Health savings account rules are principally made by the U.S. federal government, though there are a few rules that may be made by the administrators of an account, such as the times at which contributions need to be made. Similar rules apply to other types of health savings accounts (HSAs), like medical reimbursement accounts (MRAs), and flexible spending arrangements (FSAs). Some of the laws governing these saving accounts address how much they can hold, how long they can be used, and qualifying expenses, while other laws speak to how they are handled for taxation purposes. These rules are subject to change, and have done so in the past.
In 2003, President George W. Bush created the first health savings account rules with the Medicare, Prescription Drug, Improvement, and Modernization Act. This allowed taxpayers to individually or through an employer, set aside a certain amount of funds per year to pay for extra medical expenses, like prescription drugs, copayments, and coinsurance. Depending on the type of HSA, the funds were either deducted from income earned and never taxed, or they could be reported at the end of the yearly tax period for tax breaks.
An allowable maximum contribution per year was set, as were certain other health savings account rules. Eligible expenses were defined, and other limits were established. For instance, most of these accounts have a “use it or lose it” rule, where if the funds aren’t used within the benefit year they are deposited or within a month or two thereafter, they are lost.
It’s pointed out that health saving accounts of all types represent a particular political position, which is that individuals should be personally responsible for obtaining health care. When they pay for their own medical expenses, they are rewarded by the government with a tax break. During the 2008 elections, Senator John McCain suggested expanding HSAs to a much higher amount so people could buy insurance on the private market and get a tax break at the same time.
President Barack Obama’s response was to instead create a hybridized public/private insurance health care plan that could lean less heavily on HSAs. With passage of the Patient Protection and Affordable Care Act in 2010 there have been some reductions in total amounts that can be deposited, and certain health savings account rules have been modified more. They often can’t be used to purchase medicines and medical supplies that are sold over the counter, unless a prescription is obtained. The shift to a partially government funded health plan is partly paid for by reduction in tax breaks that accompany HSAs.
