Benefits-Related Washington News to Watch

August 31, 2020

While the two houses of Congress are in recess until September, they have been told to remain available for a vote on additional legislation related to COVID-19. The Senate Republicans’ HEALS Act is a proposed $1 trillion package. The HEROES Act proposed by House Democrats is a $3 trillion package and includes $1 trillion for additional funding for state and local governments. Other legislation recently introduced that could impact the health benefits industry includes:

Senate Bill Introduced to Provide COBRA Subsidization

In late July Senator Martha McSally (R-AZ), along with Senators John Cornyn (R-TX), Steve Daines (R-MT), and Dan Sullivan (R-AK) introduced S. 4329, the Continuous Health Coverage for Workers Act, in order to provide premium assistance for COBRA continuation coverage for individuals whose jobs have been impacted by COVID-19. The language of the bill is intended to be included in the overall Senate response under the Health, Economic Assistance, Liability Protection and Schools (HEALS) Act.

The Senate proposal would provide employers with up to a 85 percent premium reimbursement for COBRA continuation coverage, beginning with the first month after the Act's enactment and ending on December 31, 2020. This subsidy would allow qualified beneficiaries who have not terminated voluntarily to maintain employer-sponsored health coverage at a cost that is more affordable to those who have been made newly unemployed or have had hours reduced.

Legislation Introduced to Expand HSA Access

In early August, Senator Rand Paul (R-KY) introduced the Health Savings Accounts for All Act of 2020 (S.4367). The legislation is intended to expand access and reduce restrictions on Health Savings Accounts (HSAs).

According to details of Senator Paul’s press release, the bill proposes to eliminate the annual limit on tax-deductible contributions to HSAs by individuals and their employers. The requirement to be enrolled in a high-deductible health plan (HDHP) in order to contribute to an HSA would also be eliminated. Additionally, HSA balances could be used for the payment of health insurance premiums, direct care service arrangements, and expenses incurred during the prior or current tax year before the establishment of the HSA. Another provision would allow for the tax-free transfer of HSAs upon death to certain family members.

In its current form the bill reads, during the coronavirus emergency period, any individual who is covered by any health plan, including a health plan which is not a high-deductible health plan, shall be treated as an eligible individual. This allows that anyone who has health insurance can have an HSA and can contribute to an HSA. The goal is to get this provision into the next COVID-related bill as a temporary measure and then in a year-end package to make the change permanent.

Decoupling HSAs from HDHPs could be a growth opportunity and significantly change the equation for Health Savings Accounts. It may, however, contribute to the demise of Flexible Spending Accounts (FSAs) as HSAs are simpler to use, have additional tax benefits, and don’t come with the “use-it-or-lose-it” rule that FSAs include.

These proposals and their potential impact on healthcare savings plans bear watching. Chard Snyder will continue to update you through timely Compliance Alert emails as more information becomes available or pandemic-related legislation is passed.