IB 

Union Calendar No. 330 

118TH CONGRESS 

2D SESSION H. R. 5688 

[Report No. 118–401] 

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

accounts. 

IN THE HOUSE OF REPRESENTATIVES 

SEPTEMBER 26, 2023 

Mr. SMUCKER (for himself and Mr. BLUMENAUER) introduced the following 

bill; which was referred to the Committee on Ways and Means 

FEBRUARY 26, 2024 

Reported with an amendment, committed to the Committee of the Whole 

House on the State of the Union, and ordered to be printed 

[Strike out all after the enacting clause and insert the part printed in italic] 

[For text of introduced bill, see copy of bill as introduced on September 26, 2023] 


ssavage on LAPJG3WLY3PROD with BILLS
2 

•HR 5688 RH

A BILL 

To amend the Internal Revenue Code of 1986 to improve 

health savings accounts. 


ssavage on LAPJG3WLY3PROD with BILLS
3 

•HR 5688 RH

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 ‘‘Bipartisan HSA Im5 provement Act of 2023’’. 

6 SEC. 2. TREATMENT OF DIRECT PRIMARY CARE SERVICE 

7 ARRANGEMENTS. 

8 (a) IN GENERAL.—Section 223(c)(1) of the Internal 

9 Revenue Code of 1986 is amended by adding at the end 

10 the following new subparagraph: 

11 ‘‘(E) TREATMENT OF DIRECT PRIMARY

12 CARE SERVICE ARRANGEMENTS.— 

13 ‘‘(i) IN GENERAL.—A direct primary 

14 care service arrangement shall not be treat15 ed as a health plan for purposes of subpara16 graph (A)(ii). 

17 ‘‘(ii) DIRECT PRIMARY CARE SERVICE

18 ARRANGEMENT.—For purposes of this para19 graph— 

20 ‘‘(I) IN GENERAL.—The term ‘di21 rect primary care service arrangement’ 

22 means, with respect to any individual, 

23 an arrangement under which such in24 dividual is provided medical care (as 

25 defined in section 213(d)) consisting 


ssavage on LAPJG3WLY3PROD with BILLS
4 

•HR 5688 RH

1 solely of primary care services pro2 vided by primary care practitioners 

3 (as defined in section 1833(x)(2)(A) of 

4 the Social Security Act, determined 

5 without regard to clause (ii) thereof), if 

6 the sole compensation for such care is 

7 a fixed periodic fee. 

8 ‘‘(II) LIMITATION.—With respect 

9 to any individual for any month, such 

10 term shall not include any arrange11 ment if the aggregate fees for all direct 

12 primary care service arrangements (de13 termined without regard to this sub14 clause) with respect to such individual 

15 for such month exceed $150 (twice such 

16 dollar amount in the case of an indi17 vidual with any direct primary care 

18 service arrangement (as so determined) 

19 that covers more than one individual). 

20 ‘‘(iii) CERTAIN SERVICES SPECIFI21 CALLY EXCLUDED FROM TREATMENT AS

22 PRIMARY CARE SERVICES.—For purposes of 

23 this paragraph, the term ‘primary care 

24 services’ shall not include— 


ssavage on LAPJG3WLY3PROD with BILLS
5 

•HR 5688 RH

1 ‘‘(I) procedures that require the 

2 use of general anesthesia, 

3 ‘‘(II) prescription drugs (other 

4 than vaccines), and 

5 ‘‘(III) laboratory services not 

6 typically administered in an ambula7 tory primary care setting. 

8 The Secretary, after consultation with the 

9 Secretary of Health and Human Services, 

10 shall issue regulations or other guidance re11 garding the application of this clause.’’. 

12 (b) DIRECT PRIMARY CARE SERVICE ARRANGEMENT

13 FEES TREATED AS MEDICAL EXPENSES.—Section 

14 223(d)(2)(C) of such Code is amended by striking ‘‘or’’ at 

15 the end of clause (iii), by striking the period at the end 

16 of clause (iv) and inserting ‘‘, or’’, and by adding at the 

17 end the following new clause: 

18 ‘‘(v) any direct primary care service 

19 arrangement.’’. 

20 (c) INFLATION ADJUSTMENT.—Section 223(g)(1) of 

21 such Code is amended— 

22 (1) by inserting ‘‘, (c)(1)(E)(ii)(II),’’ after 

23 ‘‘(b)(2)’’ each place it appears, and 

24 (2) in subparagraph (B), by inserting ‘‘and 

25 (iii)’’ after ‘‘clause (ii)’’ in clause (i), by striking 


ssavage on LAPJG3WLY3PROD with BILLS
6 

•HR 5688 RH

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

2 at the end of clause (ii) and inserting ‘‘, and’’, and 

3 by inserting after clause (ii) the following new clause: 

4 ‘‘(iii) in the case of the dollar amount 

5 in subsection (c)(1)(E)(ii)(II) for taxable 

6 years beginning in calendar years after 

7 2026, ‘calendar year 2025’.’’. 

8 (d) REPORTING OF DIRECT PRIMARY CARE SERVICE

9 ARRANGEMENT FEES ON W-2.—Section 6051(a) of such 

10 Code is amended by striking ‘‘and’’ at the end of paragraph 

11 (16), by striking the period at the end of paragraph (17) 

12 and inserting ‘‘, and’’, and by inserting after paragraph 

13 (17) the following new paragraph: 

14 ‘‘(18) in the case of a direct primary care service 

15 arrangement (as defined in section 223(c)(1)(E)(ii)) 

16 which is provided in connection with employment, the 

17 aggregate fees for such arrangement for such em18 ployee.’’. 

19 (e) EFFECTIVE DATE.—The amendments made by this 

20 section shall apply to months beginning after December 31, 

21 2025, in taxable years ending after such date. 

22 SEC. 3. ON-SITE EMPLOYEE CLINICS. 

23 (a) IN GENERAL.—Section 223(c)(1) of the Internal 

24 Revenue Code of 1986, as amended by the preceding proviVerDate Sep 11 2014 20:30 Feb 26, 2024 Jkt 049200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6203 E:\BILLS\H5688.RH H5688

ssavage on LAPJG3WLY3PROD with BILLS
7 

•HR 5688 RH

1 sions of this Act, is amended by adding at the end the fol2 lowing new subparagraph: 

3 ‘‘(F) SPECIAL RULE FOR QUALIFIED ITEMS

4 AND SERVICES.— 

5 ‘‘(i) IN GENERAL.—For purposes of 

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

7 not be treated as covered under a health 

8 plan described in subclauses (I) and (II) of 

9 such subparagraph merely because the indi10 vidual is eligible to receive, or receives, 

11 qualified items and services— 

12 ‘‘(I) at a healthcare facility lo13 cated at a facility owned or leased by 

14 the employer of the individual (or of 

15 the individual’s spouse), or 

16 ‘‘(II) at a healthcare facility oper17 ated primarily for the benefit of em18 ployees of the employer of the indi19 vidual (or of the individual’s spouse). 

20 ‘‘(ii) QUALIFIED ITEMS AND SERVICES

21 DEFINED.—For purposes of this subpara22 graph, the term ‘qualified items and serv23 ices’ means the following: 

24 ‘‘(I) Physical examination. 


ssavage on LAPJG3WLY3PROD with BILLS
8 

•HR 5688 RH

1 ‘‘(II) Immunizations, including 

2 injections of antigens provided by em3 ployees. 

4 ‘‘(III) Drugs or biologicals other 

5 than a prescribed drug (as such term is 

6 defined in section 213(d)(3)). 

7 ‘‘(IV) Treatment for injuries oc8 curring in the course of employment. 

9 ‘‘(V) Preventive care for chronic 

10 conditions (as defined in clause (iv)). 

11 ‘‘(VI) Drug testing. 

12 ‘‘(VII) Hearing or vision 

13 screenings and related services. 

14 ‘‘(iii) AGGREGATION.—For purposes of 

15 clause (i), all persons treated as a single 

16 employer under subsection (b), (c), (m), or 

17 (o) of section 414 shall be treated as a single 

18 employer. 

19 ‘‘(iv) PREVENTIVE CARE FOR CHRONIC

20 CONDITIONS.—For purposes of this subpara21 graph, the term ‘preventive care for chronic 

22 conditions’ means any item or service speci23 fied in the Appendix of Internal Revenue 

24 Service Notice 2019–45 which is prescribed 

25 to treat an individual diagnosed with the 


ssavage on LAPJG3WLY3PROD with BILLS
9 

•HR 5688 RH

1 associated chronic condition specified in 

2 such Appendix for the purpose of preventing 

3 the exacerbation of such chronic condition 

4 or the development of a secondary condition, 

5 including any amendment, addition, re6 moval, or other modification made by the 

7 Secretary (pursuant to the authority grant8 ed to the Secretary under paragraph (2)(C)) 

9 to the items or services specified in such Ap10 pendix subsequent to the date of enactment 

11 of this subparagraph.’’. 

12 (b) EFFECTIVE DATE.—The amendments made by this 

13 section shall apply to months in taxable years beginning 

14 after December 31, 2025. 

15 SEC. 4. CONTRIBUTIONS PERMITTED IF SPOUSE HAS 

16 HEALTH FLEXIBLE SPENDING ARRANGE17 MENT. 

18 (a) CONTRIBUTIONS PERMITTED IF SPOUSE HAS A

19 HEALTH FLEXIBLE SPENDING ARRANGEMENT.—Section 

20 223(c)(1)(B) of the Internal Revenue Code of 1986 is 

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

22 striking the period at the end of clause (iii) and inserting 

23 ‘‘, and’’, and by adding at the end the following new clause: 

24 ‘‘(iv) coverage under a health flexible 

25 spending arrangement of the spouse of the 


ssavage on LAPJG3WLY3PROD with BILLS
10 

•HR 5688 RH

1 individual for any plan year of such ar2 rangement if the aggregate reimbursements 

3 under such arrangement for such year do 

4 not exceed the aggregate expenses which 

5 would be eligible for reimbursement under 

6 such arrangement if such expenses were de7 termined without regard to any expenses 

8 paid or incurred with respect to such indi9 vidual.’’. 

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

11 section shall apply to plan years beginning after December 

12 31, 2025. 

13 SEC. 5. FSA AND HRA TERMINATIONS OR CONVERSIONS TO 

14 FUND HSAs. 

15 (a) IN GENERAL.—Section 106(e)(2) of the Internal 

16 Revenue Code of 1986 is amended to read as follows: 

17 ‘‘(2) QUALIFIED HSA DISTRIBUTION.—For pur18 poses of this subsection— 

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

20 HSA distribution’ means, with respect to any 

21 employee, a distribution from a health flexible 

22 spending arrangement or health reimbursement 

23 arrangement of such employee contributed di24 rectly to a health savings account of such em25 ployee if— 


ssavage on LAPJG3WLY3PROD with BILLS
11 

•HR 5688 RH

1 ‘‘(i) such distribution is made in con2 nection with such employee establishing cov3 erage under a high deductible health plan 

4 (as defined in section 223(c)(2)) if during 

5 the 4-year period preceding the date the em6 ployee so establishes coverage the employee 

7 was not covered under such a high deduct8 ible health plan, and 

9 ‘‘(ii) such arrangement is described in 

10 section 223(c)(1)(B)(vi) with respect to any 

11 portion of the plan year remaining after 

12 such distribution is made, if such employee 

13 remains enrolled in such arrangement. 

14 ‘‘(B) DOLLAR LIMITATION.—The aggregate 

15 amount of distributions from health flexible 

16 spending arrangements and health reimburse17 ment arrangements of any employee which may 

18 be treated as qualified HSA distributions in con19 nection with an establishment of coverage de20 scribed in subparagraph (A)(i) shall not exceed 

21 the dollar amount in effect under section 

22 125(i)(1) (twice such amount in the case of cov23 erage which is described in section 

24 223(b)(2)(B)).’’. 


ssavage on LAPJG3WLY3PROD with BILLS
12 

•HR 5688 RH

1 (b) PARTIAL REDUCTION OF LIMITATION ON DEDUCT2 IBLE HSA CONTRIBUTIONS.—Section 223(b)(4) of such 

3 Code is amended by striking ‘‘and’’ at the end of subpara4 graph (B), by striking the period at the end of subpara5 graph (C) and inserting ‘‘, and’’, and by inserting after 

6 subparagraph (C) the following new subparagraph: 

7 ‘‘(D) so much of any qualified HSA dis8 tribution (as defined in section 106(e)(2)) made 

9 to a health savings account of such individual 

10 during the taxable year as does not exceed the 

11 aggregate increases in the balance of the arrange12 ment from which such distribution is made 

13 which occur during the portion of the plan year 

14 which precedes such distribution (other than any 

15 balance carried over to such plan year and deter16 mined without regard to any decrease in such 

17 balance during such portion of the plan year).’’. 

18 (c) CONVERSION TO HSA-COMPATIBLE ARRANGEMENT

19 FOR REMAINDER OF PLAN YEAR.—Section 223(c)(1)(B) of 

20 such Code, as amended by this preceding provisions of this 

21 Act, is amended by striking ‘‘and’’ at the end of clause (iii), 

22 by striking the period at the end of clause (iv) and inserting 

23 ‘‘, and’’, and by adding at the end the following new clause: 

24 ‘‘(v) coverage under a health flexible 

25 spending arrangement or health reimburseVerDate Sep 11 2014 20:30 Feb 26, 2024 Jkt 049200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6203 E:\BILLS\H5688.RH H5688

ssavage on LAPJG3WLY3PROD with BILLS
13 

•HR 5688 RH

1 ment arrangement for the portion of the 

2 plan year after a qualified HSA distribu3 tion (as defined in section 106(e)(2) deter4 mined without regard to subparagraph 

5 (A)(ii) thereof) is made, if the terms of such 

6 arrangement which apply for such portion 

7 of the plan year are such that, if such terms 

8 applied for the entire plan year, then such 

9 arrangement would not be taken into ac10 count under subparagraph (A)(ii) of this 

11 paragraph for such plan year.’’. 

12 (d) INCLUSION OF QUALIFIED HSA DISTRIBUTIONS

13 ON W–2.— 

14 (1) IN GENERAL.—Section 6051(a) of such Code, 

15 as amended by this preceding provisions of this Act, 

16 is amended by striking ‘‘and’’ at the end of para17 graph (17), by striking the period at the end of para18 graph (18) and inserting ‘‘, and’’, and by inserting 

19 after paragraph (18) the following new paragraph: 

20 ‘‘(19) the amount of any qualified HSA distribu21 tion (as defined in section 106(e)(2)) with respect to 

22 such employee.’’. 

23 (2) CONFORMING AMENDMENT.—Section 

24 6051(a)(12) of such Code is amended by inserting 

25 ‘‘(other than any qualified HSA distribution, as deVerDate Sep 11 2014 20:30 Feb 26, 2024 Jkt 049200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6203 E:\BILLS\H5688.RH H5688

ssavage on LAPJG3WLY3PROD with BILLS
14 

•HR 5688 RH

1 fined in section 106(e)(2))’’ before the comma at the 

2 end. 

3 (e) EFFECTIVE DATE.—The amendments made by this 

4 section shall apply to distributions made after December 31, 

5 2025, in taxable years ending after such date. 


ssavage on LAPJG3WLY3PROD with BILLS

ssavage on LAPJG3WLY3PROD with BILLS
Union Calendar No. 330 

118TH CONGRESS 

2D SESSION H. R. 5688 

[Report No. 118–401] 

A BILL 

To amend the Internal Revenue Code of 1986 to 

improve health savings accounts. 

FEBRUARY 26, 2024 

Reported with an amendment, committed to the Comand ordered to be printed mittee of the Whole House on the State of the Union, 


ssavage on LAPJG3WLY3PROD with BILLS