Sponsors (10)
The bill expands and simplifies tax-advantaged health accounts and employer-funded account benefits (helping older savers, new hires, and employers) at the cost of reduced federal revenue, potential erosion of employer-based comprehensive coverage and consumer protections, and increased administrative complexity.
Older savers and account holders (including low-income users of direct primary care) gain more flexible, tax-advantaged access to health funds: higher catch-up contributions for people 55+, expanded list of deductible health expenses (e.g., direct primary care, health care sharing ministry costs), and 60-day rollovers to move funds without tax consequences.
Employees hired after the five-year date and their employers can use employer contributions to health freedom accounts as a tax-advantaged benefit, lowering recipients' taxable income and giving employers a recruiting tool without raising payroll taxes.
Administrative continuity and simplification measures (removing monthly-eligibility rule, clarifying contribution-limit language, and a transition rule treating contributions as employer-provided coverage) reduce some procedural friction for contributors, custodians, and employers.
Employees (especially new hires) risk losing traditional employer-provided comprehensive coverage—the bill phases in employer contributions to individual accounts and removes the employer-provided exclusion for some hires, which could increase out-of-pocket costs and reduce pooled protections.
Broadening qualified expenses to include health care sharing ministries and similar alternatives lets tax-advantaged funds pay for coverage options that may lack consumer protections (e.g., preexisting-condition coverage), increasing risk for vulnerable patients.
Expanding deductible uses and raising catch-up limits will reduce federal tax revenue, which could widen deficits or shift tax burdens to other taxpayers over time.
Based on analysis of 3 sections of legislative text.
Renames HSAs to health freedom accounts, expands qualifying expenses, revises contribution/rollover and catch-up rules, and changes tax treatment of employer contributions for future hires.
Introduced January 9, 2025 by Charles Roy · Last progress January 9, 2025
Renames health savings accounts to “health freedom accounts” and changes many of the tax and account rules that govern them: expands what counts as a qualified medical expense (including direct primary care and health-care sharing), relaxes eligibility for contributions, allows 60-day rollovers, changes contribution-limit and catch-up rules (raising the catch-up for age 55+ to $5,000), and updates permitted contribution types. It also creates a new rule that lets employers exclude contributions to these accounts from employee income for workers hired five years after enactment while ending the tax exclusion for employer-provided accident and health coverage for those same new hires, with a transition rule for earlier taxable years.