How the Updated Better Care Reconciliation Act Impacts HSAs

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It’s hard to keep up with all the health care legislation news lately. That’s why we’re providing regular summaries of the latest news, reflecting the current state of health care in the United States or how it may be changing in the not-too-distant future. Here’s a recap of some of the latest stories:

Senate Republicans’ Updated Better Care Reconciliation Act (“BCRA”) and the Impact on HSAs

Senate Republicans left Washington for their July 4th Recess without voting on the Better Care Reconciliation Act. This unexpected delay was due to broad opposition to the draft released in June.

Over the past three weeks, Senate Republicans have been drafting amended legislation to try and win the support of fifty members of their caucus.

The updated legislative language retains the changes to employee health benefits and consumer directed health care released in the previous discussion draft and includes additional alterations to the law surrounding Health Savings Accounts (“HSAs”).

New changes to HSAs include:

  • Allowing tax free distributions for children under the age of 27;
  • Allowing tax-free distributions to pay the premium for high-deductible health plans; and
  • Excluding otherwise eligible High Deductible Health Plans (“HDHPs”) covering abortion from eligibility to contribute to an HSA.

As with the previous draft, this iteration of the bill would delay implementation of the “Cadillac Tax” until 2026; repeal the $2,600 contribution limit on Flexible Spending Accounts (“FSAs”); and allow over-the-counter medications to be claimed as qualified medical expenses for HSAs, FSAs, and HRAs.

Two Republican Senators Oppose Bill, Leadership Can Only Afford One More Defection

With a slim 52-48 majority in the Senate, Majority Leader Mitch McConnell (R-KY) can only afford two “no” votes.

The first hurdle that McConnell and his leadership team will face is getting over the procedural hurdle of bringing the bill to the floor for debate. Senators Rand Paul (R-KY) and Susan Collins (R-ME) each came out against the BCRA and vowed to vote against the bill coming up for debate, putting the bill in procedural peril.

Several other Senators have withheld support saying that they need time to review before they can endorse the recent changes and before they will consider voting to bring the bill to the Senate floor.

Senator McConnell has previously said that a failure to pass the bill would result in McConnell working with Democrats on health care legislation.

Senate Majority Whip John Cornyn (R-TX) says, in the alternative, that if Republicans vote no on the BCRA “it essentially is a vote for Obamacare because that’s what we’re going to be left with.”

The updated language has been submitted to the Congressional Budget Office (“CBO”) for the score required to bring the bill for a vote.

The CBO score is expected this week and will include two separate analyses – one including an amendment allowing insurance plans to waive essential health benefits and one without.

McCain’s Operation Delays BCRA

Although Majority Leader Mitch McConnell intended to begin voting on the BCRA this week, Senator John McCain (R-AZ) recovers from an operation.

With the vote set for the coming week now indefinitely postponed, GOP success in its long-promised ObamaCare repeal grows all the more uncertain.

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By |2018-02-13T12:12:07+00:00July 17th, 2017|FSAs, HRAs, HSAs, Legislation|
Disclaimer: ConnectYourCare does not provide tax or legal advice. This information is not intended and should not be taken as tax or legal advice. Any tax or legal information in this notice is merely a summary of ConnectYourCare’s understanding and interpretation of some of the current tax regulations and is not exhaustive. You should consult your tax advisor or legal counsel for advice and information concerning your particular situation before making any decisions.