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Proposed Family and Retirement Health Investment Act of 2011 would benefits FSAs and HSAs

Sen. Orrin Hatch, R-Utah, introduced Thursday a bill that would modify and streamline rules for health savings accounts and flexible spending accounts.

Companion legislation was introduced in the U.S. House of Representatives by U.S. Rep. Erik Paulsen (R-Minn.).

Known as The Family and Retirement Health Investment Act of 2011, Hatch’s bill would:

  • Allow a husband and wife to make catch-up contributions to the same HSA
  • Remove the onerous new restrictions on the use of HSA and FSA dollars for the purchase of over-the-counter drugs
  • Allow individuals to roll-over up to $500 from their FSA accounts
  • Clarify the use of prescription drugs as preventive care that will not be subject to an HSA-eligible plan deductible
  • Reauthorize the use of Medicaid health opportunity accounts
  • Promote wellness by expanding the definition of qualified medical expenses to encourage more exercise and better diet
  • Allow seniors enrolled in Medicare Part A to continue contributing to their HSAs
  • Allow for the purchase of low-premium health insurance and long-term care insurance with HSA dollars.
  • Repeals the recently enacted deductible limits of $2,000 for single coverage and $4,000 for family coverage for plans sold to small employers.
  • Allows purchase of COBRA coverage, long-term care insurance, and HSA-qualified policies from an HSA.

“This legislation will provide American workers and retirees with a common-sense way of improving access to quality, affordable health care,” said Hatch, a ranking member of the Senate Finance Committee. “These health plans empower Americans to take control of their health and well-being. Health Savings Accounts and Flexible Spending Accounts allow consumers to make informed decisions about their health care and will help restrain costs by putting people in charge of their health choices. ”

Just three months ago, Republican lawmakers introduced legislation that would abolish a provision in health reform law, which prohibits Americans to use their FSA and HSA funds to purchase over-the-counter medications without a prescription. [See FSA changes go into effect]

Rep. Erik Paulsen, R-Minn., and Sen. Kay Bailey Hutchison, R-Texas, introduced the bill, known as The Patients’ Freedom to Choose Act of 2011.

Groups such as the Consumer Healthcare Products Association, the Health Choices Coaltion, and the National Association of Chain Drug Stores have pushed for the repeal of the OTC provision, saying it undermines tax-advantaged health plans and increases costs for patients.

“Instead of saving consumers money and encouraging them to proactively address their health needs when they can and should, this provision will increase costs to the health care system and place a new burden on already over-burdened physician offices,” Shawn Martin, director of government relations for the American Osteopathic Association recently said in a statement.

The American Osteopathic Association is part of the Health Choices Coalition, which sent a letter to Congress earlier this month.

The House of Representatives also passed a measure earlier this month that prohibits workers from receiving tax-free reimbursement from their HSA or FSA for out-of-pocket expenses relating to most abortions. The law does not apply to abortions performed in the cases of pregnancy resulting from rape or incest.

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