Following the many hardships caused by Covid-19, members of the House Education and Labor Health Subcommittee have asked Congress to make it easier for Health Savings Account holders to obtain some low or no-cost mental health care before meeting their deductibles. In response to the pandemic, Congress allowed first-dollar coverage for telehealth. Members of the committee would like to make this option permanent and include access to worksite clinics as well. With estimates reflecting a nearly four-fold rise in the number of US adults reporting symptoms of depression or anxiety compared to a year ago, we can expect calls for help to continue.
The IRS has announced that contribution limits for 2022 are increasing by $50 for individual coverage and $100 for family coverage, to $3,650 and $7,300 respectively. This represents an increase of 1.4% from 2021 levels and those age 55 and older can still contribute an additional $1,000 per year. While minimum annual deductible levels will remain unchanged at $1,400 for individual coverage and $2,800 for family coverage, maximum out-of-pocket expense limits for HDHPs will increase to $7,050 for individual coverage and $14,100 for family coverage.
Overall, enrollment in HSAs continues to grow. Advisory firm Devenir reports that approximately 30 million Americans currently own health savings accounts with overall balances totaling more than $82 billion.
Currently, patients with high deductible health plans and health savings accounts have to pay for treatment of chronic illnesses out-of-pocket until they have reached their required deductible. According to IRS Notice 2019-45, those with chronic conditions such as diabetes, high blood pressure or asthma, will reduce their financial burden prior to reaching their health plan deductible.
The notice, which becomes effective on January 1, 2020, states that the service or item needed must be low cost and supported by medical evidence showing that it will prevent the chronic condition from getting worse or causing other related health issues.
According to Fidelity Investments, a couple retiring this year can expect to spend $285,000 on medical expenses during their retirement. And while the rate of healthcare cost increases has slowed in recent years, Americans are living longer, meaning they will need to address the cost of healthcare for a longer period of time.
The good news is that as we have noted many times, HSAs are becoming more popular all the time and a great way to save for retirement on a tax-free basis. Fidelity reports that their portfolio of HSA owners has grown to more than 830,000 individuals who currently own $3 billion in assets. In addition, consultants say that employers contributed nearly $9 billion to employees’ HSAs in 2018 alone. If our economy remains strong, we can expect these trends to continue. More and more employers will be able to provide matching contributions and funds contributed to HSAs are never taxed.
Employees will be able to save some additional healthcare dollars in 2020 as the IRS will increase the limit on deductible contributions to an HSA by $50 for individuals and $100 for families. The limits will be $3,550 for individuals with self-only coverage and $7,100 for family coverage. The minimum deductible for a qualifying high deductible health plan will also increase, rising to $1,400 for single coverage and $2,800 for family coverage
Research shows that the number of HSAs increased by 13% over the past year, topping 25 million accounts with an anticipated increase to 30 million by 2020. Another important statistic revealed that the average employer contribution to HSAs rose from just over $600 in 2017 to $839 in 2018 – an increase of some 39%. Supporters are encouraging legislators to make HSAs even more consumer friendly by allowing adults over 65 to continue using an HSA to save for healthcare costs in retirement. We will continue to report on these efforts going forward.
While EBRI researchers have reported slower growth rates in recent years, more than 40% of HSA enrollees opened their accounts in just the past two years. Other recent projections, in fact, expect the value of HSA accounts to grow from $54 billion in 2018 to nearly $75 billion in 2020. Proposals floating around Washington could expand the list of HSA-eligible expenses as well as the age at which seniors must stop contributing to their HSA. Proposals like these would make HSAs even more valuable in the future.
Health savings accounts are hot, with nearly two-thirds of respondents to a Plan Sponsor Council of America survey saying they believe that even those without a high deductible health plan should qualify. A benefit often cited by employers and employees alike is that HSAs can be a valuable part of one’s retirement strategy, since healthcare expenses are viewed as one of the largest people face in retirement.
The IRS and Department of Health and Human Services recently released new limits for contributions to HSAs and Health FSAs for 2017. Contributions by individuals to HSAs cannot exceed $3,400 in 2017, with the maximum family contribution remaining at $6,750, the same as 2016. Once again, a $1,000 catch-up contribution also applies.
Health FSA limits for 2017 have been increased by $50 from $2,550 per employee to $2,600. Health FSA transportation fringe benefits for parking, transit passes or vanpooling are remaining the same this year, with a limit of $255 for each.
The IRS began indexing affordability safe harbors to inflation last year. This year, minimum annual deductibles for High Deductible Health Plans (HDHPs) remain unchanged at $1,300 for individuals and $2,600 for families, with required out-of-pocket maximums remaining at a minimum of $6,550 for individuals and $13,100 for families.
While it will take support from Republicans and Democrats to fully replace Obamacare, a simple majority of Republican senators could repeal parts of the law through reconciliation. Here are just a few:
- The individual and employer mandates can be reduced to zero
- The Cadillac tax, currently delayed to 2020, could be repealed
- Individual subsidies to purchase exchange coverage can be reduced to zero
Another welcome step requiring only a simple majority in the Senate would be increasing the limits on FSA and HSA contributions.