Ways and Means Bills Would Expand HSA Tax Breaks, Weaken Insurance Marketplaces
People with a high-deductible health plan (that is, with a deductible of at least
No other savings vehicle offers all three tax benefits. For example, 401(k) contributions and earnings are tax-free but withdrawals are taxed. Moreover, there are no income limits on HSA participation, so affluent people who have "maxed out" their individual retirement account and 401(k) contributions can use HSAs to shelter more funds.
HSAs mainly benefit high-income people, for two reasons. First, high-income people can best afford to save for health care expenses and are therefore the most likely to contribute to HSAs. This explains why higher-income filers are much likelier to establish HSAs than lower-income filers, why they're likelier to max out their contributions, and why 70 percent of HSA contributions come from households with incomes over
See chart here (https://www.cbpp.org/blog/ways-and-means-bills-would-expand-hsa-tax-breaks-weaken-insurance-marketplaces).
The main -- and costliest -- of the bills to expand HSAs (H.R. 6306) would nearly double the annual contribution limits, to
Costly provisions of other bills would allow Medicare beneficiaries to contribute to HSAs (H.R. 6309) and allow accountholders to use HSA funds for things other than medical care, such as gym memberships and cycling classes (H.R. 6312).
Another bill before Ways and Means (H.R. 6311) would likely reduce choice and competition in the ACA marketplaces. It would allow people buying individual-market plans outside the ACA marketplaces to receive ACA tax credits, although the credits would only be available when they file their tax returns the following year, not up front to help them pay premiums. And it would eliminate the requirement that insurers, in order to sell plans eligible for the ACA tax credit, must offer at least one "silver" and one "gold" plan through the marketplace. If this bill were enacted, an insurer could offer coverage only outside the marketplace while still giving consumers access to premium tax credits.
Reducing the incentives for insurers to offer marketplace coverage could make it easier for insurers to engage in strategies to attract only healthier enrollees, such as offering only bronze or catastrophic plans, which have higher deductibles and other cost-sharing expenses for consumers than silver and gold plans. It also could reduce plan choices for consumers within the marketplaces, if insurers shift to off-marketplace business. And it could prompt fewer consumers to comparison shop in the marketplaces, where they can compare premiums and benefits for multiple insurers, thus reducing competitive pressure on insurers to hold down premiums.
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