Sponsors (10)
Official title: To amend the Internal Revenue Code of 1986 to create health freedom accounts available to all individuals.
Introduced January 9, 2025 by Charles Roy · Last progress January 9, 2025
The bill broadens and simplifies tax-advantaged health accounts—expanding who can save and what expenses qualify (including direct primary care and cost-sharing ministries) and offering higher catch-up limits—while risking federal revenue, weakening ties to traditional high-deductible coverage (which may raise overall health spending and premiums), and creating transitional and equity concerns.
Individual taxpayers (broadly) can make and deduct contributions to newly named "health freedom accounts" with simplified eligibility rules, increasing tax-advantaged saving for health care.
Account holders (including low-income individuals) may use account funds for direct primary care and health-care sharing/medical cost-sharing arrangements, making tax-advantaged payment possible for a wider set of care options.
Employees hired five years after enactment can exclude employer contributions to health freedom accounts from their taxable income, effectively increasing take-home pay for those future workers.
Expanding tax-advantaged treatment to additional uses (health sharing, direct primary care) and deductible contributions likely reduces federal tax revenue, increasing budgetary costs or shifting tax burden.
Loosening the link between these accounts and high-deductible health plans could encourage use of less comprehensive, account-funded care and raise long-term healthcare spending or out-of-pocket costs for some families.
Employees hired after the five-year trigger lose the current §106 tax-free status for employer-provided coverage, which may increase out-of-pocket medical costs if account-based coverage is less comprehensive than traditional plans.
Based on analysis of 3 sections of legislative text.
Converts HSAs into "health freedom accounts," broadens deductible contributors and eligible expenses, and creates a new employer-contribution exclusion for hires five years after enactment.
Replaces the existing "health savings account" rules with a new "health freedom account" framework that broadens who can deduct contributions, expands what counts as eligible medical expenses (including direct primary care and health-care-sharing ministries), and adjusts contribution and rollover rules. It also creates a new tax exclusion for employer contributions to these accounts for employees hired five years after enactment and makes the old employer-provided coverage rule inapplicable to those employees. The changes alter Internal Revenue Code sections to rename and rework §223 (HSAs) and to add a new §106A (excluding employer contributions for certain future hires), with staggered effective dates: most individual-account rule changes apply for months in taxable years beginning after enactment; employer-contribution exclusions and related employer rules apply based on hire date five years after enactment and transition rules for taxable years beginning after enactment.