I 

112TH CONGRESS 

1ST SESSION H. R. 2010 

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 

MAY 26, 2011 

Mr. PAULSEN (for himself, Mr. TIBERI, Ms. GRANGER, Mr. CULBERSON, Mr. 

BURTON of Indiana, Mr. FRANKS of Arizona, Mr. MCHENRY, Mr. FLEMING, Mr. GARRETT, Mr. GOHMERT, Ms. HERRERA BEUTLER, Mr. 

LUETKEMEYER, Mr. DANIEL E. LUNGREN of California, Mr. MANZULLO, 

Mr. PEARCE, Mr. CHAFFETZ, Mr. PAUL, Mr. ROSKAM, Mrs. LUMMIS, 

Mrs. MCMORRIS RODGERS, Mr. WESTMORELAND, Mr. BRADY of Texas, 

Mr. DENT, Mrs. BIGGERT, Mr. LANCE, and Mr. ROONEY) 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 ‘‘Family and Retirement Health Investment Act of 2011’’. 


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1 (b) AMENDMENT OF 1986 CODE.—Except as other2 wise expressly provided, whenever in this Act an amend3 ment or repeal is expressed in terms of an amendment 

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

5 shall be considered to be made to a section or other provi6 sion of the Internal Revenue Code of 1986. 

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

8 as follows: 

Sec. 1. Short title, etc. 

TITLE I—PROVISIONS RELATING TO TAX-PREFERRED HEALTH 

ACCOUNTS 

Sec. 101. Allow both spouses to make catch-up contributions to the same HSA 

account. 

Sec. 102. Provisions relating to Medicare. 

Sec. 103. Individuals eligible for veterans benefits for a service-connected disability. 

Sec. 104. Individuals eligible for Indian Health Service assistance. 

Sec. 105. Individuals eligible for TRICARE coverage. 

Sec. 106. Health FSA carryforwards. 

Sec. 107. FSA and HRA interaction with HSAs. 

Sec. 108. Allowance of distributions for prescription and over-the-counter medicines and drugs. 

Sec. 109. Purchase of health insurance from HSA account. 

Sec. 110. Special rule for certain medical expenses incurred before establishment of account. 

Sec. 111. Preventive care prescription drug clarification. 

Sec. 112. Equivalent bankruptcy protections for health savings accounts as retirement funds. 

Sec. 113. Administrative error correction before due date of return. 

Sec. 114. Reauthorization of medicaid health opportunity accounts. 

TITLE II—OTHER PROVISIONS 

Sec. 121. Certain exercise equipment and physical fitness programs treated as 

medical care. 

Sec. 122. Certain nutritional and dietary supplements to be treated as medical 

care. 

Sec. 123. Certain provider fees to be treated as medical care. 

Sec. 124. Repeal of annual limitations on deductibles for employer-sponsored 

plans offered in small group market. 


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1 TITLE I—PROVISIONS RELATING 

2 TO TAX-PREFERRED HEALTH 

3 ACCOUNTS 

4 SEC. 101. ALLOW BOTH SPOUSES TO MAKE CATCH-UP CON5 TRIBUTIONS TO THE SAME HSA ACCOUNT. 

6 (a) IN GENERAL.—Paragraph (3) of section 223(b) 

7 is amended by adding at the end the following new sub8 paragraph: 

9 ‘‘(C) SPECIAL RULE WHERE BOTH

10 SPOUSES ARE ELIGIBLE INDIVIDUALS WITH 1

11 ACCOUNT.—If— 

12 ‘‘(i) an individual and the individual’s 

13 spouse have both attained age 55 before 

14 the close of the taxable year, and 

15 ‘‘(ii) the spouse is not an account ben16 eficiary of a health savings account as of 

17 the close of such year, 

18 the additional contribution amount shall be 200 

19 percent of the amount otherwise determined 

20 under subparagraph (B).’’. 

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

22 this section shall apply to taxable years beginning after 

23 the date of the enactment of this Act. 


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1 SEC. 102. PROVISIONS RELATING TO MEDICARE. 

2 (a) INDIVIDUALS OVER AGE 65 ONLY ENROLLED IN

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

4 amended by adding at the end the following: ‘‘This para5 graph shall not apply to any individual during any period 

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

7 is an entitlement to hospital insurance benefits under part 

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

9 for such hospital insurance benefits under section 

10 226(a)(1) of such Act.’’. 

11 (b) MEDICARE BENEFICIARIES PARTICIPATING IN

12 MEDICARE ADVANTAGE MSA MAY CONTRIBUTE THEIR

13 OWN MONEY TO THEIR MSA.—Subsection (b) of section 

14 138 is amended by striking paragraph (2) and by redesig15 nating paragraphs (3) and (4) as paragraphs (2) and (3), 

16 respectively. 

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. 

20 SEC. 103. INDIVIDUALS ELIGIBLE FOR VETERANS BENE21 FITS FOR A SERVICE-CONNECTED DIS22 ABILITY. 

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 ‘‘(C) SPECIAL RULE FOR INDIVIDUALS ELI2 GIBLE FOR CERTAIN VETERANS BENEFITS.— 

3 For purposes of subparagraph (A)(ii), an indi4 vidual shall not be treated as covered under a 

5 health plan described in such subparagraph 

6 merely because the individual receives periodic 

7 hospital care or medical services for a service8 connected disability under any law administered 

9 by the Secretary of Veterans Affairs but only if 

10 the individual is not eligible to receive such care 

11 or services for any condition other than a serv12 ice-connected disability.’’. 

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

14 this section shall apply to taxable years beginning after 

15 the date of the enactment of this Act. 

16 SEC. 104. INDIVIDUALS ELIGIBLE FOR INDIAN HEALTH 

17 SERVICE ASSISTANCE. 

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

19 as amended by section 103, is amended by adding at the 

20 end the following new subparagraph: 

21 ‘‘(D) SPECIAL RULE FOR INDIVIDUALS EL22 IGIBLE FOR ASSISTANCE UNDER INDIAN

23 HEALTH SERVICE PROGRAMS.—For purposes of 

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

25 treated as covered under a health plan deVerDate Mar 15 2010 01:48 Jun 02, 2011 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H2010.IH H2010

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1 scribed in such subparagraph merely because 

2 the individual receives hospital care or medical 

3 services under a medical care program of the 

4 Indian Health Service or of a tribal organiza5 tion.’’. 

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

7 this section shall apply to taxable years beginning after 

8 the date of the enactment of this Act. 

9 SEC. 105. INDIVIDUALS ELIGIBLE FOR TRICARE COVERAGE. 

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

11 as amended by sections 103 and 104, is amended by add12 ing at the end the following new subparagraph: 

13 ‘‘(E) SPECIAL RULE FOR INDIVIDUALS EL14 IGIBLE FOR ASSISTANCE UNDER TRICARE.—For 

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

16 shall not be treated as covered under a health 

17 plan described in such subparagraph merely be18 cause the individual is eligible to receive hos19 pital care, medical services, or prescription 

20 drugs under TRICARE Extra or TRICARE 

21 Standard and such individual is not enrolled in 

22 TRICARE Prime.’’. 

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

24 this section shall apply to taxable years beginning after 

25 the date of the enactment of this Act. 


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1 SEC. 106. HEALTH FSA CARRYFORWARDS. 

2 (a) IN GENERAL.—Section 125 is amended by redes3 ignating subsections (i) and (j) as subsections (j) and (k), 

4 respectively, and by inserting after subsection (h) the fol5 lowing new subsection: 

6 ‘‘(i) SPECIAL RULES APPLICABLE TO HEALTH

7 FLEXIBLE SPENDING ARRANGEMENTS.— 

8 ‘‘(1) IN GENERAL.—For purposes of this title, 

9 a plan or other arrangement shall not fail to be 

10 treated as a health flexible spending or similar ar11 rangement solely because under the plan or arrange12 ment a participant is permitted access to any unused 

13 balance in the participant’s accounts under such 

14 plan or arrangement in the manner provided under 

15 paragraph (2). 

16 ‘‘(2) CARRYFORWARD OF UNUSED BENEFITS IN

17 HEALTH ARRANGEMENTS.— 

18 ‘‘(A) IN GENERAL.—A plan or arrange19 ment may permit a participant in a health flexi20 ble spending arrangement to elect to carry for21 ward any aggregate unused balances in the par22 ticipant’s accounts under such arrangement as 

23 of the close of any year to the succeeding year. 

24 Such carryforward shall be treated as having 

25 occurred within 30 days of the close of the year. 


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1 ‘‘(B) DOLLAR LIMIT ON

2 CARRYFORWARDS.— 

3 ‘‘(i) IN GENERAL.—The amount which 

4 a participant may elect to carry forward 

5 under subparagraph (A) from any year 

6 shall not exceed $500. For purposes of this 

7 paragraph, all plans and arrangements 

8 maintained by an employer or any related 

9 person shall be treated as 1 plan. 

10 ‘‘(ii) COST-OF-LIVING ADJUSTMENT.— 

11 In the case of any taxable year beginning 

12 in a calendar year after 2011, the $500 

13 amount under clause (i) shall be increased 

14 by an amount equal to— 

15 ‘‘(I) $500, multiplied by 

16 ‘‘(II) the cost-of-living adjust17 ment determined under section 1(f)(3) 

18 for such calendar year, determined by 

19 substituting ‘2010’ for ‘1992’ in sub20 paragraph (B) thereof. 

21 If any dollar amount as increased under 

22 this clause is not a multiple of $100, such 

23 amount shall be rounded to the next lowest 

24 multiple of $100. 


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1 ‘‘(C) EXCLUSION FROM GROSS INCOME.— 

2 No amount shall be required to be included in 

3 gross income under this chapter by reason of 

4 any carryforward under this paragraph. 

5 ‘‘(D) COORDINATION WITH LIMITS.—The 

6 maximum amount which may be contributed to 

7 a health flexible spending arrangement for any 

8 year to which an unused amount is carried 

9 under this paragraph shall be reduced by such 

10 amount. 

11 ‘‘(3) TERMS RELATING TO FLEXIBLE SPENDING

12 ARRANGEMENTS.— 

13 ‘‘(A) FLEXIBLE SPENDING ARRANGE14 MENTS.—For purposes of this subsection, a 

15 flexible spending arrangement is a benefit pro16 gram which provides employees with coverage 

17 under which specified incurred expenses may be 

18 reimbursed (subject to reimbursement maxi19 mums and other reasonable conditions). 

20 ‘‘(B) HEALTH ARRANGEMENTS.—The term 

21 ‘health flexible spending arrangement’ means 

22 any flexible spending arrangement (or portion 

23 thereof) which provides payments for expenses 

24 incurred for medical care (as defined in section 

25 213(d)).’’. 


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1 (b) CONFORMING AMENDMENTS.— 

2 (1) The heading for section 125 of the Internal 

3 Revenue Code of 1986 is amended by inserting 

4 ‘‘AND HEALTH FLEXIBLE SPENDING ARRANGE5 MENTS’’ after ‘‘PLANS’’. 

6 (2) The item relating to section 125 in the table 

7 of sections for part III of subchapter B of chapter 

8 1 of such Code is amended by inserting ‘‘and health 

9 flexible spending arrangements’’ after ‘‘plans’’. 

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

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

12 of this Act. 

13 SEC. 107. FSA AND HRA INTERACTION WITH HSAS. 

14 (a) ELIGIBLE INDIVIDUALS INCLUDE FSA AND HRA 

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

16 is amended— 

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

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

19 (iii) and inserting ‘‘, and’’, and 

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

21 new clause: 

22 ‘‘(iv) coverage under a health flexible 

23 spending arrangement or a health reim24 bursement arrangement in the plan year a 

25 qualified HSA distribution as described in 


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1 section 106(e) is made on behalf of the in2 dividual if after the qualified HSA dis3 tribution is made and for the remaining 

4 duration of the plan year, the coverage 

5 provided under the health flexible spending 

6 arrangement or health reimbursement ar7 rangement is converted to— 

8 ‘‘(I) coverage that does not pay 

9 or reimburse any medical expense in10 curred before the minimum annual de11 ductible under paragraph (2)(A)(i) 

12 (prorated for the period occurring 

13 after the qualified HSA distribution is 

14 made) is satisfied, 

15 ‘‘(II) coverage that, after the 

16 qualified HSA distribution is made, 

17 does not pay or reimburse any med18 ical expense incurred after the quali19 fied HSA distribution is made other 

20 than preventive care as defined in 

21 paragraph (2)(C), 

22 ‘‘(III) coverage that, after the 

23 qualified HSA distribution is made, 

24 pays or reimburses benefits for cov25 erage described in clause (ii) (but not 


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1 through insurance or for long-term 

2 care services), 

3 ‘‘(IV) coverage that, after the 

4 qualified HSA distribution is made, 

5 pays or reimburses benefits for per6 mitted insurance or coverage de7 scribed in clause (ii) (but not for long8 term care services), 

9 ‘‘(V) coverage that, after the 

10 qualified HSA distribution is made, 

11 pays or reimburses only those medical 

12 expenses incurred after an individual’s 

13 retirement (and no expenses incurred 

14 before retirement), or 

15 ‘‘(VI) coverage that, after the 

16 qualified HSA distribution is made, is 

17 suspended, pursuant to an election 

18 made on or before the date the indi19 vidual elects a qualified HSA distribu20 tion or, if later, on the date of the in21 dividual enrolls in a high deductible 

22 health plan, that does not pay or re23 imburse, at any time, any medical ex24 pense incurred during the suspension 


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1 period except as defined in the pre2 ceding subclauses of this clause.’’. 

3 (b) QUALIFIED HSA DISTRIBUTION SHALL NOT AF4 FECT FLEXIBLE SPENDING ARRANGEMENT.—Paragraph 

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

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

7 treated as a health flexible spending arrangement 

8 under this section, section 105, or section 125, or as 

9 a health reimbursement arrangement under this sec10 tion or section 105, merely because such plan pro11 vides for a qualified HSA distribution.’’. 

12 (c) FSA BALANCES AT YEAR END SHALL NOT FOR13 FEIT.—Paragraph (2) of section 125(d) is amended by 

14 adding at the end the following new subparagraph: 

15 ‘‘(E) EXCEPTION FOR QUALIFIED HSA DIS16 TRIBUTIONS.—Subparagraph (A) shall not 

17 apply to the extent that there is an amount re18 maining in a health flexible spending account at 

19 the end of a plan year that an individual elects 

20 to contribute to a health savings account pursu21 ant to a qualified HSA distribution (as defined 

22 in section 106(e)(2)).’’. 

23 (d) SIMPLIFICATION OF LIMITATIONS ON FSA AND

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

25 amended to read as follows: 


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1 ‘‘(2) QUALIFIED HSA DISTRIBUTION.— 

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

3 HSA distribution’ means a distribution from a 

4 health flexible spending arrangement or health 

5 reimbursement arrangement to the extent that 

6 such distribution does not exceed the lesser 

7 of— 

8 ‘‘(i) the balance in such arrangement 

9 as of the date of such distribution, or 

10 ‘‘(ii) the amount determined under 

11 subparagraph (B). 

12 Such term shall not include more than 1 dis13 tribution with respect to any arrangement. 

14 ‘‘(B) DOLLAR LIMITATIONS.— 

15 ‘‘(i) DISTRIBUTIONS FROM A HEALTH

16 FLEXIBLE SPENDING ARRANGEMENT.—A 

17 qualified HSA distribution from a health 

18 flexible spending arrangement shall not ex19 ceed the applicable amount. 

20 ‘‘(ii) DISTRIBUTIONS FROM A HEALTH

21 REIMBURSEMENT ARRANGEMENT.—A 

22 qualified HSA distribution from a health 

23 reimbursement arrangement shall not ex24 ceed— 


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1 ‘‘(I) the applicable amount di2 vided by 12, multiplied by 

3 ‘‘(II) the number of months dur4 ing which the individual is a partici5 pant in the health reimbursement ar6 rangement. 

7 ‘‘(iii) APPLICABLE AMOUNT.—For 

8 purposes of this subparagraph, the applica9 ble amount is— 

10 ‘‘(I) $2,250 in the case of an eli11 gible individual who has self-only cov12 erage under a high deductible health 

13 plan at the time of such distribution, 

14 and 

15 ‘‘(II) $4,500 in the case of an eli16 gible individual who has family cov17 erage under a high deductible health 

18 plan at the time of such distribu19 tion.’’. 

20 (e) ELIMINATION OF ADDITIONAL TAX FOR FAILURE

21 TO MAINTAIN HIGH DEDUCTIBLE HEALTH PLAN COV22 ERAGE.—Subsection (e) of section 106 is amended— 

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

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

25 respectively, and 


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

2 (3), as so redesignated, and redesignating subpara3 graphs (B) and (C) of such paragraph as subpara4 graphs (A) and (B) thereof, respectively. 

5 (f) LIMITED PURPOSE FSAS AND HRAS.—Sub6 section (e) of section 106, as amended by this section, is 

7 amended by adding at the end the following new para8 graph: 

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

10 plan shall not fail to be a health flexible spending 

11 arrangement or health reimbursement arrangement 

12 under this section or section 105 merely because the 

13 plan converts coverage for individuals who enroll in 

14 a high deductible health plan described in section 

15 223(c)(2) to coverage described in section 

16 223(c)(1)(B)(iv). Coverage for such individuals may 

17 be converted as of the date of enrollment in the high 

18 deductible health plan, without regard to the period 

19 of coverage under the health flexible spending ar20 rangement or health reimbursement arrangement, 

21 and without requiring any change in coverage to in22 dividuals who do not enroll in a high deductible 

23 health plan.’’. 

24 (g) DISTRIBUTION AMOUNTS ADJUSTED FOR COST25 OF-LIVING.—Subsection (e) of section 106, as amended 


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1 by this section, is amended by adding at the end the fol2 lowing new paragraph: 

3 ‘‘(6) COST-OF-LIVING ADJUSTMENT.— 

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

5 taxable year beginning after December 31, 

6 2011, each of the dollar amounts in paragraph 

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

8 equal to such dollar amount, multiplied by the 

9 cost-of-living adjustment determined under sec10 tion 1(f)(3) for the calendar year in which such 

11 taxable year begins by substituting ‘calendar 

12 year 2010’ for ‘calendar year 1992’ in subpara13 graph (B) thereof. 

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

15 paragraph (1) is not a multiple of $50, such in16 crease shall be rounded to the nearest multiple 

17 of $50.’’. 

18 (h) DISCLAIMER OF DISQUALIFYING COVERAGE.— 

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

20 this section, is amended— 

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

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

23 (iv) and inserting ‘‘, and’’, and 

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

25 new clause: 


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1 ‘‘(v) any coverage (including prospec2 tive coverage) under a health plan that is 

3 not a high deductible health plan which is 

4 disclaimed in writing, at the time of the 

5 creation or organization of the health sav6 ings account, including by execution of a 

7 trust described in subsection (d)(1) 

8 through a governing instrument that in9 cludes such a disclaimer, or by acceptance 

10 of an amendment to such a trust that in11 cludes such a disclaimer.’’. 

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

13 this section shall apply to taxable years beginning after 

14 the date of the enactment of this Act. 

15 SEC. 108. ALLOWANCE OF DISTRIBUTIONS FOR PRESCRIP16 TION AND OVER-THE-COUNTER MEDICINES 

17 AND DRUGS. 

18 (a) REPEAL OF DISTRIBUTIONS FOR MEDICINE

19 QUALIFIED ONLY IF FOR PRESCRIBED DRUG OR INSU20 LIN.—Section 9003 of the Patient Protection and Afford21 able Care Act (Public Law 111–148) and the amendments 

22 made by such section are repealed and the Internal Rev23 enue Code of 1986 shall be applied as if such section and 

24 amendments had never been enacted. 


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1 (b) ALLOWANCE OF DISTRIBUTIONS FOR ALL MEDI2 CINES AND DRUGS.— 

3 (1) HSAS.—Subparagraph (A) of section 

4 223(d)(2) is amended by adding at the end the fol5 lowing: ‘‘Such term shall include an amount paid for 

6 any prescription or over-the-counter medicine or 

7 drug.’’. 

8 (2) ARCHER MSAS.—Subparagraph (A) of sec9 tion 220(d)(2) is amended by adding at the end the 

10 following: ‘‘Such term shall include an amount paid 

11 for any prescription or over-the-counter medicine or 

12 drug.’’. 

13 (3) HEALTH FLEXIBLE SPENDING ARRANGE14 MENTS AND HEALTH REIMBURSEMENT ARRANGE15 MENTS.—Section 106 is amended by adding at the 

16 end the following new subsection: 

17 ‘‘(f) REIMBURSEMENTS FOR ALL MEDICINES AND

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

19 reimbursement for expenses incurred for any prescription 

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

21 a reimbursement for medical expenses.’’. 

22 (4) EFFECTIVE DATES.— 

23 (A) DISTRIBUTIONS FROM SAVINGS AC24 COUNTS.—The amendments made by para25 graphs (1) and (2) shall apply to amounts paid 


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1 with respect to taxable years beginning after 

2 December 31, 2009. 

3 (B) REIMBURSEMENTS.—The amendment 

4 made by paragraph (3) shall apply to expenses 

5 incurred with respect to taxable years beginning 

6 after December 31, 2009. 

7 SEC. 109. PURCHASE OF HEALTH INSURANCE FROM HSA 

8 ACCOUNT. 

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

10 is amended to read as follows: 

11 ‘‘(2) QUALIFIED MEDICAL EXPENSES.— 

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

13 medical expenses’ means, with respect to an ac14 count beneficiary, amounts paid by such bene15 ficiary for medical care (as defined in section 

16 213(d)) for any individual covered by a high de17 ductible health plan of the account beneficiary, 

18 but only to the extent such amounts are not 

19 compensated for by insurance or otherwise. 

20 ‘‘(B) HEALTH INSURANCE MAY NOT BE

21 PURCHASED FROM ACCOUNT.—Except as pro22 vided in subparagraph (C), subparagraph (A) 

23 shall not apply to any payment for insurance. 


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1 ‘‘(C) EXCEPTIONS.—Subparagraph (B) 

2 shall not apply to any expense for coverage 

3 under— 

4 ‘‘(i) a health plan during any period 

5 of continuation coverage required under 

6 any Federal law, 

7 ‘‘(ii) a qualified long-term care insur8 ance contract (as defined in section 

9 7702B(b)), 

10 ‘‘(iii) a health plan during any period 

11 in which the individual is receiving unem12 ployment compensation under any Federal 

13 or State law, 

14 ‘‘(iv) a high deductible health plan, or 

15 ‘‘(v) any health insurance under title 

16 XVIII of the Social Security Act, other 

17 than a Medicare supplemental policy (as 

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

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

20 this section shall apply with respect to insurance pur21 chased after the date of the enactment of this Act in tax22 able years beginning after such date. 


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1 SEC. 110. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES 

2 INCURRED BEFORE ESTABLISHMENT OF AC3 COUNT. 

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

5 as amended by section 109, is amended by adding at the 

6 end the following new subparagraph: 

7 ‘‘(D) CERTAIN MEDICAL EXPENSES IN8 CURRED BEFORE ESTABLISHMENT OF ACCOUNT

9 TREATED AS QUALIFIED.—An expense shall not 

10 fail to be treated as a qualified medical expense 

11 solely because such expense was incurred before 

12 the establishment of the health savings account 

13 if such expense was incurred— 

14 ‘‘(i) during either— 

15 ‘‘(I) the taxable year in which the 

16 health savings account was estab17 lished, or 

18 ‘‘(II) the preceding taxable year 

19 in the case of a health savings ac20 count established after the taxable 

21 year in which such expense was in22 curred but before the time prescribed 

23 by law for filing the return for such 

24 taxable year (not including extensions 

25 thereof), and 


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1 ‘‘(ii) for medical care of an individual 

2 during a period that such individual was 

3 covered by a high deductible health plan 

4 and met the requirements of subsection 

5 (c)(1)(A)(ii) (after application of sub6 section (c)(1)(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. 111. PREVENTIVE CARE PRESCRIPTION DRUG CLARI11 FICATION. 

12 (a) CLARIFY USE OF DRUGS IN PREVENTIVE

13 CARE.—Subparagraph (C) of section 223(c)(2) is amend14 ed by adding at the end the following: ‘‘Preventive care 

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

16 medicines which have the primary purpose of preventing 

17 the onset of, further deterioration from, or complications 

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

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

20 this section shall apply to taxable years beginning after 

21 December 31, 2003. 


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1 SEC. 112. EQUIVALENT BANKRUPTCY PROTECTIONS FOR 

2 HEALTH SAVINGS ACCOUNTS AS RETIRE3 MENT FUNDS. 

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

5 States Code, is amended by adding at the end the fol6 lowing new subsection: 

7 ‘‘(r) TREATMENT OF HEALTH SAVINGS AC8 COUNTS.—For purposes of this section, any health savings 

9 account (as described in section 223 of the Internal Rev10 enue Code of 1986) shall be treated in the same manner 

11 as an individual retirement account described in section 

12 408 of such Code.’’. 

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

14 this section shall apply to cases commencing under title 

15 11, United States Code, after the date of the enactment 

16 of this Act. 

17 SEC. 113. ADMINISTRATIVE ERROR CORRECTION BEFORE 

18 DUE DATE OF RETURN. 

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

20 is amended by adding at the end the following new sub21 paragraph: 

22 ‘‘(D) EXCEPTION FOR ADMINISTRATIVE

23 ERRORS CORRECTED BEFORE DUE DATE OF RE24 TURN.—Subparagraph (A) shall not apply if 

25 any payment or distribution is made to correct 


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1 an administrative, clerical or payroll contribu2 tion error and if— 

3 ‘‘(i) such distribution is received by 

4 the individual on or before the last day 

5 prescribed by law (including extensions of 

6 time) for filing such individual’s return for 

7 such taxable year, and 

8 ‘‘(ii) such distribution is accompanied 

9 by the amount of net income attributable 

10 to such contribution. 

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

12 included in the gross income of the individual 

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

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

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

16 of this Act. 

17 SEC. 114. REAUTHORIZATION OF MEDICAID HEALTH OP18 PORTUNITY ACCOUNTS. 

19 (a) IN GENERAL.—Section 1938 of the Social Secu20 rity Act (42 U.S.C. 1396u–8) is amended— 

21 (1) in subsection (a)— 

22 (A) by striking paragraph (2) and insert23 ing the following: 

24 ‘‘(2) INITIAL DEMONSTRATION.—The dem25 onstration program under this section shall begin on 


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1 January 1, 2007. The Secretary shall approve States 

2 to conduct demonstration programs under this sec3 tion for a 5-year period, with each State demonstra4 tion program covering 1 or more geographic areas 

5 specified by the State. With respect to a State, after 

6 the initial 5-year period of any demonstration pro7 gram conducted under this section by the State, un8 less the Secretary finds, taking into account cost-ef9 fectiveness and quality of care, that the State dem10 onstration program has been unsuccessful, the dem11 onstration program may be extended or made per12 manent in the State.’’; and 

13 (B) in paragraph (3), in the matter pre14 ceding subparagraph (A)— 

15 (i) by striking ‘‘not’’; and 

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

17 ‘‘if’’; 

18 (2) in subsection (b)— 

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

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

21 amendment made by section 2004(c)(2) of Pub22 lic Law 111–148), (x), or (xi) of’’ after ‘‘de23 scribed in’’; and 

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

25 (6); 


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1 (3) in subsection (c)— 

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

3 (B) by redesignating paragraphs (5) 

4 through (8) as paragraphs (3) through (6), re5 spectively; and 

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

7 subparagraph (B)), by striking ‘‘Subject to sub8 paragraphs (D) and (E)’’ and inserting ‘‘Sub9 ject to subparagraph (D)’’; and 

10 (4) in subsection (d)— 

11 (A) in paragraph (2), by striking subpara12 graph (E); and 

13 (B) in paragraph (3)— 

14 (i) in subparagraph (A)(ii), by strik15 ing ‘‘Subject to subparagraph (B)(ii), in’’ 

16 and inserting ‘‘In’’; and 

17 (ii) by striking subparagraph (B) and 

18 inserting the following: 

19 ‘‘(B) MAINTENANCE OF HEALTH OPPOR20 TUNITY ACCOUNT AFTER BECOMING INELI21 GIBLE FOR PUBLIC BENEFIT.—Notwithstanding 

22 any other provision of law, if an account holder 

23 of a health opportunity account becomes ineli24 gible for benefits under this title because of an 

25 increase in income or assets— 


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1 ‘‘(i) no additional contribution shall be 

2 made into the account under paragraph 

3 (2)(A)(i); and 

4 ‘‘(ii) the account shall remain avail5 able to the account holder for 3 years after 

6 the date on which the individual becomes 

7 ineligible for such benefits for withdrawals 

8 under the same terms and conditions as if 

9 the account holder remained eligible for 

10 such benefits, and such withdrawals shall 

11 be treated as medical assistance in accord12 ance with subsection (c)(4).’’. 

13 (b) CONFORMING AMENDMENT.—Section 613 of 

14 Public Law 111–3 is repealed. 

15 TITLE II—OTHER PROVISIONS 

16 SEC. 121. CERTAIN EXERCISE EQUIPMENT AND PHYSICAL 

17 FITNESS PROGRAMS TREATED AS MEDICAL 

18 CARE. 

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

20 amended by adding at the end the following new para21 graph: 

22 ‘‘(12) EXERCISE EQUIPMENT AND PHYSICAL

23 FITNESS PROGRAMS.— 

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

25 care’ shall include amounts paid— 


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1 ‘‘(i) to purchase or use equipment 

2 used in a program (including a self-di3 rected program) of physical exercise, 

4 ‘‘(ii) to participate, or receive instruc5 tion, in a program of physical exercise, and 

6 ‘‘(iii) for membership dues in a fitness 

7 club the primary purpose of which is to 

8 provide access to equipment and facilities 

9 for physical exercise. 

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

11 medical care under subparagraph (A) shall not 

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

13 any taxable year.’’. 

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

15 this section shall apply to taxable years beginning after 

16 the date of the enactment of this Act. 

17 SEC. 122. CERTAIN NUTRITIONAL AND DIETARY SUPPLE18 MENTS TO BE TREATED AS MEDICAL CARE. 

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

20 amended by section 121, is amended by adding at the end 

21 the following new paragraph: 

22 ‘‘(13) NUTRITIONAL AND DIETARY SUPPLE23 MENTS.— 

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

25 care’ shall include amounts paid to purchase 


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1 herbs, vitamins, minerals, homeopathic rem2 edies, meal replacement products, and other di3 etary and nutritional supplements. 

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

5 medical care under subparagraph (A) shall not 

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

7 any taxable year. 

8 ‘‘(C) MEAL REPLACEMENT PRODUCT.— 

9 For purposes of this paragraph, the term ‘meal 

10 replacement product’ means any product that— 

11 ‘‘(i) is permitted to bear labeling mak12 ing a claim described in section 403(r)(3) 

13 of the Federal Food, Drug, and Cosmetic 

14 Act, and 

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

16 section that such product is low in fat and 

17 is a good source of protein, fiber, and mul18 tiple essential vitamins and minerals.’’. 

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

20 this section shall apply to taxable years beginning after 

21 the date of the enactment of this Act. 


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1 SEC. 123. CERTAIN PROVIDER FEES TO BE TREATED AS 

2 MEDICAL CARE. 

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

4 amended by sections 121 and 122, is amended by adding 

5 at the end the following new paragraph: 

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

7 ‘medical care’ shall include periodic fees paid to a 

8 primary physician, physician assistant, or nurse 

9 practitioner for the right to receive medical services 

10 on an as-needed basis.’’. 

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. 124. REPEAL OF ANNUAL LIMITATIONS ON 

15 DEDUCTIBLES FOR EMPLOYER-SPONSORED 

16 PLANS OFFERED IN SMALL GROUP MARKET. 

17 Section 1302(c)(2) of the Patient Protection and Af18 fordable Care Act (Public Law 111–148) is repealed. 

Æ 


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