

Source:Staff of the Joint Committee on Taxation. Note:Components may not sum to total because of rounding a. A negative sign for revenues indicates a reduction in revenues.

V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE

A. Committee Oversight Findings and Recommendations

With respect to clause 3(c)(1) of rule XIII of the Rules of the House of Representatives (relating to oversight findings), the Committee advises that it was as a result of the Committee's review of the provisions of H.R. 5458 that the Committee concluded that it is appropriate to report the bill, as amended, favorably to the House of Representatives with the recommendation that the bill do pass.

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(g)(2) of H. Res. 5 (114th Congress), 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 the Federal Program Information Act (Public Law 95-220, as amended by Public Law 98-169).

H. Disclosure of Directed Rule Makings

In compliance with Sec. 3(i) of H. Res. 5 (114th Congress), the following statement is made concerning directed rule makings: The Committee estimates 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

A. Text of Existing Law Amended or Repealed by the Bill, as Reported

In compliance with clause 3(e)(1)(A) of rule XIII of the Rules of the House of Representatives, the text of each section proposed to be amended or repealed by the bill, as reported, is shown below:

Changes in Existing Law Made by the Bill, as Reported

In compliance with clause 3(e)(1)(A) of rule XIII of the Rules of the House of Representatives, the text of each section proposed to be amended or repealed by the bill, as reported, is shown below:

VII. ADDITIONAL VIEWS

Many veterans, after completing their service to the country, enter the civilian workforce and may receive health coverage though this private employer. Some employers choose to offer health savings accounts (HSAs) coupled with a high deductible health plan. For veterans also receiving coverage though Tricare, this can cause a problem. Contributions to a health savings account may only be made while the account owner is enrolled in a high deductible health plan. Further, the account owner may not be eligible for coverage that is not a high deductible health plan. Under present law, eligibility for Tricare coverage disqualifies a retiree from HSA eligibility because the Tricare program is not a high deductible health plan. While there is a difference of opinion in the committee on tax-preferred health accounts, the legislation recognizes that some veterans may have that coverage, and could run afoul of current law because of enrollment in Tricare. This is an issue that we should fix.

H.R. 5458 would provide that military retirees may disclaim their eligibility for the Tricare Program--the military's retiree medical insurance program. This would allow a retiree who is enrolled in a high deductible health plan to receive or make HSA contributions. Under the bill, retirees would be permitted to revoke their disclaimer upon a change of status event and enroll in Tricare coverage--such as if they terminate employment with a civilian employer who offers the high deductible health plan.

The Department of Defense as well as the House Armed Services Committee have some concerns with the approach in this bill, in particular that TRICARE eligibility is a statutory entitlement that cannot be waived. Changes in this legislation may also lead to a number of unintended consequences. Disclaimer of eligibility is not contingent upon enrollment in a HDHP so beneficiaries who do not obtain minimum essential coverage elsewhere, or who incur a gap in coverage, may be liable for the individual coverage penalty at the end of the tax year. We must also make sure that the Department of Defense and veterans' organizations properly educate beneficiaries about the very narrow circumstances by which this proposed language would apply and the potential impact on family readiness such an election could have should a beneficiary suffer a catastrophic illness or injury. We hope these issues will be addressed before the bill is brought to the House floor.

Sander M. Levin,

Ranking Member.

The full text of the report is found at: https://www.congress.gov/congressional-report/114th-congress/house-report/809/1?r=5.

Myron Struck, editor, Targeted News Service, Springfield, Va., 703/304-1897; [email protected]; http://www.targetednews.com

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