Dr. HSA

Guest Columnist, Roy Ramthun

Former Economic Advisor to President Bush

HSA Substantiation Update

April 2008 - Vol. 13

HSA substantiation language was included in H.R. 5719, the Taxpayer Assistance and Simplification Act.  This legislation was reported out of the House Ways & Means Committee this afternoon on a straight party-line vote of 24Y – 17N.  I am expecting the legislation to be voted on by the entire U.S. House of Representatives within the next two weeks. However, its fate is uncertain in the U.S. Senate.

At the mark-up today, Chairman Rangel offered an amendment to his original mark that delays the implementation of the HSA substantiation provision by two years (until 2011).  We are not sure why the Chairman decided to delay the provision’s effective date, but the delay will provide extra time to eliminate the provision or give people more time to adjust to its implementation.

Rep. Paul Ryan (R-WI) led the Republican charge in opposition to the HSA substantiation provision.  He questioned the large amount of revenue raised by the provision ($485 million over 10 years – now decreased to $308 because of the two year delay).  According to staff on the Joint Tax Committee (who scores tax provisions for the Congressional budget), the number was derived based on two factors: (1) The IRS will be collecting more penalties on HSAs; and (2) Contributions to HSAs will go down.

The Joint Tax staff declined to specify how much of the revenue raised would come from penalties for unsubstantiated withdrawals and how much would come from decreased contributions to HSAs.  They refused to say that there would be fewer HSAs -- only that contributions would go down.  They did agree however that the HSA substantiation provision would have a significant impact on the HSA market.

During discussion, Rep. Sam Johnson (R-TX) noted that the number of folks reporting non-medical spending was relatively consistent (i.e. – what’s the problem??).  He stated that he did not think that HSAs should have the same rules as FSAs.  Further he raised the issue of HIPAA privacy if banks are administering the accounts.  Rep. Lewis (D-GA) noted that the two-year delay in implementation should be sufficient time to deal with those types of issues.

Rep. Paul Ryan (R-WI) offered an amendment to strike Sec. 17 (HSA substantiation).  Rep. Cantor (R-VA) was a cosponsor of the amendment but not present at the mark-up.  A number of Republican members spoke in favor of the Ryan amendment including Reps. McCreary (R-LA), Brady (R-TX) and Camp (R-MI). The amendment fell on a near party-line vote of 24Y – 15N.  Rep. Jon Porter (R-NV) voted with the Democrats against the Ryan amendment.

>> What's your point of view? Email Dr. HSA. We look forward to hearing from you!

Related Links: 

• H.R. 5719 Bill
• President Bush threatens veto on H.R. 5719 Bill

About the author...

Roy Ramthun is President of HSA Consulting Services, LLC, a health care consulting practice specializing in Health Savings Accounts and consumer-driven health care issues. Mr. Ramthun is also a Visiting Fellow at the Council for Affordable Health Insurance. Click here for Roy's website.