HSA Modernization Act

Bill Number: H.R. 548
Origin Chamber: House
Congress: 119th Congress, Session 1
Policy Area: Taxation
Status: Introduced
Latest Action: 2025-01-16: Referred to the House Committee on Ways and Means.
Last Updated: 2026-06-01T15:38:02Z

AI-Generated Summary

Purpose of the Legislation

The HSA Modernization Act (H.R. 548) aims to update rules for Health Savings Accounts (HSAs), which are tax-advantaged savings accounts designed to help individuals cover medical expenses. It expands eligibility for contributions, increases flexibility in how HSAs can be used, and adjusts contribution limits to make these accounts more accessible and useful for a broader range of people.

Key Provisions

Expanded Eligibility for Veterans: Individuals eligible for certain Veterans Administration health benefits (without a service-connected disability) can now contribute to an HSA.
Medicare Part A Exceptions: People entitled to Medicare hospital insurance (Part A) solely due to age (typically 65 and older) are allowed to contribute to an HSA, with adjustments to ensure proper treatment of distributions and penalties.
Indian Health Service Users: Eligibility for hospital or medical services through Indian Health Service or tribal programs does not disqualify someone from having an HSA.
Inclusion of Bronze and Catastrophic Plans: These lower-cost health insurance plans under the Affordable Care Act (ACA) are now treated as qualifying "high deductible health plans" (HDHPs), which are required to pair with an HSA. (An HDHP is a health plan with a higher annual deductible and lower premiums than traditional plans.)
Mental Health Safe Harbor: HDHPs can waive the deductible for the first $500 of mental health benefits without losing HSA eligibility.
Pre-Establishment Expenses: If an HSA is opened within 60 days of starting HDHP coverage, it can reimburse certain medical expenses incurred from the coverage start date.
Spousal Catch-Up Contributions: Married couples both over age 55 can each make "catch-up" contributions (extra amounts for those nearing retirement) to a single shared HSA, rather than needing separate accounts.
Higher Contribution Limits: The annual maximum HSA contribution is increased to match the HDHP's deductible amount plus its out-of-pocket maximum (the most you'd pay for covered services in a year).
Long-Term Care Clarification: HSA funds can explicitly cover qualified long-term care services (such as nursing home or home health care for chronic illnesses), confirming this as a qualified medical expense.

Most changes apply to taxable years or plan years beginning after December 31, 2025, with the long-term care provision effective immediately upon enactment.

Significant Changes to Existing Law

Removes restrictions that previously barred certain veterans, age-based Medicare enrollees, and Native American health program users from HSA contributions.
Broadens the definition of qualifying HDHPs to include ACA Bronze and Catastrophic plans, which were previously ineligible.
Introduces new flexibilities, such as the mental health deductible waiver, pre-establishment expense rule, and spousal contribution options, which did not exist before.
Ties contribution limits directly to HDHP cost-sharing amounts, replacing fixed dollar caps (e.g., $2,250 for self-only or $4,500 for family coverage) with inflation-adjusted figures based on deductibles and out-of-pocket limits.
Explicitly includes long-term care services as qualified expenses, codifying what was previously ambiguous.

These amendments modify Section 223 of the Internal Revenue Code of 1986, which governs HSAs.

Potential Impacts

On Citizens: More individuals, including seniors, veterans, Native Americans, and those with lower-cost ACA plans, can save pre-tax dollars for healthcare, potentially reducing out-of-pocket costs and encouraging personal health savings. Families and those needing mental health or long-term care may benefit from greater flexibility.
On Government Agencies: The Internal Revenue Service (IRS) will need to update guidance, forms, and enforcement for HSA rules, possibly leading to short-term administrative costs. It could reduce federal tax revenue due to increased tax-free contributions but may lower long-term reliance on public programs like Medicare or Medicaid by promoting private savings.
On International Relations: No direct impacts, as this is a domestic tax policy focused on U.S. healthcare.

Main Stakeholders Affected

Individuals and Families: HSA holders, especially married couples, seniors on Medicare Part A, veterans without disabilities, Native Americans using tribal health services, and those with Bronze/Catastrophic plans or mental health/long-term care needs.
Healthcare Providers and Insurers: Insurance companies offering HDHPs (including ACA plans) may see increased enrollment; providers of mental health and long-term care services could benefit from easier HSA reimbursements.
Government Entities: IRS for tax administration; Department of Veterans Affairs and Indian Health Service for alignment with their programs; potentially Congress and the Treasury Department for ongoing adjustments to limits.
Employers: Those sponsoring HDHPs may need to revise benefits packages to incorporate the new rules.

Notable Legal, Constitutional, or Political Implications

Legal: Strengthens tax incentives for HSAs without altering their core tax-exempt status, but requires IRS rulemaking to implement details like adjusted contribution limits. The long-term care clarification avoids retroactive changes, preventing legal challenges over past interpretations.
Constitutional: No apparent issues, as it involves Congress's authority to regulate taxation and commerce under Article I.
Political: Promotes individual responsibility in healthcare financing, aligning with conservative policies favoring tax-advantaged savings over public spending. It could face debate over equity (e.g., benefits skew toward higher-income groups able to afford HDHPs) or integration with ACA reforms, but remains neutral on broader healthcare access debates.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Van Duyne, Beth [R-TX-24]

Cosponsors (4)

Rep. Crenshaw, Dan [R-TX-2], Rep. Meuser, Daniel [R-PA-9], Rep. Wittman, Robert J. [R-VA-1], Rep. Bacon, Don [R-NE-2]