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Creates a new tax structure that replaces existing health savings accounts with renamed “health freedom accounts,” broadens what account funds can pay for, raises some contribution limits, and permits short-term rollovers. It also changes the tax treatment of employer contributions for employees hired five or more years after enactment, removing certain employer-provided accident and health coverage rules for those future hires while providing a transition rule. The bill mainly changes Internal Revenue Code rules: revising eligibility and qualified distributions, increasing the age 55+ catch-up to $5,000, and shifting how employer contributions count for tax exclusion for a delayed cohort of new employees. Most tax-rule changes apply to months in taxable years beginning after enactment; the employer-rule for new hires has a five-year delayed application with an immediate transition rule for taxable years after enactment.
The bill expands flexible, tax-advantaged health account uses and employer-provided account contributions—benefiting many taxpayers and older savers—but does so at the expense of traditional employer group coverage, federal revenue, consumer protections for non‑insurance cost‑sharing entities, and access for unbanked individuals.
Millions of taxpayers and employees can use tax-advantaged health freedom accounts for a broader set of health services (including direct primary care and medical cost-sharing), lowering some out-of-pocket health spending.
Employees (including many newly hired workers) can receive employer contributions to health freedom accounts tax-free, reducing taxable income and making employer-provided benefits more flexible.
People age 55 and older can make larger catch-up contributions ($5,000), enabling better saving for retirement medical costs and improving seniors' financial preparedness for health needs.
Workers hired after the cutoff may lose coverage under traditional employer-sponsored group accident and health plans, shifting risk and potentially increasing out-of-pocket health costs for many employees and families.
Expanded tax preferences and larger catch-up amounts reduce federal revenue, which could increase budget deficits or require spending offsets or tax changes affecting all taxpayers.
Permitting payments to health care sharing ministries and similar medical cost-sharing organizations extends tax-favored status to entities that are not regulated like insurance, risking reduced consumer protections and poorer outcomes for people with major health needs.
Introduced January 9, 2025 by Charles Roy · Last progress January 9, 2025