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How Early HSA Withdrawals are Affected by the Health Care Reform

Created March 31st, 2010 by HDHPexpert                                                                              Print

Currently Health Savings Accounts (HSAs) are designed for medium-to-long term financial savings set aside for qualified medical expenses.  If HSA funds are withdrawn as cash and/or spent on unqualified purchases, substantial penalties are incurred.  The current health care reform will increase these penalties.

Currently any HSA dollars withdrawn or spent improperly are assessed a 10% penalty in addition to income taxes that must be paid at year end.  These are referred to as unqualified distributions. 

Under the new legislation, this penalty would be increased to 20%.  These taxes and penalties are collectd and enforced by the IRS.  

This change will go into effect in 2011. As of today this is the only upcoming change affecting HSAs. 

Sources: and HR 3590, HR 4872 and  JLBG Health  

Full Text of HR 3590 – A Major Influence on HR 4872

Created March 27th, 2010 by HDHPexpert                                                                              Print

A lot of fuss has been made lately about the passage of HR 4872, the Health Care and Education Affordability.  However the majority of this 150 page bill (full text of HR 4872 here) relates to and directly references HR 3590, a 2409-page bill passed on December, 24 2009.  This bill was titled the Patient Protection and Affordable Care Act.

For the full text (4 MB file) of HR 3590, the Patient Protection and Affordable Care Act, can be found here.

Health Care Reform (HR 4872) Summary – 6 Month and 2014 Timeframes

Created March 26th, 2010 by HDHPexpert                                                                              Print

Based on our personal review of the H.R. 4872 Health Care and Education Affordability Reconciliation Act of 2010 and a number of documents summarizing the 150 page bill, we have categorized all major upcoming changes into two headings shown below.  The first details changes set to take place within or beginning in six months, whereas the others are set to begin (as of today) on January 1, 2014.  Please use this list as a reference guide only.

6 Month Timeframe

• Dependents must be allowed coverage on their parents plan up to age 26
• In regards to maximum annual limits, H.R. 4872 “restricts annual limits”  More details to follow on this as they become available.

2014 Timeframe

• No pre-existing conditions can be excluded
• In regards to maximum annual limits, H.R. 4872 “prohibits annual limits.”
• State-based exchanges must be established and running.
• Government premium subsidies enacted for those with qualifying needs/low income.
• Tax credits to be provided to employers providing coverage to their employees.    More details to follow on this as they become available.
• “Quality Provisions,” equating to an emphasis on better quality versus quantity.   It is hoped that this will discourage excessive billing and treatments while improving health and lowering costs systemwide.