H. Rept. 116-401 - INHALER COVERAGE AND ACCESS NOW ACT116th Congress (2019-2020)
Committee Report
Hide Overview| Report Type: | House Report |
|---|---|
| Accompanies: | H.R.4716 |
| Committees: | House Ways and Means Committee |
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116th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 116-401
======================================================================
INHALER COVERAGE AND ACCESS NOW ACT
_______
February 21, 2020.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Neal, from the Committee on Ways and Means, submitted the following
R E P O R T
[To accompany H.R. 4716]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 4716) to amend the Internal Revenue Code of 1986 to
provide a safe harbor for high deductible health plans without
a deductible for certain inhalers, having considered the same,
reports favorably thereon with an amendment and recommends that
the bill as amended do pass.
CONTENTS
Page
I. SUMMARY AND BACKGROUND............................................1
A. Purpose and Summary................................... 1
B. Background and Need for Legislation................... 1
C. Legislative History................................... 3
II. EXPLANATION OF THE BILL...........................................4
A. Safe Harbor for High Deductible Health Plans Without
Deductible for Certain Inhalers (sec. 2 of the bill
and sec. 223 of the Code)............................ 4
III.VOTES OF THE COMMITTEE............................................6
IV. BUDGET EFFECTS OF THE BILL........................................6
A. Committee Estimate of Budgetary Effects............... 6
B. Statement Regarding New Budget Authority and Tax
Expenditures Budget Authority........................ 8
C. Cost Estimate Prepared by the Congressional Budget
Office............................................... 8
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE.......11
A. Committee Oversight Findings and Recommendations...... 11
B. Statement of General Performance Goals and Objectives. 11
C. Information Relating to Unfunded Mandates............. 12
D. Applicability of House Rule XXI, Clause 5(b).......... 12
E. Tax Complexity Analysis............................... 12
F. Congressional Earmarks, Limited Tax Benefits, and
Limited Tariff Benefits.............................. 12
G. Duplication of Federal Programs....................... 12
H. Hearings.............................................. 13
VI. CHANGES IN EXISTING LAW MADE BY THE BILL.........................13
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Inhaler Coverage and Access Now Act''
or as the ``I CAN Act''.
SEC. 2. SAFE HARBOR FOR HIGH DEDUCTIBLE HEALTH PLANS WITHOUT DEDUCTIBLE
FOR CERTAIN INHALERS.
(a) In General.--Section 223(c)(2)(C) of the Internal Revenue Code of
1986 is amended--
(1) by striking ``for preventive care'' and inserting ``for
one or more of the following:
``(i) Preventive care'', and
(2) by adding at the end the following new clause:
``(ii) Inhalers for treatment of any chronic
lung disease (and any medicine or drug which is
delivered through such inhaler for treatment of
such disease).''.
(b) Conforming Amendment.--The heading for section 223(c)(2)(C) of
such Code is amended by striking ``preventive care deductible'' and
inserting ``certain deductibles''.
(c) Effective Date.--The amendments made by this section shall apply
to months beginning after the date of the enactment of this Act.
I. SUMMARY AND BACKGROUND
A. Purpose and Summary
The bill, H.R. 4716, the ``I CAN Act,'' as amended and
ordered reported by the Committee on Ways and Means on October
17, 2019, provides for coverage under a high deductible health
plan not requiring a deductible of inhalers for treatment of
any chronic lung disease, including asthma (and any medicine or
drug which is delivered through such inhalers for treatment of
such diseases).
B. Background and Need for Legislation
High Deductible Health Plans (HDHPs) represent a growing
percentage of plans offered on the individual and group market.
HDHPs have defined minimum deductibles and maximum out-of-
pocket limits. HDHPs are often, but not always, paired with a
tax-free health savings account (HSA). In general, HSAs provide
tax-favored treatment for current medical expenses as well as
the ability to save on a tax-favored basis for future medical
expenses. In general, an HSA is a tax-exempt account created
exclusively to pay for qualified medical expenses. Employers
are increasingly offering HSA-eligible HDHPs as a way to lower
their health care spending. Proponents argue this benefit
design leads to increased consumer engagement in their health
care and greater sensitivity to prices in the health care
market. However even with HSAs available, greater deductibles
lead to greater cost for consumers and an additional barrier to
care.
To use an HSA associated with a HDHP, the plan is
prohibited from offering coverage below the deductible (i.e.,
first dollar coverage) of services or benefits meant to treat
``an existing illness, injury or condition.'' However, an HDHP
may offer preventive care, such as mammography and
immunizations, without a deductible. Recognizing that consumers
often delay care because of higher deductibles, many
researchers have recommended offering coverage for chronic
conditions below the deductible. While such actions run counter
to the original intent of HDHPs, they are helpful to
individuals facing rising health care costs, especially those
individuals with consistent health care spending, and generally
improve health outcomes because individuals have easier access
to much needed treatment. Inhalers for treatment of chronic
lung disease is one such pre-deductible service that has been
identified as providing cost savings and improved health
outcomes for individuals with access to such treatments.
C. Legislative History
Background
H.R. 4716, the ``Inhaler Coverage and Access Now Act'' or
``I CAN Act,'' was introduced on October 17, 2019 and was
referred to the Committee on Ways and Means.
Committee hearings
The Committee on Ways and Means Subcommittee on Health held
a hearing on Lowering Costs and Expanding Access to Health Care
through Consumer-Directed Health Plans on June 6, 2018. The
witnesses for this hearing were Roy Ramthun, President and
Founder of Ask Mr. HSA Service; Matt Eyles, President and CEO
of America's Health Insurance Plans; Jody Dietel, Chief
Compliance Officer at WageWorks; and Dr. Sherry Glied, Dean of
New York University's Robert F. Wagner Graduate School of
Public Service.
The Committee on Ways and Means held a hearing on The
Rising Costs of Prescription Drugs on February 12, 2019. The
witnesses for this hearing were Ola Ojewumi, Founder of Project
ASCEND and patient; Mark E. Miller, PhD, Executive Vice
President of Health Care Arnold Ventures; Rachel Sachs,
Associate Professor of Law, Washington University in St. Louis;
Alan Reuther, Legislative Consultant, UAW Retiree Medical
Benefits Trust; and Joseph R. Antos, PhD, Wilson H. Taylor
Scholar In Health Care and Retirement Policy with the American
Enterprise Institute.
The Committee on Ways and Means held a hearing on Investing
in the U.S. Health System by Lowering Drug Prices, Reducing
Out-of-Pocket costs, and Improving Medicare Benefits on October
17, 2019. The witnesses for this hearing were Samantha Reid, a
Crohn's Disease patient; Catherine Alicia Georges, National
Volunteer President for AARP; Mark E. Miller, PhD, Executive
Vice President of Health Care at Arnold Ventures; Judy Feder,
PhD, Professor and former Dean of Georgetown University's
McCourt School of Public Policy; and Benedic N. Ippolito, PhD,
Research Fellow at the American Enterprise Institute.
Committee action
The Committee on Ways and Means marked up H.R. 4716 on
October 23, 2019, and ordered the bill, as amended, favorably
reported to the House of Representatives by voice vote (with a
quorum being present).
II. EXPLANATION OF THE BILL
A. Safe Harbor for High Deductible Health Plans Without Deductible for
Certain Inhalers (sec. 2 of the bill and sec. 223 of the Code)
PRESENT LAW
Health savings accounts
An individual may establish a health savings account
(``HSA'') only if the individual is covered under a plan that
meets the requirements for a high deductible health plan, as
described below. In general, HSAs provide tax-favored treatment
for current medical expenses as well as the ability to save on
a tax-favored basis for future medical expenses. In general, an
HSA is a tax-exempt trust or custodial account created
exclusively to pay for the qualified medical expenses of the
account holder and his or her spouse and dependents.
Within limits,\1\ contributions to an HSA made by or on
behalf of an eligible individual are deductible by the
individual. Contributions to an HSA are excludible from income
and employment taxes if made by the employer. Earnings in HSAs
are not taxable. Distributions from an HSA for qualified
medical expenses are not includible in gross income.
Distributions from an HSA that are not used for qualified
medical expenses are includible in gross income and are subject
to an additional tax of 20 percent. The 20-percent additional
tax does not apply if the distribution is made after death,
disability, or the individual attains the age of Medicare
eligibility (age 65).
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\1\For 2019, the basic limit on annual contributions that can be
made to an HSA is $3,500 in the case of self-only coverage and $7,000
in the case of family coverage. The basic annual contributions limits
are increased by $1,000 for individuals who have attained age 55 by the
end of the taxable year (referred to as ``catch-up'' contributions).
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High deductible health plans
A high deductible health plan is a health plan that has an
annual deductible which is not less than $1,350 (for 2019) for
self-only coverage and twice this amount for family coverage,
and for which the sum of the annual deductible and other annual
out-of-pocket expenses (other than premiums) for covered
benefits does not exceed $6,750 (for 2019) for self-only
coverage and twice this amount for family coverage.\2\ These
dollar thresholds are subject to inflation adjustment, based on
chained CPI.\3\
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\2\Sec. 223(c)(2).
\3\Sec. 223(g).
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An individual who is covered under a high deductible health
plan is eligible to establish an HSA, provided that while such
individual is covered under the high deductible health plan,
the individual is not covered under any health plan that (1) is
not a high deductible health plan and (2) provides coverage for
any benefit (subject to certain exceptions) covered under the
high deductible health plan.\4\
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\4\Sec. 223(c)(1).
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Various types of coverage are disregarded for this purpose,
including coverage of any benefit provided by permitted
insurance, coverage (whether through insurance or otherwise)
for accidents, disability, dental care, vision care, or long-
term care, as well as certain limited coverage through health
flexible savings accounts.\5\ Permitted insurance means
insurance under which substantially all of the coverage
provided relates to liabilities incurred under workers'
compensation laws, tort liabilities, liabilities relating to
ownership or use of property, or such other similar liabilities
as specified by the Secretary under regulations. Permitted
insurance also means insurance for a specified disease or
illness, and insurance paying a fixed amount per day (or other
period) of hospitalization.\6\
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\5\Sec. 223(c)(1)(B).
\6\Sec. 223(c)(3).
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Under a safe harbor, a high deductible health plan is
permitted to provide coverage for preventive care (within the
meaning of section 1861 of the Social Security Act, except as
otherwise provided by the Secretary) before satisfaction of the
minimum deductible.\7\ IRS guidance describes the types of
coverage that constitute preventive care for this purpose.\8\
More recently, Notice 2019-45\9\ provides an appendix with a
limited list of preventive care services and items for certain
chronic conditions that may be treated as preventive care, and
provides that these services and items are treated as
preventive only when prescribed to treat an individual
diagnosed with the specified chronic condition, and only when
prescribed for the purpose of preventing the exacerbation of
the chronic condition or the development of a secondary
condition. In connection with medicines or drugs delivered
through inhalers, Notice 2019-45 limits as preventive care
inhaled corticosteroids for individuals diagnosed with asthma;
the Notice also permits as preventive care peak flow meters for
such diagnosed individuals.
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\7\Sec. 223(c)(2)(C).
\8\Notice 2004-23, 2004-15 I.R.B. 725 (April 12, 2004). See also
Notice 2004-50, 2004-33 IRB 1 (Aug. 9, 2004); Notice 2008-59, 2008-29
I.R.B. 123 (July 21, 2008); Notice 2013-37, 2013-40 I.R.B. 293 (Sept.
30, 2013).
\9\2019-32 I.R.B. 593 (August 5, 2019).
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REASONS FOR CHANGE
The Committee observes that research shows that exposure to
high out-of-pocket costs leads consumers to delay or even forgo
treatment for necessary care. In addition, the Committee
observes that ensuring access to inhalers for individuals who
need them will help prevent costly complications. The Committee
released a report that asthma medication is higher priced in
the U.S. than other developed countries.\10\ For example,
Advair Diskus, a common asthma medication costs 1,296 percent
higher in the U.S. During Committee hearings on prescription
drug costs, the Committee heard testimony about the increasing
costs of medications for asthma. The provision will help
address the affordability barrier by expanding access to
inhalers for the treatment of chronic lung disease for
individuals enrolled in high deductible health plans.
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\10\A Painful Pill to Swallow: U.S. vs. International Prescription
Drug Prices, Ways and Means Committee, September 23, 2019. https://
waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/
documents/U.S.%20vs.%20International%20
Prescription%20Drug%20Prices_0.pdf.
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EXPLANATION OF PROVISION
The provision permits a high deductible health plan to
provide inhalers for treatment of any chronic lung disease, or
any medicine or drug which is delivered through such inhaler
for treatment of such disease, without satisfaction of the
plan's minimum deductible. Thus, under the provision, a health
plan will not fail to be treated as a high deductible health
plan merely by reason of failing to require a deductible for
such inhalers or such medicines and drugs, and an individual
who is covered under such a plan may contribute to an HSA.
EFFECTIVE DATE
The provision applies to months beginning after the date of
enactment.
III. VOTES OF THE COMMITTEE
Pursuant to 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. 4716, the ``Inhaler Coverage and Access
Now Act,'' on October 23, 2019.
The amendment in the nature of a substitute to H.R. 4716
was agreed to by voice vote (with a quorum being present).
The bill, H.R. 4716, 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.
The bill is estimated to decrease Federal fiscal year
budget receipts by $1.4 billion dollars for the period 2019
through 2029.
ESTIMATED REVENUE EFFECT OF THE PROPOSAL
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Fiscal Years [Millions of Dollars]
Item -------------------------------------------------------------------------------------------------------------
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2020-24 2020-29
--------------------------------------------------------------------------------------------------------------------------------------------------------
Safe Harbor for High Deductible Health -35 -68 -98 -129 -146 -157 -177 -189 -197 -206 -476 -1,402
Plans Without Deductible for Certain
Inhallers\1\.............................
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NOTE: Details may not add to totals due to rounding.
\1\Estimate includes the following budget effects:
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2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2020-24 2020-29
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On-buget.................................. -27 -52 -76 -99 -113 -121 -139 -150 -156 -163 -367 -1,095
Off-budget................................ -8 -16 -22 -30 -33 -36 -38 -39 -41 -43 -109 -307
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B. Statement Regarding New Budget Authority and Tax Expenditures Budget
Authority
Pursuant to 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 bill involves no new tax expenditure.
C. Cost Estimate Prepared by the Congressional
Budget Office
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, requiring a cost estimate prepared by
CBO, the following statement by CBO is provided.
U.S. Congress,
Congressional Budget Office,
Washington, DC, October 31, 2019.
Hon. Richard Neal,
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. 4716, the Inhaler
Coverage and Access Now Act of 2019.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Nathaniel
Frentz.
Sincerely,
Phillip Swagel,
Director.
Enclosure.
The bill would:
H.R. 4716 would amend the Internal Revenue
Code to allow a high deductible plan to provide
inhalers for treatment of any chronic lung disease, or
any medicine or drug which is delivered through such
inhaler for treatment of such disease, without a
deductible and without affecting a beneficiary's
eligibility to participate in a Health Savings Account
(HSA).
Estimated budgetary effects would primarily stem from:
An increase in contributions to HSAs, which
are excluded from income and employment taxes.
The Congressional Budget Act of 1974, as amended,
stipulates that revenue estimates provided by the staff of the
Joint Committee on Taxation (JCT) will be the official
estimates for all tax legislation considered by Congress. As
such, CBO incorporates those estimates into its cost estimates
of the effects of legislation. All of the estimates for the
provisions of H.R. 4716 were provided by JCT.
Bill summary: H.R. 4716 would amend the Internal Revenue
Code by expanding the range of services a high deductible
health plan can cover before the plan's minimum deductible is
satisfied. Under current law, individuals are generally
eligible to participate in a Health Savings Account (HSA) if
they are covered by a high deductible health plan and no other
health care plan, except for certain types of coverage
specifically disregarded by law. Currently, high-deductible
health plans are allowed to provide ``first dollar'' (before
the minimum deductible is satisfied) coverage for preventative
care, including inhalers for individuals diagnosed with asthma.
H.R. 4716 would allow a high deductible plan to also provide
inhalers for treatment of any chronic lung disease, or any
medicine or drug which is delivered through such inhaler for
treatment of such disease, without a deductible and without
affecting a beneficiary's eligibility to participate in an HSA.
Estimated Federal cost: The estimated budgetary effect of
H.R. 4716 is shown in Table 1.
TABLE 1.--ESTIMATED BUDGETARY EFFECTS OF H.R. 4716
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By fiscal year, millions of dollars--
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2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2020-2024 2020-2029
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Decreases (-) in Revenues
Estimated Revenues.................... -35 -68 -98 -129 -146 -157 -177 -189 -197 -206 -476 -1,402
On-Budget......................... -27 -52 -76 -99 -113 -121 -139 -150 -156 -163 -367 -1,095
Off-Budget\a\..................... -8 -16 -22 -30 -33 -36 -38 -39 -41 -43 -109 -307
Increase in the Deficit From Changes in Revenues
Effect on the Deficit................. 35 68 98 129 146 157 177 189 197 206 476 1,402
On-Budget Deficit................. 27 52 76 99 113 121 139 150 156 163 367 1,095
Off-Budget Deficit................ 8 16 22 30 33 36 38 39 41 43 109 307
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Source: Staff of the Joint Committee on Taxation.
Components may not sum to totals because of rounding.
\a\Off-budget revenues result from changes in Social Security payroll tax receipts.
Basis of estimate: The Congressional Budget Act of 1974, as
amended, stipulates that revenue estimates provided by the
staff of the Joint Committee on Taxation (JCT) are the official
estimates for all tax legislation considered by the Congress.
CBO therefore incorporates those estimates into its cost
estimates of the effects of legislation. All of the estimates
for the provisions of H.R. 4716 were provided by JCT.\1\
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\1\For JCT's estimates of the provisions, which include detail
beyond the summary presented below, see Joint Committee on Taxation,
Description of H.R. 4716, Description Of H.R. 4716, The ``Inhaler
Coverage and Access Now Act'', JCX-45-19 (October 21, 2019) https://
go.usa.gov/xpajj
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Revenues: JCT estimates that the bill would decrease
revenues by $1.4 billion over the 2020-2029 period. The change
in revenues includes a reduction of $307 million that would
result from changes in off-budget revenues (from Social
Security payroll taxes).
Uncertainty: These budgetary estimates are uncertain
because they rely on underlying projections and other estimates
that are uncertain. Specifically, they are based in part on
CBO's economic projections for the next decade under current
law, and on estimates of changes in taxpayers' behavior in
response to changes in tax rules.
Pay-As-You-Go considerations: The Statutory Pay-As-You-Go
Act of 2010 establishes budget-reporting and enforcement
procedures for legislation affecting direct spending or
revenues. The changes in revenues that are subject to those
pay-as-you-go procedures are shown in Table 1. Only on-budget
changes to outlays or revenues are subject to pay-as-you-go
procedures.
Increase in long-term deficits: JCT estimates that enacting
H.R. 4716 would increase on-budget deficits by less than $5
billion in each of the four consecutive 10-year periods
beginning in 2030.
Mandates: None.
JCT has reviewed H.R. 4716 and determined that it contains
no intergovernmental or private-sector mandates as defined in
the Unfunded Mandates Reform Act.
Estimate prepared by: Revenues: Staff of the Joint
Committee on Taxation and Nathaniel Frentz; Mandates: Staff of
the Joint Committee on Taxation.
Estimate reviewed by: Joshua Shakin, Chief, Revenue
Estimating Unit; Joseph Rosenberg, Deputy Assistant Director
for Tax Analysis; John McClelland, Assistant Director for Tax
Analysis.
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 and clause
2(b)(1) of rule X of the Rules of the House of Representatives,
the Committee made findings and recommendations that are
reflected in this report.
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 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, Clause 5(b)
Clause 5(b) of rule XXI of the Rules of the House of
Representatives provides, in part, that ``It shall not be in
order to consider a bill, joint resolution, amendment, or
conference report carrying a retroactive Federal income tax
rate increase.'' The Committee, after careful review, states
that the bill does not involve any retroactive Federal income
tax rate increase within the meaning of the rule.
E. Tax Complexity Analysis
Section 4022(b) of Pub. L. No. 105-266, the Internal
Revenue Service Restructuring and Reform Act of 1998 (the
``RRA''), 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 RRA because the bill
contains no provision that amends the Internal Revenue Code of
1986 and has ``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 clause 3(c)(5) of rule XIII of the Rules
of the House of Representatives, 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
to Congress pursuant to section 21 of Pub. L. No. 111-139; or
(3) a program related to a program identified in the most
recent Catalog of Federal Domestic Assistance, published
pursuant to section 6104 of title 31, United States Code.
H. Hearings
In compliance with Sec. 103(i) of H. Res. 6 (116th
Congress) (1) the following hearing was used to develop or
consider H.R. 4716:
On February 12, 2019, the Committee held a hearing on the
Rising Costs of Prescription Drugs, held.
(2) The following related hearing was held:
On October 17th, 2019. the Committee held a hearing on
Investing in the U.S. Health System by Lowering Drug Prices,
Reducing Out-of-Pocket Costs, and Improving Medicare Benefits.
VI. CHANGES IN EXISTING LAW MADE BY THE BILL
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, and existing law in which no
change is proposed is shown in roman):
INTERNAL REVENUE CODE OF 1986
* * * * * * *
Subtitle A--Income Taxes
* * * * * * *
CHAPTER 1--NORMAL TAXES AND SURTAXES
* * * * * * *
Subchapter B--COMPUTATION OF TAXABLE INCOME
* * * * * * *
PART VII--ADDITIONAL ITEMIZED DEDUCTIONS FOR INDIVIDUALS
* * * * * * *
SEC. 223. HEALTH SAVINGS ACCOUNTS.
(a) Deduction allowed.--In the case of an individual who is
an eligible individual for any month during the taxable year,
there shall be allowed as a deduction for the taxable year an
amount equal to the aggregate amount paid in cash during such
taxable year by or on behalf of such individual to a health
savings account of such individual.
(b) Limitations.--
(1) In general.--The amount allowable as a deduction
under subsection (a) to an individual for the taxable
year shall not exceed the sum of the monthly
limitations for months during such taxable year that
the individual is an eligible individual.
(2) Monthly limitation.--The monthly limitation for
any month is 1 12 of--
(A) in the case of an eligible individual who
has self-only coverage under a high deductible
health plan as of the first day of such month,
$2,250.
(B) in the case of an eligible individual who
has family coverage under a high deductible
health plan as of the first day of such month,
$4,500.
(3) Additional contributions for individuals 55 or
older.--
(A) In general.--In the case of an individual
who has attained age 55 before the close of the
taxable year, the applicable limitation under
subparagraphs (A) and (B) of paragraph (2)
shall be increased by the additional
contribution amount.
(B) Additional contribution amount.--For
purposes of this section, the additional
contribution amount is the amount determined in
accordance with the following table:
(4) Coordination with other contributions.--The
limitation which would (but for this paragraph) apply
under this subsection to an individual for any taxable
year shall be reduced (but not below zero) by the sum
of--
(A) the aggregate amount paid for such
taxable year to Archer MSAs of such individual,
(B) the aggregate amount contributed to
health savings accounts of such individual
which is excludable from the taxpayer's gross
income for such taxable year under section
106(d) (and such amount shall not be allowed as
a deduction under subsection (a)), and
(C) the aggregate amount contributed to
health savings accounts of such individual for
such taxable year under section 408(d)(9) (and
such amount shall not be allowed as a deduction
under subsection (a)).
Subparagraph (A) shall not apply with respect to any
individual to whom paragraph (5) applies.
(5) Special rule for married individuals.--In the
case of individuals who are married to each other, if
either spouse has family coverage--
(A) both spouses shall be treated as having
only such family coverage (and if such spouses
each have family coverage under different
plans, as having the family coverage with the
lowest annual deductible), and
(B) the limitation under paragraph (1) (after
the application of subparagraph (A) and without
regard to any additional contribution amount
under paragraph (3))--
(i) shall be reduced by the aggregate
amount paid to Archer MSAs of such
spouses for the taxable year, and
(ii) after such reduction, shall be
divided equally between them unless
they agree on a different division.
(6) Denial of deduction to dependents.--No deduction
shall be allowed under this section to any individual
with respect to whom a deduction under section 151 is
allowable to another taxpayer for a taxable year
beginning in the calendar year in which such
individual's taxable year begins.
(7) Medicare eligible individuals.--The limitation
under this subsection for any month with respect to an
individual shall be zero for the first month such
individual is entitled to benefits under title XVIII of
the Social Security Act and for each month thereafter.
(8) Increase in limit for individuals becoming
eligible individuals after the beginning of the year.--
(A) In general.--For purposes of computing
the limitation under paragraph (1) for any
taxable year, an individual who is an eligible
individual during the last month of such
taxable year shall be treated--
(i) as having been an eligible
individual during each of the months in
such taxable year, and
(ii) as having been enrolled, during
each of the months such individual is
treated as an eligible individual
solely by reason of clause (i), in the
same high deductible health plan in
which the individual was enrolled for
the last month of such taxable year.
(B) Failure to maintain high deductible
health plan coverage.--
(i) In general.--If, at any time
during the testing period, the
individual is not an eligible
individual, then--
(I) gross income of the
individual for the taxable year
in which occurs the first month
in the testing period for which
such individual is not an
eligible individual is
increased by the aggregate
amount of all contributions to
the health savings account of
the individual which could not
have been made but for
subparagraph (A), and
(II) the tax imposed by this
chapter for any taxable year on
the individual shall be
increased by 10 percent of the
amount of such increase.
(ii) Exception for disability or
death.--Subclauses (I) and (II) of
clause (i) shall not apply if the
individual ceased to be an eligible
individual by reason of the death of
the individual or the individual
becoming disabled (within the meaning
of section 72(m)(7)).
(iii) Testing period.--The term
``testing period'' means the period
beginning with the last month of the
taxable year referred to in
subparagraph (A) and ending on the last
day of the 12th month following such
month.
(c) Definitions and special rules.--For purposes of this
section--
(1) Eligible individual.--
(A) In general.--The term ``eligible
individual'' means, with respect to any month,
any individual if--
(i) such individual is covered under
a high deductible health plan as of the
1st day of such month, and
(ii) such individual is not, while
covered under a high deductible health
plan, covered under any health plan--
(I) which is not a high
deductible health plan, and
(II) which provides coverage
for any benefit which is
covered under the high
deductible health plan.
(B) Certain coverage disregarded.--
Subparagraph (A)(ii) shall be applied without
regard to--
(i) coverage for any benefit provided
by permitted insurance,
(ii) coverage (whether through
insurance or otherwise) for accidents,
disability, dental care, vision care,
or long-term care, and
(iii) for taxable years beginning
after December 31, 2006, coverage under
a health flexible spending arrangement
during any period immediately following
the end of a plan year of such
arrangement during which unused
benefits or contributions remaining at
the end of such plan year may be paid
or reimbursed to plan participants for
qualified benefit expenses incurred
during such period if--
(I) the balance in such
arrangement at the end of such
plan year is zero, or
(II) the individual is making
a qualified HSA distribution
(as defined in section 106(e))
in an amount equal to the
remaining balance in such
arrangement as of the end of
such plan year, in accordance
with rules prescribed by the
Secretary.
(C) Special rule for individuals eligible for
certain veterans benefits.--An individual shall
not fail to be treated as an eligible
individual for any period merely because the
individual receives hospital care or medical
services under any law administered by the
Secretary of Veterans Affairs for a service-
connected disability (within the meaning of
section 101(16) of title 38, United States
Code).
(2) High deductible health plan.--
(A) In general.--The term ``high deductible
health plan'' means a health plan--
(i) which has an annual deductible
which is not less than--
(I) $1,000 for self-only
coverage, and
(II) twice the dollar amount
in subclause (I) for family
coverage, and
(ii) the sum of the annual deductible
and the other annual out-of-pocket
expenses required to be paid under the
plan (other than for premiums) for
covered benefits does not exceed--
(I) $5,000 for self-only
coverage, and
(II) twice the dollar amount
in subclause (I) for family
coverage.
(B) Exclusion of certain plans.--Such term
does not include a health plan if substantially
all of its coverage is coverage described in
paragraph (1)(B).
(C) Safe harbor for absence of [preventive
care deductible] certain deductibles.--A plan
shall not fail to be treated as a high
deductible health plan by reason of failing to
have a deductible [for preventive care] for one
or more of the following:
(i) Preventive care (within the
meaning of section 1861 of the Social
Security Act, except as otherwise
provided by the Secretary).
(ii) Inhalers for treatment of any
chronic lung disease (and any medicine
or drug which is delivered through such
inhaler for treatment of such disease).
(D) Special rules for network plans.--In the
case of a plan using a network of providers--
(i) Annual out-of-pocket
limitation.--Such plan shall not fail
to be treated as a high deductible
health plan by reason of having an out-
of-pocket limitation for services
provided outside of such network which
exceeds the applicable limitation under
subparagraph (A)(ii).
(ii) Annual deductible.--Such plan's
annual deductible for services provided
outside of such network shall not be
taken into account for purposes of
subsection (b)(2).
(3) Permitted insurance.--The term ``permitted
insurance'' means--
(A) insurance if substantially all of the
coverage provided under such insurance relates
to--
(i) liabilities incurred under
workers' compensation laws,
(ii) tort liabilities,
(iii) liabilities relating to
ownership or use of property, or
(iv) such other similar liabilities
as the Secretary may specify by
regulations,
(B) insurance for a specified disease or
illness, and
(C) insurance paying a fixed amount per day
(or other period) of hospitalization.
(4) Family coverage.--The term ``family coverage''
means any coverage other than self-only coverage.
(5) Archer MSA.--The term ``Archer MSA'' has the
meaning given such term in section 220(d).
(d) Health savings account.--For purposes of this section--
(1) In general.--The term ``health savings account''
means a trust created or organized in the United States
as a health savings account exclusively for the purpose
of paying the qualified medical expenses of the account
beneficiary, but only if the written governing
instrument creating the trust meets the following
requirements:
(A) Except in the case of a rollover
contribution described in subsection (f)(5) or
section 220(f)(5), no contribution will be
accepted--
(i) unless it is in cash, or
(ii) to the extent such contribution,
when added to previous contributions to
the trust for the calendar year,
exceeds the sum of--
(I) the dollar amount in
effect under subsection
(b)(2)(B), and
(II) the dollar amount in
effect under subsection
(b)(3)(B).
(B) The trustee is a bank (as defined in
section 408(n)), an insurance company (as
defined in section 816), or another person who
demonstrates to the satisfaction of the
Secretary that the manner in which such person
will administer the trust will be consistent
with the requirements of this section.
(C) No part of the trust assets will be
invested in life insurance contracts.
(D) The assets of the trust will not be
commingled with other property except in a
common trust fund or common investment fund.
(E) The interest of an individual in the
balance in his account is nonforfeitable.
(2) Qualified medical expenses.--
(A) In general.--The term ``qualified medical
expenses'' means, with respect to an account
beneficiary, amounts paid by such beneficiary
for medical care (as defined in section 213(d))
for such individual, the spouse of such
individual, and any dependent (as defined in
section 152, determined without regard to
subsections (b)(1), (b)(2), and (d)(1)(B)
thereof) of such individual, but only to the
extent such amounts are not compensated for by
insurance or otherwise. Such term shall include
an amount paid for medicine or a drug only if
such medicine or drug is a prescribed drug
(determined without regard to whether such drug
is available without a prescription) or is
insulin.
(B) Health insurance may not be purchased
from account.--Subparagraph (A) shall not apply
to any payment for insurance.
(C) Exceptions.--Subparagraph (B) shall not
apply to any expense for coverage under--
(i) a health plan during any period
of continuation coverage required under
any Federal law,
(ii) a qualified long-term care
insurance contract (as defined in
section 7702B(b)),
(iii) a health plan during a period
in which the individual is receiving
unemployment compensation under any
Federal or State law, or
(iv) in the case of an account
beneficiary who has attained the age
specified in section 1811 of the Social
Security Act, any health insurance
other than a medicare supplemental
policy (as defined in section 1882 of
the Social Security Act).
(3) Account beneficiary.--The term ``account
beneficiary'' means the individual on whose behalf the
health savings account was established.
(4) Certain rules to apply.--Rules similar to the
following rules shall apply for purposes of this
section:
(A) Section 219(d)(2) (relating to no
deduction for rollovers).
(B) Section 219(f)(3) (relating to time when
contributions deemed made).
(C) Except as provided in section 106(d),
section 219(f)(5) (relating to employer
payments).
(D) Section 408(g) (relating to community
property laws).
(E) Section 408(h) (relating to custodial
accounts).
(e) Tax treatment of accounts.--
(1) In general.--A health savings account is exempt
from taxation under this subtitle unless such account
has ceased to be a health savings account.
Notwithstanding the preceding sentence, any such
account is subject to the taxes imposed by section 511
(relating to imposition of tax on unrelated business
income of charitable, etc. organizations).
(2) Account terminations.--Rules similar to the rules
of paragraphs (2) and (4) of section 408(e) shall apply
to health savings accounts, and any amount treated as
distributed under such rules shall be treated as not
used to pay qualified medical expenses.
(f) Tax treatment of distributions.--
(1) Amounts used for qualified medical expenses.--Any
amount paid or distributed out of a health savings
account which is used exclusively to pay qualified
medical expenses of any account beneficiary shall not
be includible in gross income.
(2) Inclusion of amounts not used for qualified
medical expenses.--Any amount paid or distributed out
of a health savings account which is not used
exclusively to pay the qualified medical expenses of
the account beneficiary shall be included in the gross
income of such beneficiary.
(3) Excess contributions returned before due date of
return.--
(A) In general.--If any excess contribution
is contributed for a taxable year to any health
savings account of an individual, paragraph (2)
shall not apply to distributions from the
health savings accounts of such individual (to
the extent such distributions do not exceed the
aggregate excess contributions to all such
accounts of such individual for such year) if--
(i) such distribution is received by
the individual on or before the last
day prescribed by law (including
extensions of time) for filing such
individual's return for such taxable
year, and
(ii) such distribution is accompanied
by the amount of net income
attributable to such excess
contribution.
Any net income described in clause (ii) shall
be included in the gross income of the
individual for the taxable year in which it is
received.
(B) Excess contribution.--For purposes of
subparagraph (A), the term ``excess
contribution'' means any contribution (other
than a rollover contribution described in
paragraph (5) or section 220(f)(5)) which is
neither excludable from gross income under
section 106(d) nor deductible under this
section.
(4) Additional tax on distributions not used for
qualified medical expenses.--
(A) In general.--The tax imposed by this
chapter on the account beneficiary for any
taxable year in which there is a payment or
distribution from a health savings account of
such beneficiary which is includible in gross
income under paragraph (2) shall be increased
by 20 percent of the amount which is so
includible.
(B) Exception for disability or death.--
Subparagraph (A) shall not apply if the payment
or distribution is made after the account
beneficiary becomes disabled within the meaning
of section 72(m)(7) or dies.
(C) Exception for distributions after
medicare eligibility.--Subparagraph (A) shall
not apply to any payment or distribution after
the date on which the account beneficiary
attains the age specified in section 1811 of
the Social Security Act.
(5) Rollover contribution.--An amount is described in
this paragraph as a rollover contribution if it meets
the requirements of subparagraphs (A) and (B).
(A) In general.--Paragraph (2) shall not
apply to any amount paid or distributed from a
health savings account to the account
beneficiary to the extent the amount received
is paid into a health savings account for the
benefit of such beneficiary not later than the
60th day after the day on which the beneficiary
receives the payment or distribution.
(B) Limitation.--This paragraph shall not
apply to any amount described in subparagraph
(A) received by an individual from a health
savings account if, at any time during the 1-
year period ending on the day of such receipt,
such individual received any other amount
described in subparagraph (A) from a health
savings account which was not includible in the
individual's gross income because of the
application of this paragraph.
(6) Coordination with medical expense deduction.--For
purposes of determining the amount of the deduction
under section 213, any payment or distribution out of a
health savings account for qualified medical expenses
shall not be treated as an expense paid for medical
care.
(7) Transfer of account incident to divorce.--The
transfer of an individual's interest in a health
savings account to an individual's spouse or former
spouse under a divorce or separation instrument
described in clause (i) of section 121(d)(3)(C) shall
not be considered a taxable transfer made by such
individual notwithstanding any other provision of this
subtitle, and such interest shall, after such transfer,
be treated as a health savings account with respect to
which such spouse is the account beneficiary.
(8) Treatment after death of account beneficiary.--
(A) Treatment if designated beneficiary is
spouse.--If the account beneficiary's surviving
spouse acquires such beneficiary's interest in
a health savings account by reason of being the
designated beneficiary of such account at the
death of the account beneficiary, such health
savings account shall be treated as if the
spouse were the account beneficiary.
(B) Other cases.--
(i) In general.--If, by reason of the
death of the account beneficiary, any
person acquires the account
beneficiary's interest in a health
savings account in a case to which
subparagraph (A) does not apply--
(I) such account shall cease
to be a health savings account
as of the date of death, and
(II) an amount equal to the
fair market value of the assets
in such account on such date
shall be includible if such
person is not the estate of
such beneficiary, in such
person's gross income for the
taxable year which includes
such date, or if such person is
the estate of such beneficiary,
in such beneficiary's gross
income for the last taxable
year of such beneficiary.
(ii) Special rules.--
(I) Reduction of inclusion
for predeath expenses.--The
amount includible in gross
income under clause (i) by any
person (other than the estate)
shall be reduced by the amount
of qualified medical expenses
which were incurred by the
decedent before the date of the
decedent's death and paid by
such person within 1 year after
such date.
(II) Deduction for estate
taxes.--An appropriate
deduction shall be allowed
under section 691(c) to any
person (other than the decedent
or the decedent's spouse) with
respect to amounts included in
gross income under clause (i)
by such person.
(g) Cost-of-living adjustment.--
(1) In general.--Each dollar amount in subsections
(b)(2) and (c)(2)(A) shall be increased by an amount
equal to--
(A) such dollar amount, multiplied by
(B) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in
which such taxable year begins determined by
substituting for ``calendar year 2016'' in
subparagraph (A)(ii) thereof--
(i) except as provided in clause
(ii), ``calendar year 1997'', and
(ii) in the case of each dollar
amount in subsection (c)(2)(A),
``calendar year 2003''.
In the case of adjustments made for any taxable year
beginning after 2007, section 1(f)(4) shall be applied
for purposes of this paragraph by substituting ``March
31'' for ``August 31'', and the Secretary shall publish
the adjusted amounts under subsections (b)(2) and
(c)(2)(A) for taxable years beginning in any calendar
year no later than June 1 of the preceding calendar
year.
(2) Rounding.--If any increase under paragraph (1) is
not a multiple of $50, such increase shall be rounded
to the nearest multiple of $50.
(h) Reports.--The Secretary may require--
(1) the trustee of a health savings account to make
such reports regarding such account to the Secretary
and to the account beneficiary with respect to
contributions, distributions, the return of excess
contributions, and such other matters as the Secretary
determines appropriate, and
(2) any person who provides an individual with a high
deductible health plan to make such reports to the
Secretary and to the account beneficiary with respect
to such plan as the Secretary determines appropriate.
The reports required by this subsection shall be filed at such
time and in such manner and furnished to such individuals at
such time and in such manner as may be required by the
Secretary.
* * * * * * *