On Thursday, June 23, 2016, the House will begin consideration of H.R. 1270, the Restoring Access to Medication Act of 2015, under a rule. The bill was introduced on March 4, 2015, by Rep. Lynn Jenkins (R-KS) and was referred to the Committee on Ways and Means, which ordered the bill reported on September 17, 2015, as amended, by voice vote.
H.R. 1270 incorporates the text of three bills to improve access to health care through health savings accounts and provide targeted relief from Obamacare. Specifically, the bill includes the policies contained in H.R. 1270, the Restoring Access to Medication Act of 2015 (Jenkins), as ordered reported by the Committee on September 17, 2015, H.R. 4723, the Protecting Taxpayers by Recovering Improper Obamacare Subsidy Overpayments Act (Jenkins), as ordered reported by the Committee on March 16, 2016, and H.R. 5445, the Health Care Security Act of 2016 (Paulsen), as ordered to be reported by the Committee on June 15, 2016.
Title I: Includes the text of H.R 1270 to repeal the prohibition on using tax-free funds from health savings accounts, Archer medical savings account, health flexible savings accounts, and health reimbursement arrangement to purchase over-the-counter medication without a prescription.
Title II: Includes the text of H.R 5445 to allow both spouses to make catch-up contributions to the same health savings account, allows for more flexibility between incurring certain medical expenses prior to the establishment of a health savings account, and increases the maximum contribution limit to a health savings account to match the combined annual limit on out-of-pocket and deductible expenses under their health savings account-qualified insurance plan.
Title III: Includes a modified version of the text of H.R. 4723 to amend provisions of the Internal Revenue Code of 1986 relating to premium assistance credits for the purchase of health insurance by further modifying the existing limits on the amounts to be repaid by taxpayers whose advance payments exceed the Obamacare subsidy to which they are entitled.
An individual with a high deductible health plan and no other health plan (other than a plan that provides certain permitted insurance or permitted coverage) may establish a health savings account (HSA). Subject to limits, contributions to an HSA made by or on behalf of an eligible individual are deductible in determining adjusted gross income of the individual. Contributions to an HSA by an employer for an employee (including salary reduction contributions made through a cafeteria plan) are excludible from income and from wages for employment tax purposes. Distributions from an HSA for qualified medical expenses are not includible in gross income.
HSA contributions for a year are subject to basic dollar limits that are also adjusted annually as needed to reflect annual cost-of-living increases. For 2016, the basic limit on contributions that can be made to an HSA for a year is $3,350 in the case of self-only coverage and $6,750 in the case of family coverage. For 2017, the amount is $3,400 in the case of self only coverage and $6,750 (the same as 2016) in the case of family coverage. The basic contribution limits are increased by $1,000 for an eligible individual who has attained age 55 by the end of the taxable year (referred to as “catch-up contributions”).
Under current law, if both spouses of a married couple are eligible individuals, each may contribute to an HSA, but they cannot have a joint HSA. The spouses may divide their basic contribution limit for the year by allocating the entire amount to one spouse to be contributed to that spouse’s HSA. This rule does not apply to catch-up contribution amounts. Thus, if both spouses are at least age 55 and eligible to make catch-up contributions, each must make the catch-up contribution to his or her own HSA. Under Title II if both spouses of a married couple are eligible for catch-up contributions and either has family coverage, the annual contribution limit that can be divided between them includes catch-up contribution amounts of both spouses.
In addition, expenses for medical care not compensated for by insurance or otherwise, are deductible by an individual to the extent the expenses exceed 10% of an individual’s adjusted gross income in a given year. Medical care is generally defined broadly as amounts paid for the diagnosis, cure, mitigation, treatment or prevention of disease, or for the purpose of affecting any structure of the body. Under current law, any amount paid during a taxable year for medicine or drugs is deductible as a medical expense only if the medicine or drug is a prescribed drug or insulin. “Over-the-counter medicine”, or medicine available without a prescription, is not deductible as a medical expense.
According to the Committee, the requirement that over-the-counter medicine requires a prescription in order to be an eligible expense for individuals and families covered by a health FSA, HSA, HRA, or Archer MSA has left these consumers with three options: (1) seek an unnecessary appointment with a doctor to obtain a prescription, and then submit the purchase for reimbursement under a health FSA account; (2) purchase the over-the-counter medicine out-of-pocket, which significantly increases the after-tax cost to the consumer; or (3) forego treatment entirely and suffer from the symptoms of the condition. Title I of the legislation effectively repeals the change to the definition of medical care made by the Affordable Care Act, and permits amounts paid from a health FSA or HRA, or funds distributed from an HSA or an Archer MSA, to reimburse a taxpayer for over-the-counter medicine, such as nonprescription aspirin, allergy medicine, antacids, or pain relievers, resulting in these purchases being tax-free in accordance with the general rules associated with those respective health-related savings and reimbursement accounts.
Finally, under Obamacare, the law permits a refundable tax credit for certain taxpayers who purchase health insurance (referred to as a ‘‘qualified health plan’’) for themselves and their families through an American Health Benefit Exchange (‘‘Exchange’’). The premium assistance credit, which is payable in advance directly to the insurer, subsidizes the purchase of a qualified health plan through an Exchange. The credit is generally available for taxpayers with household incomes between 100 and 400 percent of the Federal poverty level for the family size involved who do not receive health insurance through an employer or a spouse’s employer and are not eligible for certain other types of coverage, such as Medicare or Medicaid.
According to the Committee, this creates the potential for waste, fraud, and abuse. The combination of income determination rules, limits on the amount of subsidy overpayments that can be recouped, and the large amount of Federal funds being expended (more than $800 billion will be spent over the next ten years on both Obamacare’s advanceable refundable tax credits and cost-sharing reductions) make the program particularly susceptible to improper payments. Modification of these caps can make the repayment methodology more fair.
 See Joint Committee on Taxation, Description of H.R. 5445, A Bill to Amend the Internal Revenue Code of 1986 to Improve the Rules with Respect to Health Savings Accounts (JCX-53-16), June 14, 2016.
 See Joint Committee on Taxation, Description of H.R. 1270, the “Restoring Access to Medication Act of 2015” (JCX-114-15), September 16, 2015.
 See House Report 114-308 at 5.
 Id. at 6.
 See House Report 114-475 at 3.
 Id. at 2.
The Congressional Budget Office (CBO) estimate on the amended bill is not currently available. However, individual CBO estimates are as follows: for H.R.1270, CBO previously estimated that enacting this legislation would reduce revenues by $6.6 billion over the 2016-2025 period; for H.R. 5445, CBO previously estimated that enacting the legislation would reduce revenues by $20.5 billion over the 2017-2016 period; and for H.R. 4723, CBO previously estimated that enacting the legislation would reduce federal budget deficits by $61.6 billion over the 2016-2026 period.
For questions or further information please contact Jake Vreeburg with the House Republican Policy Committee by email or at 5-0190.