I 

114TH CONGRESS 

2D SESSION H. R. 4469 

To amend the Internal Revenue Code of 1986 to improve access to health 

care through expanded health savings accounts, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 4, 2016 

Mr. PAULSEN (for himself, Mr. KELLY of Pennsylvania, and Ms. JENKINS of 

Kansas) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committees on the 

Judiciary and Energy and Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions 

as fall within the jurisdiction of the committee concerned 

A BILL 

To amend the Internal Revenue Code of 1986 to improve 

access to health care through expanded health savings 

accounts, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE, ETC. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Health Savings Act of 2016’’. 

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment 


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1 to, or repeal of, a section or other provision, the reference 

2 shall be considered to be made to a section or other provi3 sion of the Internal Revenue Code of 1986. 

4 (c) TABLE OF CONTENTS.—The table of contents is 

5 as follows: 

Sec. 1. Short title, etc. 

TITLE I—RENAMING HIGH DEDUCTIBLE HEALTH PLANS 

Sec. 101. High deductible health plans renamed HSA-qualified health plans. 

TITLE II—ENHANCING ACCESS TO TAX-PREFERRED HEALTH 

ACCOUNTS 

Sec. 201. Allow both spouses to make catch-up contributions to the same HSA 

account. 

Sec. 202. Provisions relating to Medicare. 

Sec. 203. Individuals eligible for Indian Health Service assistance. 

Sec. 204. Individuals eligible for TRICARE coverage. 

Sec. 205. Members of health care sharing ministries eligible to establish health 

savings accounts. 

Sec. 206. Treatment of direct primary care service arrangements. 

Sec. 207. Individuals eligible for on-site medical clinic coverage. 

Sec. 208. Treatment of embedded deductibles. 

TITLE III—IMPROVING COVERAGE UNDER TAX-PREFERRED 

HEALTH ACCOUNTS 

Sec. 301. Allowance of distributions for prescription and over-the-counter medicines and drugs. 

Sec. 302. Purchase of health insurance from HSA account. 

Sec. 303. Special rule for certain medical expenses incurred before establishment of account. 

Sec. 304. Preventive care prescription drug clarification. 

TITLE IV—PROTECTING ACCESS TO LOW-COST HEALTH PLANS 

BY REDUCING BURDENSOME MANDATES 

Sec. 401. HSA-qualified health plans qualify as providing minimum value. 

TITLE V—MISCELLANEOUS PROVISIONS RELATING TO TAXPREFERRED HEALTH ACCOUNTS 

Sec. 501. FSA and HRA interaction with HSAs. 

Sec. 502. Equivalent bankruptcy protections for health savings accounts as retirement funds. 

Sec. 503. Administrative error correction before due date of return. 

Sec. 504. Reauthorization of Medicaid health opportunity accounts. 

Sec. 505. Exclusion of certain health arrangements from employer-sponsored 

excise tax. 

TITLE VI—OTHER PROVISIONS 


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Sec. 601. Certain exercise equipment and physical fitness programs treated as 

medical care. 

Sec. 602. Certain nutritional and dietary supplements to be treated as medical 

care. 

Sec. 603. Certain provider fees to be treated as medical care. 

1 TITLE I—RENAMING HIGH 

2 DEDUCTIBLE HEALTH PLANS 

3 SEC. 101. HIGH DEDUCTIBLE HEALTH PLANS RENAMED 

4 HSA-QUALIFIED HEALTH PLANS. 

5 (a) IN GENERAL.—Section 223 is amended by strik6 ing ‘‘high deductible health plan’’ each place it appears 

7 and inserting ‘‘HSA-qualified health plan’’. 

8 (b) CONFORMING AMENDMENTS.— 

9 (1) The heading for paragraph (2) of section 

10 223(c) is amended by striking ‘‘HIGH DEDUCTIBLE

11 HEALTH PLAN’’ and inserting ‘‘HSA-QUALIFIED

12 HEALTH PLAN’’. 

13 (2) Section 408(d)(9) is amended— 

14 (A) by striking ‘‘high deductible health 

15 plan’’ each place it appears in subparagraph 

16 (C) and inserting ‘‘HSA-qualified health plan’’, 

17 and 

18 (B) by striking ‘‘HIGH DEDUCTIBLE

19 HEALTH PLAN’’ in the heading of subparagraph 

20 (D) and inserting ‘‘HSA-QUALIFIED HEALTH

21 PLAN’’. 


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1 TITLE II—ENHANCING ACCESS 

2 TO TAX-PREFERRED HEALTH 

3 ACCOUNTS 

4 SEC. 201. ALLOW BOTH SPOUSES TO MAKE CATCH-UP CON5 TRIBUTIONS TO THE SAME HSA ACCOUNT. 

6 (a) IN GENERAL.—Paragraph (5) of section 223(b) 

7 is amended to read as follows: 

8 ‘‘(5) SPECIAL RULE FOR MARRIED INDIVIDUALS

9 WITH FAMILY COVERAGE.— 

10 ‘‘(A) IN GENERAL.—In the case of individ11 uals who are married to each other, if both 

12 spouses are eligible individuals and either 

13 spouse has family coverage under an HSA14 qualified health plan as of the first day of any 

15 month— 

16 ‘‘(i) the limitation under paragraph 

17 (1) shall be applied by not taking into ac18 count any other HSA-qualified health plan 

19 coverage of either spouse (and if such 

20 spouses both have family coverage under 

21 separate HSA-qualified health plans, only 

22 one such coverage shall be taken into ac23 count), 

24 ‘‘(ii) such limitation (after application 

25 of clause (i)) shall be reduced by the agVerDate Sep 11 2014 22:52 Feb 05, 2016 Jkt 059200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H4469.IH H4469

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1 gregate amount paid to Archer MSAs of 

2 such spouses for the taxable year, and 

3 ‘‘(iii) such limitation (after application 

4 of clauses (i) and (ii)) shall be divided 

5 equally between such spouses unless they 

6 agree on a different division. 

7 ‘‘(B) TREATMENT OF ADDITIONAL CON8 TRIBUTION AMOUNTS.—If both spouses referred 

9 to in subparagraph (A) have attained age 55 

10 before the close of the taxable year, the limita11 tion referred to in subparagraph (A)(iii) which 

12 is subject to division between the spouses shall 

13 include the additional contribution amounts de14 termined under paragraph (3) for both spouses. 

15 In any other case, any additional contribution 

16 amount determined under paragraph (3) shall 

17 not be taken into account under subparagraph 

18 (A)(iii) and shall not be subject to division be19 tween the spouses.’’. 

20 (b) EFFECTIVE DATE.—The amendment made by 

21 this section shall apply to taxable years beginning after 

22 the date of the enactment of this Act. 

23 SEC. 202. PROVISIONS RELATING TO MEDICARE. 

24 (a) INDIVIDUALS OVER AGE 65 ONLY ENROLLED IN

25 MEDICARE PART A.—Paragraph (7) of section 223(b) is 


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1 amended by adding at the end the following: ‘‘This para2 graph shall not apply to any individual during any period 

3 for which the individual’s only entitlement to such benefits 

4 is an entitlement to hospital insurance benefits under part 

5 A of title XVIII of such Act pursuant to an enrollment 

6 for such hospital insurance benefits under section 226(a) 

7 of such Act.’’. 

8 (b) MEDICARE BENEFICIARIES PARTICIPATING IN

9 MEDICARE ADVANTAGE MSA MAY CONTRIBUTE THEIR

10 OWN MONEY TO THEIR MSA.— 

11 (1) IN GENERAL.—Subsection (b) of section 

12 138 is amended by striking paragraph (2) and by re13 designating paragraphs (3) and (4) as paragraphs 

14 (2) and (3), respectively. 

15 (2) CONFORMING AMENDMENT.—Paragraph (4) 

16 of section 138(c) is amended by striking ‘‘and para17 graph (2)’’. 

18 (c) EFFECTIVE DATE.—The amendments made by 

19 this section shall apply to taxable years beginning after 

20 the date of the enactment of this Act. 

21 SEC. 203. INDIVIDUALS ELIGIBLE FOR INDIAN HEALTH 

22 SERVICE ASSISTANCE. 

23 (a) IN GENERAL.—Paragraph (1) of section 223(c) 

24 is amended by adding at the end the following new sub25 paragraph: 


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1 ‘‘(D) SPECIAL RULE FOR INDIVIDUALS EL2 IGIBLE FOR ASSISTANCE UNDER INDIAN

3 HEALTH SERVICE PROGRAMS.—For purposes of 

4 subparagraph (A)(ii), an individual shall not be 

5 treated as covered under a health plan de6 scribed in such subparagraph merely because 

7 the individual receives hospital care or medical 

8 services under a medical care program of the 

9 Indian Health Service or of a tribal organiza10 tion.’’. 

11 (b) EFFECTIVE DATE.—The amendment made by 

12 this section shall apply to taxable years beginning after 

13 the date of the enactment of this Act. 

14 SEC. 204. INDIVIDUALS ELIGIBLE FOR TRICARE COVERAGE. 

15 (a) IN GENERAL.—Paragraph (1) of section 223(c), 

16 as amended by section 203, is amended by adding at the 

17 end the following new subparagraph: 

18 ‘‘(E) SPECIAL RULE FOR INDIVIDUALS EL19 IGIBLE FOR ASSISTANCE UNDER TRICARE.—For 

20 purposes of subparagraph (A)(ii), an individual 

21 shall not be treated as covered under a health 

22 plan described in such subparagraph merely be23 cause the individual is eligible to receive hos24 pital care, medical services, or prescription 

25 drugs under TRICARE Extra or TRICARE 


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1 Standard and such individual is not enrolled in 

2 TRICARE Prime.’’. 

3 (b) EFFECTIVE DATE.—The amendment made by 

4 this section shall apply to taxable years beginning after 

5 the date of the enactment of this Act. 

6 SEC. 205. MEMBERS OF HEALTH CARE SHARING MIN7 ISTRIES ELIGIBLE TO ESTABLISH HEALTH 

8 SAVINGS ACCOUNTS. 

9 (a) IN GENERAL.—Section 223 is amended by adding 

10 at the end the following new subsection: 

11 ‘‘(i) APPLICATION TO HEALTH CARE SHARING MIN12 ISTRIES.—For purposes of this section, membership in a 

13 health care sharing ministry (as defined in section 

14 5000A(d)(2)(B)(ii)) shall be treated as coverage under an 

15 HSA-qualified health plan.’’. 

16 (b) EFFECTIVE DATE.—The amendment made by 

17 this section shall apply to taxable years beginning after 

18 the date of the enactment of this Act. 

19 SEC. 206. TREATMENT OF DIRECT PRIMARY CARE SERVICE 

20 ARRANGEMENTS. 

21 (a) IN GENERAL.—Section 223(c) is amended by 

22 adding at the end the following new paragraph: 

23 ‘‘(6) TREATMENT OF DIRECT PRIMARY CARE

24 SERVICE ARRANGEMENTS.—An arrangement under 

25 which an individual is provided coverage restricted to 


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1 primary care services in exchange for a fixed peri2 odic fee or payment for primary care services— 

3 ‘‘(A) shall not be treated as a health plan 

4 for purposes of paragraph (1)(A)(ii), and 

5 ‘‘(B) shall not be treated as insurance for 

6 purposes of subsection (d)(2)(B).’’. 

7 (b) EFFECTIVE DATE.—The amendment made by 

8 this section shall apply to taxable years beginning after 

9 the date of the enactment of this Act. 

10 SEC. 207. INDIVIDUALS ELIGIBLE FOR ON-SITE MEDICAL 

11 CLINIC COVERAGE. 

12 (a) IN GENERAL.—Paragraph (1) of section 223(c), 

13 as amended by sections 203 and 204, is amended by add14 ing at the end the following new subparagraph: 

15 ‘‘(F) SPECIAL RULE FOR INDIVIDUALS EL16 IGIBLE FOR ON-SITE MEDICAL CLINIC COV17 ERAGE.— 

18 ‘‘(i) IN GENERAL.—For purposes of 

19 subparagraph (A)(ii), an individual shall 

20 not be treated as covered under a health 

21 plan described in such subparagraph mere22 ly because the individual is eligible to re23 ceive health care benefits from an onsite24 medical clinic of employer of the individual 


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1 or the individual’s spouse if such health 

2 care benefits are not significant benefits. 

3 ‘‘(ii) INCLUDED BENEFITS.—For pur4 poses of clause (i), the following health 

5 care benefits shall be considered to be ben6 efits which are not significant benefits: 

7 ‘‘(I) Physicals and immuniza8 tions. 

9 ‘‘(II) Injecting antigens provided 

10 by employees. 

11 ‘‘(III) Medications available with12 out a prescription, such as pain reliev13 ers and antihistamines. 

14 ‘‘(IV) Treatment for injuries oc15 curring at the employer’s place of em16 ployment or otherwise in the course of 

17 employment. 

18 ‘‘(V) Tests for infectious diseases 

19 and conditions, such as streptococcal 

20 sore throat. 

21 ‘‘(VI) Monitoring of chronic con22 ditions, such as diabetes. 

23 ‘‘(VII) Drug testing. 

24 ‘‘(VIII) Hearing or vision 

25 screenings and related services. 


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1 ‘‘(IX) Other services and treat2 ments of a similar nature to the serv3 ices described in subclauses (I) 

4 through (VIII). 

5 ‘‘(iii) AGGREGATION RULES.—For 

6 purposes of clause (i), all persons treated 

7 as a single employer under subsection (b), 

8 (c), (m), or (o) of section 414 shall be 

9 treated as a single employer.’’. 

10 (b) EFFECTIVE DATE.—The amendment made by 

11 this section shall apply to taxable years beginning after 

12 the date of the enactment of this Act. 

13 SEC. 208. TREATMENT OF EMBEDDED DEDUCTIBLES. 

14 (a) IN GENERAL.—Paragraph (2) of section 223(c) 

15 is amended by adding at the end the following new sub16 paragraph: 

17 ‘‘(E) TREATMENT OF EMBEDDED DEDUCT18 IBLE.—A health plan providing family coverage 

19 that has an annual deductible for all covered in20 dividuals under the plan of at least the amount 

21 described in subparagraph (A)(i)(II) shall not 

22 fail to be treated as an HSA-qualified health 

23 plan solely because it covers expenses with re24 spect to an individual under that plan that ex25 ceed an embedded deductible which is equal to 


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1 or in excess of the amount described in sub2 paragraph (A)(i)(I).’’. 

3 (b) EFFECTIVE DATE.—The amendment made by 

4 this section shall apply to taxable years beginning after 

5 the date of the enactment of this Act. 

6 TITLE III—IMPROVING COV7 ERAGE UNDER TAX-PRE8 FERRED HEALTH ACCOUNTS 

9 SEC. 301. ALLOWANCE OF DISTRIBUTIONS FOR PRESCRIP10 TION AND OVER-THE-COUNTER MEDICINES 

11 AND DRUGS. 

12 (a) HSAS.—Section 223(d)(2)(A) is amended by 

13 striking the last sentence thereof and inserting the fol14 lowing: ‘‘Such term shall include an amount paid for any 

15 prescription or over-the-counter medicine or drug.’’. 

16 (b) ARCHER MSAS.—Section 220(d)(2)(A) is amend17 ed by striking the last sentence thereof and inserting the 

18 following: ‘‘Such term shall include an amount paid for 

19 any prescription or over-the-counter medicine or drug.’’. 

20 (c) HEALTH FLEXIBLE SPENDING ARRANGEMENTS

21 AND HEALTH REIMBURSEMENT ARRANGEMENTS.—Sub22 section (f) of section 106 is amended to read as follows: 

23 ‘‘(f) REIMBURSEMENTS FOR ALL MEDICINES AND

24 DRUGS.—For purposes of this section and section 105, 

25 reimbursement for expenses incurred for any prescription 


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1 or over-the-counter medicine or drug shall be treated as 

2 a reimbursement for medical expenses.’’. 

3 (d) EFFECTIVE DATES.— 

4 (1) DISTRIBUTIONS FROM SAVINGS AC5 COUNTS.—The amendments made by subsections (a) 

6 and (b) shall apply to amounts paid in taxable years 

7 beginning after December 31, 2016. 

8 (2) REIMBURSEMENTS.—The amendment made 

9 by subsection (c) shall apply to expenses incurred in 

10 plan years beginning after December 31, 2016. 

11 SEC. 302. PURCHASE OF HEALTH INSURANCE FROM HSA 

12 ACCOUNT. 

13 (a) IN GENERAL.—Paragraph (2) of section 223(d), 

14 as amended by section 301, is amended— 

15 (1) by striking ‘‘and any dependent (as defined 

16 in section 152, determined without regard to sub17 sections (b)(1), (b)(2), and (d)(1)(B) thereof) of 

18 such individual’’ in subparagraph (A) and inserting 

19 ‘‘any dependent (as defined in section 152, deter20 mined without regard to subsections (b)(1), (b)(2), 

21 and (d)(1)(B) thereof) of such individual, and any 

22 child (as defined in section 152(f)(1)) of such indi23 vidual who has not attained the age of 27 before the 

24 end of such individual’s taxable year’’, 


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1 (2) by striking subparagraph (B) and inserting 

2 the following: 

3 ‘‘(B) HEALTH INSURANCE MAY NOT BE

4 PURCHASED FROM ACCOUNT.—Except as pro5 vided in subparagraph (C), subparagraph (A) 

6 shall not apply to any payment for insurance.’’, 

7 and 

8 (3) by striking ‘‘or’’ at the end of subparagraph 

9 (C)(iii) and by striking subparagraph (C)(iv) and in10 serting the following: 

11 ‘‘(iv) an HSA-qualified health plan, or 

12 ‘‘(v) any health insurance under title 

13 XVIII of the Social Security Act, other 

14 than a Medicare supplemental policy (as 

15 defined in section 1882 of such Act).’’. 

16 (b) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply with respect to insurance pur18 chased after the date of the enactment of this Act in tax19 able years beginning after such date. 

20 SEC. 303. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES 

21 INCURRED BEFORE ESTABLISHMENT OF AC22 COUNT. 

23 (a) IN GENERAL.—Paragraph (2) of section 223(d) 

24 is amended by adding at the end the following new sub25 paragraph: 


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1 ‘‘(D) TREATMENT OF CERTAIN MEDICAL

2 EXPENSES INCURRED BEFORE ESTABLISHMENT

3 OF ACCOUNT.—If a health savings account is 

4 established during the 60-day period beginning 

5 on the date that coverage of the account bene6 ficiary under an HSA-qualified health plan be7 gins, then, solely for purposes of determining 

8 whether an amount paid is used for a qualified 

9 medical expense, such account shall be treated 

10 as having been established on the date that 

11 such coverage begins.’’. 

12 (b) EFFECTIVE DATE.—The amendment made by 

13 this section shall apply with respect to coverage beginning 

14 after the date of the enactment of this Act. 

15 SEC. 304. PREVENTIVE CARE PRESCRIPTION DRUG CLARI16 FICATION. 

17 (a) CLARIFY USE OF DRUGS IN PREVENTIVE

18 CARE.—Subparagraph (C) of section 223(c)(2) is amend19 ed by adding at the end the following: ‘‘Preventive care 

20 shall include prescription and over-the-counter drugs and 

21 medicines which have the primary purpose of preventing 

22 the onset of, further deterioration from, or complications 

23 associated with chronic conditions, illnesses, or diseases.’’. 


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1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2016. 

4 TITLE IV—PROTECTING ACCESS 

5 TO LOW-COST HEALTH PLANS 

6 BY REDUCING BURDENSOME 

7 MANDATES 

8 SEC. 401. HSA-QUALIFIED HEALTH PLANS QUALIFY AS PRO9 VIDING MINIMUM VALUE. 

10 (a) IN GENERAL.—Clause (ii) of section 

11 36B(c)(2)(C) is amended by inserting ‘‘, in the case of 

12 a plan other than an HSA-qualified health plan,’’ after 

13 ‘‘an eligible employer-sponsored plan (as defined in section 

14 5000A(f)(2)) and’’. 

15 (b) EFFECTIVE DATE.—The amendment made by 

16 this section shall apply to months beginning after Decem17 ber 31, 2016. 

18 TITLE V—MISCELLANEOUS PRO19 VISIONS RELATING TO TAX20 PREFERRED HEALTH AC21 COUNTS 

22 SEC. 501. FSA AND HRA INTERACTION WITH HSAS. 

23 (a) ELIGIBLE INDIVIDUALS INCLUDE FSA AND HRA 

24 PARTICIPANTS.—Subparagraph (B) of section 223(c)(1) 

25 is amended— 


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1 (1) by striking ‘‘and’’ at the end of clause (ii), 

2 (2) by striking the period at the end of clause 

3 (iii) and inserting ‘‘, and’’, and 

4 (3) by inserting after clause (iii) the following 

5 new clause: 

6 ‘‘(iv) coverage under a health flexible 

7 spending arrangement or a health reim8 bursement arrangement in the plan year a 

9 qualified HSA distribution as described in 

10 section 106(e) is made on behalf of the in11 dividual if, after the qualified HSA dis12 tribution is made and for the remaining 

13 duration of the plan year, the coverage 

14 provided under the arrangement is con15 verted solely to one or more of the fol16 lowing: 

17 ‘‘(I) POST-DEDUCTIBLE FSA OR

18 HRA.—A health flexible spending ar19 rangement or a health reimbursement 

20 arrangement that does not pay or re21 imburse any medical expense incurred 

22 before the minimum annual deductible 

23 under paragraph (2)(A)(i) (prorated 

24 for the period occurring after the 


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1 qualified HSA distribution is made) is 

2 satisfied. 

3 ‘‘(II) PREVENTATIVE CARE.—A 

4 health flexible spending arrangement 

5 or a health reimbursement arrange6 ment that, after the qualified HSA 

7 distribution is made, does not pay or 

8 reimburse any medical expense in9 curred after the qualified HSA dis10 tribution is made other than preven11 tive care as defined in paragraph 

12 (2)(C). 

13 ‘‘(III) LIMITED PURPOSE

14 HEALTH FSA.—A health flexible 

15 spending arrangement that, after the 

16 qualified HSA distribution is made, 

17 pays or reimburses benefits for cov18 erage described in clause (ii) (but not 

19 through insurance or for long-term 

20 care services). 

21 ‘‘(IV) LIMITED PURPOSE HRA.— 

22 A health reimbursement arrangement 

23 that, after the qualified HSA distribu24 tion is made, pays or reimburses bene25 fits for permitted insurance or covVerDate Sep 11 2014 22:52 Feb 05, 2016 Jkt 059200 PO 00000 Frm 00018 Fmt 6652 Sfmt 6201 E:\BILLS\H4469.IH H4469

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1 erage described in clause (ii) (but not 

2 for long-term care services). 

3 ‘‘(V) RETIREMENT HRA.—A 

4 health reimbursement arrangement 

5 that, after the qualified HSA distribu6 tion is made, pays or reimburses only 

7 those medical expenses incurred after 

8 an individual’s retirement (and no ex9 penses incurred before retirement). 

10 ‘‘(VI) SUSPENDED HRA.—A 

11 health reimbursement arrangement 

12 that, after the qualified HSA distribu13 tion is made, is suspended, pursuant 

14 to an election made on or before the 

15 date the individual elects a qualified 

16 HSA distribution or, if later, on the 

17 date of the individual enrolls in an 

18 HSA-qualified health plan, that does 

19 not pay or reimburse, at any time, 

20 any medical expense incurred during 

21 the suspension period except as de22 scribed in the preceding subclauses of 

23 this clause.’’. 


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1 (b) QUALIFIED HSA DISTRIBUTION SHALL NOT AF2 FECT FLEXIBLE SPENDING ARRANGEMENT.—Paragraph 

3 (1) of section 106(e) is amended to read as follows: 

4 ‘‘(1) IN GENERAL.—A plan shall not fail to be 

5 treated as— 

6 ‘‘(A) a health flexible spending arrange7 ment under this section, section 105, or section 

8 125, 

9 ‘‘(B) a health reimbursement arrangement 

10 under this section or section 105, or 

11 ‘‘(C) an accident or health plan, 

12 merely because such plan provides for a qualified 

13 HSA distribution.’’. 

14 (c) FSA BALANCES AT YEAR END SHALL NOT FOR15 FEIT.—Paragraph (2) of section 125(d) is amended by 

16 adding at the end the following new subparagraph: 

17 ‘‘(E) EXCEPTION FOR QUALIFIED HSA DIS18 TRIBUTIONS.—Subparagraph (A) shall not 

19 apply to the extent that there is an amount re20 maining in a health flexible spending account at 

21 the end of a plan year that an individual elects 

22 to contribute to a health savings account pursu23 ant to a qualified HSA distribution (as defined 

24 in section 106(e)(2)).’’. 


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1 (d) SIMPLIFICATION OF LIMITATIONS ON FSA AND

2 HRA ROLLOVERS.—Paragraph (2) of section 106(e) is 

3 amended to read as follows: 

4 ‘‘(2) QUALIFIED HSA DISTRIBUTION.— 

5 ‘‘(A) IN GENERAL.—The term ‘qualified 

6 HSA distribution’ means a distribution from a 

7 health flexible spending arrangement or health 

8 reimbursement arrangement directly to a health 

9 savings account of the employee to the extent 

10 that such distribution does not exceed the lesser 

11 of— 

12 ‘‘(i) the balance in such arrangement 

13 as of the date of such distribution, or 

14 ‘‘(ii) the amount determined under 

15 subparagraph (B). 

16 Such term shall not include more than 1 dis17 tribution with respect to any arrangement. 

18 ‘‘(B) DOLLAR LIMITATIONS.— 

19 ‘‘(i) DISTRIBUTIONS FROM A HEALTH

20 FLEXIBLE SPENDING ARRANGEMENT.—A 

21 qualified HSA distribution from a health 

22 flexible spending arrangement shall not ex23 ceed the applicable amount. 

24 ‘‘(ii) DISTRIBUTIONS FROM A HEALTH

25 REIMBURSEMENT ARRANGEMENT.—A 


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1 qualified HSA distribution from a health 

2 reimbursement arrangement shall not ex3 ceed— 

4 ‘‘(I) the applicable amount di5 vided by 12, multiplied by 

6 ‘‘(II) the number of months dur7 ing which the individual is a partici8 pant in the health reimbursement ar9 rangement. 

10 ‘‘(iii) APPLICABLE AMOUNT.—For 

11 purposes of this subparagraph, the applica12 ble amount is— 

13 ‘‘(I) $2,250 in the case of an eli14 gible individual who has self-only cov15 erage under an HSA-qualified health 

16 plan at the time of such distribution, 

17 and 

18 ‘‘(II) $4,500 in the case of an eli19 gible individual who has family cov20 erage under an HSA-qualified health 

21 plan at the time of such distribu22 tion.’’. 

23 (e) ELIMINATION OF ADDITIONAL TAX FOR FAILURE

24 TO MAINTAIN HSA-QUALIFIED HEALTH PLAN COV25 ERAGE.—Subsection (e) of section 106 is amended— 


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1 (1) by striking paragraph (3) and redesignating 

2 paragraphs (4) and (5) as paragraphs (3) and (4), 

3 respectively, and 

4 (2) by striking subparagraph (A) of paragraph 

5 (3), as so redesignated, and redesignating subpara6 graphs (B) and (C) of such paragraph as subpara7 graphs (A) and (B) thereof, respectively. 

8 (f) LIMITED PURPOSE FSAS AND HRAS.—Sub9 section (e) of section 106, as amended by this section, is 

10 amended by adding at the end the following new para11 graph: 

12 ‘‘(5) LIMITED PURPOSE FSAS AND HRAS.—A 

13 plan shall not fail to be a health flexible spending 

14 arrangement, a health reimbursement arrangement, 

15 or an accident or health plan under this section or 

16 section 105 merely because the plan converts cov17 erage for individuals who enroll in an HSA-qualified 

18 health plan described in section 223(c)(2) to cov19 erage described in subclause (I), (II), (III), (IV), 

20 (V), or (VI) of section 223(c)(1)(B)(iv). Coverage 

21 for such individuals may be converted as of the date 

22 of enrollment in the HSA-qualified health plan, 

23 without regard to the period of coverage under the 

24 health flexible spending arrangement or health reim25 bursement arrangement, and without requiring any 


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1 change in coverage to individuals who do not enroll 

2 in an HSA-qualified health plan.’’. 

3 (g) DISTRIBUTION AMOUNTS ADJUSTED FOR COST4 OF-LIVING.—Subsection (e) of section 106, as amended 

5 by this section, is amended by adding at the end the fol6 lowing new paragraph: 

7 ‘‘(6) COST-OF-LIVING ADJUSTMENT.— 

8 ‘‘(A) IN GENERAL.—In the case of any 

9 taxable year beginning in a calendar year after 

10 2016, each of the dollar amounts in paragraph 

11 (2)(B)(iii) shall be increased by an amount 

12 equal to such dollar amount, multiplied by the 

13 cost-of-living adjustment determined under sec14 tion 1(f)(3) for the calendar year in which such 

15 taxable year begins by substituting ‘calendar 

16 year 2015’ for ‘calendar year 1992’ in subpara17 graph (B) thereof. 

18 ‘‘(B) ROUNDING.—If any increase under 

19 paragraph (1) is not a multiple of $50, such in20 crease shall be rounded to the nearest multiple 

21 of $50.’’. 

22 (h) DISCLAIMER OF DISQUALIFYING COVERAGE.— 

23 Subparagraph (B) of section 223(c)(1), as amended by 

24 this section, is amended— 

25 (1) by striking ‘‘and’’ at the end of clause (iii), 


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1 (2) by striking the period at the end of clause 

2 (iv) and inserting ‘‘, and’’, and 

3 (3) by inserting after clause (iv) the following 

4 new clause: 

5 ‘‘(v) any coverage (including prospec6 tive coverage) under a health plan that is 

7 not an HSA-qualified health plan which is 

8 disclaimed in writing, at the time of the 

9 creation or organization of the health sav10 ings account, including by execution of a 

11 trust described in subsection (d)(1) 

12 through a governing instrument that in13 cludes such a disclaimer, or by acceptance 

14 of an amendment to such a trust that in15 cludes such a disclaimer.’’. 

16 (i) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to taxable years beginning after 

18 the date of the enactment of this Act. 

19 SEC. 502. EQUIVALENT BANKRUPTCY PROTECTIONS FOR 

20 HEALTH SAVINGS ACCOUNTS AS RETIRE21 MENT FUNDS. 

22 (a) IN GENERAL.—Section 522 of title 11, United 

23 States Code, is amended by adding at the end the fol24 lowing new subsection: 


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1 ‘‘(r) TREATMENT OF HEALTH SAVINGS AC2 COUNTS.—For purposes of this section, any health savings 

3 account (as described in section 223 of the Internal Rev4 enue Code of 1986) shall be treated in the same manner 

5 as an individual retirement account described in section 

6 408 of such Code.’’. 

7 (b) EFFECTIVE DATE.—The amendment made by 

8 this section shall apply to cases commencing under title 

9 11, United States Code, after the date of the enactment 

10 of this Act. 

11 SEC. 503. ADMINISTRATIVE ERROR CORRECTION BEFORE 

12 DUE DATE OF RETURN. 

13 (a) IN GENERAL.—Paragraph (4) of section 223(f) 

14 is amended by adding at the end the following new sub15 paragraph: 

16 ‘‘(D) EXCEPTION FOR ADMINISTRATIVE

17 ERRORS CORRECTED BEFORE DUE DATE OF RE18 TURN.—Subparagraph (A) shall not apply if 

19 any payment or distribution is made to correct 

20 an administrative, clerical, or payroll contribu21 tion error and if— 

22 ‘‘(i) such distribution is received by 

23 the individual on or before the last day 

24 prescribed by law (including extensions of 


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1 time) for filing such individual’s return for 

2 such taxable year, and 

3 ‘‘(ii) such distribution is accompanied 

4 by the amount of net income attributable 

5 to such contribution. 

6 Any net income described in clause (ii) shall be 

7 included in the gross income of the individual 

8 for the taxable year in which it is received.’’. 

9 (b) EFFECTIVE DATE.—The amendment made by 

10 this section shall take effect on the date of the enactment 

11 of this Act. 

12 SEC. 504. REAUTHORIZATION OF MEDICAID HEALTH OP13 PORTUNITY ACCOUNTS. 

14 (a) IN GENERAL.—Section 1938 of the Social Secu15 rity Act (42 U.S.C. 1396u–8) is amended— 

16 (1) in subsection (a)— 

17 (A) by striking paragraph (2) and insert18 ing the following: 

19 ‘‘(2) INITIAL DEMONSTRATION.—The Secretary 

20 shall approve States to conduct demonstration pro21 grams under this section for a 5-year period, with 

22 each State demonstration program covering one or 

23 more geographic areas specified by the State. With 

24 respect to a State, after the initial 5-year period of 

25 any demonstration program conducted under this 


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1 section by the State, unless the Secretary finds, tak2 ing into account cost-effectiveness and quality of 

3 care, that the State demonstration program has 

4 been unsuccessful, the demonstration program may 

5 be extended or made permanent in the State.’’; and 

6 (B) in paragraph (3), in the matter pre7 ceding subparagraph (A)— 

8 (i) by striking ‘‘not’’; and 

9 (ii) by striking ‘‘unless’’ and inserting 

10 ‘‘if’’; 

11 (2) in subsection (b)— 

12 (A) in paragraph (3), by inserting ‘‘clause 

13 (i) through (vii), (viii) (without regard to the 

14 amendment made by section 2004(c)(2) of Pub15 lic Law 111–148), (x), or (xi) of’’ after ‘‘de16 scribed in’’; and 

17 (B) by striking paragraphs (4), (5), and 

18 (6); 

19 (3) in subsection (c)— 

20 (A) by striking paragraphs (3) and (4); 

21 (B) by redesignating paragraphs (5) 

22 through (8) as paragraphs (3) through (6), re23 spectively; and 

24 (C) in paragraph (4) (as redesignated by 

25 subparagraph (B)), by striking ‘‘Subject to subVerDate Sep 11 2014 22:52 Feb 05, 2016 Jkt 059200 PO 00000 Frm 00028 Fmt 6652 Sfmt 6201 E:\BILLS\H4469.IH H4469

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1 paragraphs (D) and (E)’’ and inserting ‘‘Sub2 ject to subparagraph (D)’’; and 

3 (4) in subsection (d)— 

4 (A) in paragraph (2), by striking subpara5 graph (E); and 

6 (B) in paragraph (3)— 

7 (i) in subparagraph (A)(ii), by strik8 ing ‘‘Subject to subparagraph (B)(ii), in’’ 

9 and inserting ‘‘In’’; and 

10 (ii) by striking subparagraph (B) and 

11 inserting the following: 

12 ‘‘(B) MAINTENANCE OF HEALTH OPPOR13 TUNITY ACCOUNT AFTER BECOMING INELI14 GIBLE FOR PUBLIC BENEFIT.—Notwithstanding 

15 any other provision of law, if an account holder 

16 of a health opportunity account becomes ineli17 gible for benefits under this title because of an 

18 increase in income or assets— 

19 ‘‘(i) no additional contribution shall be 

20 made into the account under paragraph 

21 (2)(A)(i); and 

22 ‘‘(ii) the account shall remain avail23 able to the account holder for 3 years after 

24 the date on which the individual becomes 

25 ineligible for such benefits for withdrawals 


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1 under the same terms and conditions as if 

2 the account holder remained eligible for 

3 such benefits, and such withdrawals shall 

4 be treated as medical assistance in accord5 ance with subsection (c)(4).’’. 

6 (b) CONFORMING AMENDMENT.—Section 613 of 

7 Public Law 111–3 is repealed. 

8 SEC. 505. EXCLUSION OF CERTAIN HEALTH ARRANGE9 MENTS FROM EMPLOYER-SPONSORED EX10 CISE TAX. 

11 (a) IN GENERAL.—Subparagraph (B) of section 

12 4980I(d)(1) is amended by striking the period at the end 

13 of clause (iii) and inserting ‘‘, or’’ and by adding at the 

14 end the following new clause: 

15 ‘‘(iv) any amounts contributed to an 

16 Archer MSA under section 106(b), a 

17 health savings account under section 

18 106(d), or a health flexible spending ar19 rangement— 

20 ‘‘(I) by an employee, or 

21 ‘‘(II) by an employer through sal22 ary reduction contributions.’’. 

23 (b) CONFORMING AMENDMENTS.— 

24 (1) Section 4980I(d)(2)(B) is amended by 

25 striking ‘‘shall be equal to the sum of’’ and all that 


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1 follows and inserting ‘‘shall be equal to the amount 

2 determined under subparagraph (A) with respect to 

3 any reimbursement under the arrangement in excess 

4 of any employer contributions under any salary re5 duction election under the arrangement.’’. 

6 (2) Section 4980I(d)(2)(C) is amended by in7 serting ‘‘(determined without regard to any employer 

8 contributions under any salary reduction election 

9 under the arrangement)’’ before the period at the 

10 end. 

11 (c) EFFECTIVE DATE.—The amendments made by 

12 this section shall apply to taxable years beginning after 

13 December 31, 2019. 

14 TITLE VI—OTHER PROVISIONS 

15 SEC. 601. CERTAIN EXERCISE EQUIPMENT AND PHYSICAL 

16 FITNESS PROGRAMS TREATED AS MEDICAL 

17 CARE. 

18 (a) IN GENERAL.—Subsection (d) of section 213 is 

19 amended by adding at the end the following new para20 graph: 

21 ‘‘(12) EXERCISE EQUIPMENT AND PHYSICAL

22 FITNESS ACTIVITY.— 

23 ‘‘(A) IN GENERAL.—The term ‘medical 

24 care’ shall include amounts paid— 


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1 ‘‘(i) for equipment for use in a pro2 gram (including a self-directed program) of 

3 physical exercise or physical activity, 

4 ‘‘(ii) to participate, or receive instruc5 tion, in a program of physical exercise, nu6 trition, or health coaching (including a 

7 self-directed program), and 

8 ‘‘(iii) for membership at a fitness fa9 cility. 

10 ‘‘(B) OVERALL DOLLAR LIMITATION.— 

11 ‘‘(i) IN GENERAL.—Amounts treated 

12 as medical care under subparagraph (A) 

13 shall not exceed $1,000 with respect to any 

14 individual for any taxable year. 

15 ‘‘(ii) EXCEPTION.—Clause (i) shall 

16 not apply for purposes of determining 

17 whether expenses reimbursed through a 

18 health flexible spending arrangement sub19 ject to section 125(i)(1) are incurred for 

20 medical care. 

21 ‘‘(C) LIMITATIONS RELATED TO SPORTS

22 AND FITNESS EQUIPMENT.—Amounts paid for 

23 equipment described in subparagraph (A)(i) 

24 shall be treated as medical care only— 


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1 ‘‘(i) if such equipment is utilized ex2 clusively for participation in fitness, exer3 cise, sport, or other physical activity pro4 grams, 

5 ‘‘(ii) if such equipment is not apparel 

6 or footwear, and 

7 ‘‘(iii) in the case of any item of sports 

8 equipment (other than exercise equip9 ment), with respect to so much of the 

10 amount paid for such item as does not ex11 ceed $250. 

12 ‘‘(D) FITNESS FACILITY DEFINED.—For 

13 purposes of subparagraph (A)(iii), the term ‘fit14 ness facility’ means a facility— 

15 ‘‘(i) providing instruction in a pro16 gram of physical exercise, offering facilities 

17 for the preservation, maintenance, encour18 agement, or development of physical fit19 ness, or serving as the site of such a pro20 gram of a State or local government, 

21 ‘‘(ii) which is not a private club owned 

22 and operated by its members, 

23 ‘‘(iii) which does not offer golf, hunt24 ing, sailing, or riding facilities, 


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1 ‘‘(iv) whose health or fitness facility is 

2 not incidental to its overall function and 

3 purpose, and 

4 ‘‘(v) which is fully compliant with the 

5 State of jurisdiction and Federal anti-dis6 crimination laws.’’. 

7 (b) LIMITATION NOT TO APPLY FOR CERTAIN PUR8 POSES.— 

9 (1) HEALTH SAVINGS ACCOUNTS.—Subpara10 graph (A) of section 223(d)(2) is amended by insert11 ing ‘‘, determined without regard to paragraph 

12 (12)(B) thereof’’ after ‘‘medical care (as defined in 

13 section 213(d)’’. 

14 (2) ARCHER MSAS.—Subparagraph (A) of sec15 tion 220(d)(2) is amended by inserting ‘‘, deter16 mined without regard to paragraph (12)(B) thereof’’ 

17 after ‘‘medical care (as defined in section 213(d)’’. 

18 (c) EFFECTIVE DATE.—The amendments made by 

19 this section shall apply to taxable years beginning after 

20 the date of the enactment of this Act. 

21 SEC. 602. CERTAIN NUTRITIONAL AND DIETARY SUPPLE22 MENTS TO BE TREATED AS MEDICAL CARE. 

23 (a) IN GENERAL.—Subsection (d) of section 213, as 

24 amended by section 601, is amended by adding at the end 

25 the following new paragraph: 


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1 ‘‘(13) NUTRITIONAL AND DIETARY SUPPLE2 MENTS.— 

3 ‘‘(A) IN GENERAL.—The term ‘medical 

4 care’ shall include amounts paid to purchase 

5 herbs, vitamins, minerals, homeopathic rem6 edies, meal replacement products, and other di7 etary and nutritional supplements. 

8 ‘‘(B) LIMITATION.—Amounts treated as 

9 medical care under subparagraph (A) shall not 

10 exceed $1,000 with respect to any individual for 

11 any taxable year. 

12 ‘‘(C) MEAL REPLACEMENT PRODUCT.— 

13 For purposes of this paragraph, the term ‘meal 

14 replacement product’ means any product that— 

15 ‘‘(i) is permitted to bear labeling mak16 ing a claim described in section 403(r)(3) 

17 of the Federal Food, Drug, and Cosmetic 

18 Act, and 

19 ‘‘(ii) is permitted to claim under such 

20 section that such product is low in fat and 

21 is a good source of protein, fiber, and mul22 tiple essential vitamins and minerals. 

23 ‘‘(D) EXCEPTION.—Subparagraph (B) 

24 shall not apply for purposes of determining 

25 whether expenses reimbursed through a health 


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1 flexible spending arrangement subject to section 

2 125(i)(1) are incurred for medical care.’’. 

3 (b) LIMITATION NOT TO APPLY FOR CERTAIN PUR4 POSES.— 

5 (1) HEALTH SAVINGS ACCOUNTS.—Subpara6 graph (A) of section 223(d)(2), as amended by sec7 tion 601, is amended by striking ‘‘paragraph 

8 (12)(B)’’ and inserting ‘‘paragraphs (12)(B) and 

9 (13)(B)’’. 

10 (2) ARCHER MSAS.—Subparagraph (A) of sec11 tion 220(d)(2), as amended by section 601, is 

12 amended by striking ‘‘paragraph (12)(B)’’ and in13 serting ‘‘paragraphs (12)(B) and (13)(B)’’. 

14 (c) EFFECTIVE DATE.—The amendments made by 

15 this section shall apply to taxable years beginning after 

16 the date of the enactment of this Act. 

17 SEC. 603. CERTAIN PROVIDER FEES TO BE TREATED AS 

18 MEDICAL CARE. 

19 (a) IN GENERAL.—Subsection (d) of section 213, as 

20 amended by sections 601 and 602, is amended by adding 

21 at the end the following new paragraph: 

22 ‘‘(14) PERIODIC PROVIDER FEES.—The term 

23 ‘medical care’ shall include— 

24 ‘‘(A) periodic fees paid to a primary care 

25 physician for a defined set of medical services 


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1 or the right to receive medical services on an 

2 as-needed basis, and 

3 ‘‘(B) pre-paid primary care services de4 signed to screen for, diagnose, cure, mitigate, 

5 treat, or prevent disease and promote 

6 wellness.’’. 

7 (b) EXCEPTION FOR FLEXIBLE SPENDING AC8 COUNTS.—Section 125 is amended by redesignating sub9 sections (k) and (l) as subsections (l) and (m), respec10 tively, and by inserting after subsection (j) the following 

11 new subsection: 

12 ‘‘(k) SPECIAL RULE WITH RESPECT TO HEALTH

13 FLEXIBLE SPENDING ARRANGEMENTS.—For purposes of 

14 applying this with respect to any health flexible spending 

15 arrangement, amounts described in section 213(d)(14) 

16 shall not be considered insurance.’’. 

17 (c) EFFECTIVE DATE.—The amendments made by 

18 this section shall apply to taxable years beginning after 

19 the date of the enactment of this Act. 

Æ 


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