Sponsors (10)
The bill expands and liberalizes tax-advantaged health savings accounts and employer exclusions to increase flexibility, take-home pay, and access to alternative care, but does so at the cost of lower federal revenue, potential increases in long-term healthcare costs and premiums, reduced insurance pooling, and transitional administrative complexity.
Millions of taxpayers: Broadens traditional HSAs into 'health freedom accounts' that loosen the HDHP linkage and permit use for direct primary care and medical cost-sharing, allowing more people to use tax-advantaged savings for a wider set of healthcare services.
Employees hired five years after enactment: Employer contributions to health freedom accounts are excluded from taxable income for those workers, increasing their take-home pay and making employer benefits more flexible.
Employers and small businesses: Clearer tax treatment for employer contributions to these accounts reduces uncertainty and can simplify benefit design for new hires.
All taxpayers and plan participants: Weakening the link between tax-advantaged accounts and high-deductible health plans may erode pooled insurance coverage, shift costs onto individuals, and increase long-run healthcare spending for some.
Federal budget and taxpayers: Expanding tax-advantaged treatment to direct primary care, medical cost-sharing arrangements, and new employer exclusions will likely reduce federal tax revenue and raise budgetary costs.
Employees hired after the five-year trigger: May lose access to current tax-free employer-provided group coverage (§106) and face higher out-of-pocket costs or less comprehensive protection if accounts replace pooled plans.
Based on analysis of 3 sections of legislative text.
Renames HSAs to health freedom accounts, expands qualified expenses (including direct primary care and medical cost-sharing), changes contribution/rollover rules, and alters employer tax treatment for future hires.
Introduced January 9, 2025 by Charles Roy · Last progress January 9, 2025
Renames existing health savings accounts to a new "health freedom account" category and changes who can deduct contributions, what expenses are allowed, contribution and rollover rules, and certain distribution rules. It also creates a new tax exclusion for employer contributions to these accounts for employees hired five years after enactment, and phases out applicability of the current employer-provided coverage rule for those employees.