I 

118TH CONGRESS 

1ST SESSION H. R. 677 

To amend the Internal Revenue Code of 1986 to make improvements to 

Health Savings Accounts. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 31, 2023 

Mr. ROSENDALE introduced the following bill; which was referred to the 

Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to make 

improvements to Health Savings Accounts. 

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. 

4 This Act may be cited as the ‘‘Health Freedom and 

5 Flexibility Act’’. 

6 SEC. 2. REPEAL OF REQUIREMENT TO BE ENROLLED IN 

7 HEALTH PLAN. 

8 (a) IN GENERAL.—Subsection (a) of section 223 of 

9 the Internal Revenue Code of 1986 is amended to read 

10 as follows: 


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1 ‘‘(a) DEDUCTION ALLOWED.—In the case of an indi2 vidual, there shall be allowed as a deduction for the tax3 able year an amount equal to the aggregate amount paid 

4 in cash during such taxable year by or on behalf of such 

5 individual to a health savings account of such individual.’’. 

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

7 this section shall apply to taxable years ending after the 

8 date of the enactment of this Act. 

9 SEC. 3. REPEAL OF LIMITATIONS; RETENTION OF DENIAL 

10 OF DEDUCTION TO DEPENDENTS. 

11 (a) IN GENERAL.—Subsection (b) of section 223 of 

12 the Internal Revenue Code of 1986 is amended to read 

13 as follows: 

14 ‘‘(b) DENIAL OF DEDUCTION TO DEPENDENTS.—No 

15 deduction shall be allowed under this section to any indi16 vidual with respect to whom a deduction under section 151 

17 is allowable to another taxpayer for a taxable year begin18 ning in the calendar year in which such individual’s tax19 able year begins.’’. 

20 (b) CONFORMING AMENDMENT.—Subsection (f) of 

21 section 223 of such Code is amended by striking para22 graph (3) and by redesignating paragraphs (4) through 

23 (8) as paragraphs (3) through (7), respectively. 


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

2 this section shall apply to taxable years ending after the 

3 date of the enactment of this Act. 

4 SEC. 4. REPEAL OF RULES RELATING TO ELIGIBLE INDI5 VIDUAL; HIGH DEDUCTIBLE HEALTH PLAN. 

6 (a) IN GENERAL.—Section 223 of the Internal Rev7 enue Code of 1986 is amended by striking subsections (c) 

8 and (g) and by redesignating subsections (d), (e), (f), and 

9 (h) as subsections (c), (d), (e), and (f), respectively. 

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

11 this section shall apply to taxable years ending after the 

12 date of the enactment of this Act. 

13 SEC. 5. HEALTH SAVINGS ACCOUNT. 

14 (a) IN GENERAL.—Subparagraph (A) of section 

15 223(c)(1) of the Internal Revenue Code of 1986, as 

16 amended by the preceding sections of this Act, is amended 

17 to read as follows: 

18 ‘‘(A) Except in the case of a rollover con19 tribution described in subsection (e)(5) or sec20 tion 220(f)(5), no contribution will be accepted 

21 unless it is in cash.’’. 

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

23 this section shall apply to taxable years ending after the 

24 date of the enactment of this Act. 


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1 SEC. 6. QUALIFIED MEDICAL EXPENSES. 

2 (a) REPEAL OF PURCHASE OF HEALTH INSURANCE

3 LIMITATION.—Paragraph (2) of section 223(c) of the In4 ternal Revenue Code of 1986, as redesignated by the pre5 ceding provisions of this Act, is amended to read as fol6 lows: 

7 ‘‘(2) QUALIFIED MEDICAL EXPENSES.— 

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

9 medical expenses’ means, with respect to an ac10 count beneficiary, amounts paid by such bene11 ficiary for medical care (as defined in section 

12 213(d)) for such individual, the spouse of such 

13 individual, any dependent (as defined in section 

14 152, determined without regard to subsections 

15 (b)(1), (b)(2), and (d)(1)(B) thereof) of such 

16 individual, but only to the extent such amounts 

17 are not compensated for by insurance or other18 wise. 

19 ‘‘(B) MENSTRUAL CARE PRODUCTS.—For 

20 purposes of this paragraph— 

21 ‘‘(i) IN GENERAL.—Amounts paid for 

22 menstrual care products shall be treated as 

23 paid for medical care. 

24 ‘‘(ii) DEFINITION.—The term ‘men25 strual care product’ means a tampon, pad, 

26 liner, cup, sponge, or similar product used 


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1 by individuals with respect to menstruation 

2 or other genital-tract secretions.’’. 

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

4 this section shall apply to taxable years ending after the 

5 date of the enactment of this Act. 

6 SEC. 7. ALLOWANCE OF DISTRIBUTIONS FOR PRESCRIP7 TION AND OVER-THE-COUNTER MEDICINES 

8 AND DRUGS AND OTHER MEDICALLY NEC9 ESSARY ITEMS. 

10 (a) HSAS.—Paragraph (2) of section 223(c) of the 

11 Internal Revenue Code of 1986, as redesignated by the 

12 preceding provisions of this Act, is amended by adding at 

13 the end the following: 

14 ‘‘(C) PRESCRIPTION AND OVER-THE15 COUNTER MEDICINES AND DRUGS AND OTHER

16 MEDICALLY NECESSARY ITEMS.—For purposes 

17 of this paragraph— 

18 ‘‘(i) IN GENERAL.—The term ‘quali19 fied medical expenses’ shall include an 

20 amount paid for any prescription or over21 the-counter medicine or drug and medically 

22 necessary items. 

23 ‘‘(ii) MEDICALLY NECESSARY

24 ITEMS.—The term ‘medically necessary 

25 item’ means any item for which a doctor or 


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1 nurse certifies by a letter of medical neces2 sity that the service or medication or item 

3 is for a medical diagnosis, treatment, or 

4 prevention of a medical diseases or condi5 tion.’’. 

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

7 subsection (a) shall apply to amounts paid in taxable years 

8 ending after the date of the enactment of this Act. 

9 SEC. 8. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES 

10 INCURRED BEFORE ESTABLISHMENT OF AC11 COUNT. 

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

13 of the Internal Revenue Code of 1986, as redesignated by 

14 the preceding sections of this Act, is amended by adding 

15 at the end the following new subparagraph: 

16 ‘‘(D) CERTAIN MEDICAL EXPENSES IN17 CURRED BEFORE ESTABLISHMENT OF ACCOUNT

18 TREATED AS QUALIFIED.—An expense shall not 

19 fail to be treated as a qualified medical expense 

20 solely because such expense was incurred before 

21 the establishment of the health savings account 

22 if such expense was incurred— 

23 ‘‘(i) during either— 


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

2 health savings account was estab3 lished, or 

4 ‘‘(II) the preceding taxable year, 

5 in the case of a health savings ac6 count established after the taxable 

7 year in which such expense was in8 curred but before the time prescribed 

9 by law for filing the return for such 

10 taxable year (not including extensions 

11 thereof), and 

12 ‘‘(ii) for medical care which (but for 

13 the fact that it was incurred before the es14 tablishment of the account) otherwise 

15 meets the requirements of the preceding 

16 subparagraphs.’’. 

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

18 this subsection (a) shall apply to taxable years ending 

19 after the date of the enactment of this Act. 

20 SEC. 9. DIRECT PRIMARY CARE; EXERCISE EQUIPMENT; 

21 DENTAL CARE ITEMS. 

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

23 of the Internal Revenue Code of 1986, as amended by the 

24 preceding sections of this Act, is amended by adding at 

25 the end the following new subparagraph: 


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1 ‘‘(E) DIRECT PRIMARY CARE; EXERCISE

2 EQUIPMENT; DENTAL CARE ITEMS.—For pur3 poses of this paragraph— 

4 ‘‘(i) IN GENERAL.—The term ‘quali5 fied medical expenses’ shall include 

6 amounts paid— 

7 ‘‘(I) amounts paid under a direct 

8 primary care service arrangement, 

9 ‘‘(II) amounts paid for exercise 

10 equipment, and 

11 ‘‘(III) amounts paid for dental 

12 care items. 

13 ‘‘(ii) DIRECT PRIMARY CARE SERVICE

14 ARRANGEMENT.—The term ‘direct primary 

15 care service arrangement’ means, with re16 spect to any individual, an arrangement 

17 under which such individual is provided 

18 medical care (as defined in section 213(d)) 

19 consisting solely of primary care services 

20 provided by primary care practitioners (as 

21 defined in section 1833(x)(2)(A) of the So22 cial Security Act, determined without re23 gard to clause (ii) thereof), if the sole com24 pensation for such care is a fixed periodic 

25 fee. 


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1 ‘‘(iii) EXERCISE OR FITNESS EQUIP2 MENT.—The term ‘exercise or fitness 

3 equipment’ means devices such as motor4 ized treadmills, stair climbers or step ma5 chines, stationary bicycles, rowing ma6 chines, weight machines, circuit training 

7 equipment, cardiovascular equipment, 

8 strength equipment, or other similar equip9 ment. 

10 ‘‘(iv) DENTAL CARE ITEMS.—The 

11 term ‘dental care items’ includes manual 

12 or electric toothbrush, dental floss, and 

13 dental mouthwash.’’. 

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

15 this section shall apply to plan years ending after the date 

16 of the enactment of this Act. 

17 SEC. 10. PROHIBITION ON USE OF FUNDS FOR ELECTIVE 

18 ABORTIONS. 

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

20 of the Internal Revenue Code of 1986, as amended by the 

21 preceding sections of this Act, is amended by adding at 

22 the end the following new subparagraph: 

23 ‘‘(F) PROHIBITION ON USE OF FUNDS FOR

24 ELECTIVE ABORTIONS.—For purposes of this 

25 paragraph— 


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1 ‘‘(i) PAYMENTS FOR HEALTH INSUR2 ANCE WITH ABORTION COVERAGE.—The 

3 term ‘qualified medical expenses’ shall not 

4 include amounts paid for insurance that 

5 includes coverage for abortions. 

6 ‘‘(ii) PAYMENTS FOR ABORTIONS.— 

7 The term ‘qualified medical expense’ shall 

8 not include amounts paid for an abortion. 

9 ‘‘(iii) ABORTION.—The term ‘abor10 tion’ means the use or prescription of any 

11 instrument, medicine, drug, or any other 

12 substance or device— 

13 ‘‘(I) to intentionally kill the un14 born child of a woman known to be 

15 pregnant, or 

16 ‘‘(II) to intentionally terminate 

17 the pregnancy of a woman known to 

18 be pregnant, with an intention other 

19 than— 

20 ‘‘(aa) after viability, to 

21 produce a live birth and preserve 

22 the life and health of the child 

23 born alive, or 

24 ‘‘(bb) to remove a dead un25 born child.’’. 


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

2 this section shall apply to plan years ending after the date 

3 of the enactment of this Act. 

4 SEC. 11. TREATMENT AFTER DEATH IF DESIGNATED BENE5 FICIARY IS SPOUSE OR CHILD OF ACCOUNT 

6 BENEFICIARY. 

7 (a) IN GENERAL.—Subparagraph (A) of section 

8 223(e)(7) of the Internal Revenue Code of 1986, as redes9 ignated by the preceding sections of this Act, is amended 

10 to read as follows: 

11 ‘‘(A) TREATMENT AFTER DEATH IF DES12 IGNATED BENEFICIARY IS SPOUSE OR CHILD OF

13 ACCOUNT BENEFICIARY.—If the account bene14 ficiary’s surviving spouse or child acquires such 

15 beneficiary’s interest in a health savings ac16 count by reason of being the designated bene17 ficiary of such account at the death of the ac18 count beneficiary, such health savings account 

19 shall be treated as if the spouse or child (as the 

20 case may be) were the account beneficiary.’’. 

21 (b) CHILD DEFINED.—Paragraph (7) of section 

22 223(e) of such Code, as so redesignated, is amended by 

23 adding at the end the following: 

24 ‘‘(C) CHILD.—For purposes of this para25 graph, the term ‘child’ means, with respect to 


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1 an account beneficiary, an individual who bears 

2 a relationship to the account beneficiary de3 scribed in section 152(f)(1).’’. 

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

5 this section shall apply with respect to account bene6 ficiaries dying in taxable years ending after the date of 

7 the enactment of this Act. 

8 SEC. 12. ADMINISTRATIVE ERROR CORRECTION BEFORE 

9 DUE DATE OF RETURN. 

10 (a) IN GENERAL.—Paragraph (3) of section 223(d) 

11 of the Internal Revenue Code of 1986, as amended and 

12 redesignated by the preceding sections of this Act, is 

13 amended by adding at the end the following new subpara14 graph: 

15 ‘‘(C) EXCEPTION FOR ADMINISTRATIVE

16 ERRORS CORRECTED BEFORE DUE DATE OF RE17 TURN.—Subparagraph (A) shall not apply if 

18 any payment or distribution is made to correct 

19 an administrative, clerical, or payroll contribu20 tion error and if— 

21 ‘‘(i) such distribution is received by 

22 the individual on or before the last day 

23 prescribed by law (including extensions of 

24 time) for filing such individual’s return for 

25 such taxable year, and 


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1 ‘‘(ii) such distribution is accompanied 

2 by the amount of net income attributable 

3 to such contribution. 

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

5 included in the gross income of the individual 

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

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

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

9 of this Act. 

10 SEC. 13. CONFORMING AMENDMENTS. 

11 (a) Section 26(b)(2) of the Internal Revenue Code of 

12 1986 is amended— 

13 (1) by striking ‘‘, 223(b)(8)(B)(i)(II),’’ in sub14 paragraph (S), and 

15 (2) by striking ‘‘223(f)(4)’’ in subparagraph 

16 (U) and inserting ‘‘223(e)(3)’’. 

17 (b) Section 106 of such Code is amended— 

18 (1) by amending subsection (d)(1) to read as 

19 follows: 

20 ‘‘(1) IN GENERAL.—In the case of an employee, 

21 amounts contributed by such employee’s employer to 

22 any health savings account (as defined in section 

23 223(c)) of such employee shall be treated as em24 ployer-provided coverage for medical expenses under 

25 an accident or health plan.’’, 


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1 (2) in subsection (e)— 

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

3 redesignating paragraph (5) as paragraph (4), 

4 (B) by inserting after paragraph (2) the 

5 following new paragraph: 

6 ‘‘(3) TREATMENT AS ROLLOVER CONTRIBU7 TION.—A qualified HSA distribution shall be treated 

8 as a rollover contribution described in section 

9 223(e)(4).’’, and 

10 (C) by striking ‘‘to any eligible individual 

11 covered under a high deductible health plan of 

12 the employer’’ in paragraph (4)(B)(ii) (as so re13 designated) and inserting ‘‘to any employee 

14 with respect to whom a health savings account 

15 has been established’’. 

16 (c) Section 408 of such Code is amended— 

17 (1) in subsection (d)(9)(A) by striking ‘‘who is 

18 an eligible individual (as defined in section 223(c)) 

19 and’’; and 

20 (2) in subsection (d)(9)(C)— 

21 (A) by striking ‘‘LIMITATIONS.—’’ in the 

22 heading and all that follows through ‘‘(ii) ONE23 TIME TRANSFER.—’’ in clause (ii), and insert24 ing ‘‘ONE-TIME TRANSFER.—’’, 


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1 (B) by redesignating subclauses (I) and 

2 (II) as clauses (i) and (ii) and moving such 

3 clauses 2 ems to the left, and 

4 (C) by striking ‘‘subclause (II)’’ in clause 

5 (i), as so redesignated, and inserting ‘‘clause 

6 (ii)’’. 

7 (d) Section 877A(g)(6) of such Code is amended by 

8 striking ‘‘223(f)(4)’’ and inserting ‘‘223(e)(3)’’. 

9 (e) Section 4973 of such Code is amended by striking 

10 subsection (g) and by redesignating subsection (h) as sub11 section (g). 

12 (f) Section 4975 of such Code is amended— 

13 (1) in subsection (c)(6)— 

14 (A) by striking ‘‘section 223(d)’’ and in15 serting ‘‘section 223(c)’’, and 

16 (B) by striking ‘‘section 223(e)(2)’’ and in17 serting ‘‘section 223(d)(2)’’, and 

18 (2) in subsection (e)(1)(E), by striking ‘‘section 

19 223(d)’’ and inserting ‘‘section 223(c)’’. 

20 (g) Sections 35(g)(3), 220(f)(5)(A), 848(e)(1)(B)(v), 

21 4973(a)(5), and 6051(a)(12) of such Code are each 

22 amended by striking ‘‘section 223(d)’’ each place it ap23 pears and inserting ‘‘section 223(c)’’. 

24 (h) Section 4980G of such Code is amended— 


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1 (1) by amending subsection (b) to read as fol2 lows: 

3 ‘‘(b) RULES AND REQUIREMENTS.— 

4 ‘‘(1) IN GENERAL.—An employer meets the re5 quirements of this subsection for any calendar year 

6 if the employer makes available comparable con7 tributions to the health savings accounts of all com8 parable participating employees for each coverage 

9 period during such calendar year. 

10 ‘‘(2) COMPARABLE CONTRIBUTIONS.— 

11 ‘‘(A) IN GENERAL.—For purposes of para12 graph (1), the term ‘comparable contributions’ 

13 means contributions— 

14 ‘‘(i) which are the same amount, or 

15 ‘‘(ii) if the employees are covered by a 

16 health plan, which are the same percentage 

17 of the annual deductible limit under the 

18 plan covering the employees. 

19 ‘‘(B) PART-YEAR EMPLOYEES.—In the 

20 case of an employee who is employed by the em21 ployer for only a portion of the calendar year, 

22 a contribution to the health savings account of 

23 such employee shall be treated as comparable if 

24 it is an amount which bears the same ratio to 

25 the comparable amount (determined without reVerDate Sep 11 2014 03:56 Feb 16, 2023 Jkt 039200 PO 00000 Frm 00016 Fmt 6652 Sfmt 6201 E:\BILLS\H677.IH H677

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1 gard to this subparagraph) as such portion 

2 bears to the entire calendar year. 

3 ‘‘(3) COMPARABLE PARTICIPATING EMPLOY4 EES.—For purposes of paragraph (1), the term 

5 ‘comparable participating employees’ means all em6 ployees who are covered (if at all) under the same 

7 health plan of the employer and have the same cat8 egory of coverage. For purposes of the preceding 

9 sentence, the categories of coverage are self-only and 

10 family coverage. 

11 ‘‘(4) PART-TIME EMPLOYEES.— 

12 ‘‘(A) IN GENERAL.—Paragraph (3) shall 

13 be applied separately with respect to part-time 

14 employees and other employees. 

15 ‘‘(B) PART-TIME EMPLOYEE.—For pur16 poses of subparagraph (A), the term ‘part-time 

17 employee’ means any employee who is custom18 arily employed for fewer than 30 hours per 

19 week.’’, and 

20 (2) in subsection (d) by striking ‘‘section 

21 4980E’’ and inserting ‘‘this section’’. 

22 (i) Section 6693(a)(2)(C) of such Code is amended 

23 by striking ‘‘section 223(h)’’ and inserting ‘‘section 

24 223(f)’’. 

Æ 


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