I 

118TH CONGRESS 

1ST SESSION H. R. 5688 

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 

A BILL 

To amend the Internal Revenue Code of 1986 to improve 

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 ‘‘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: 


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1 ‘‘(E) TREATMENT OF DIRECT PRIMARY

2 CARE SERVICE ARRANGEMENTS.— 

3 ‘‘(i) IN GENERAL.—A direct primary 

4 care service arrangement shall not be 

5 treated as a health plan for purposes of 

6 subparagraph (A)(ii). 

7 ‘‘(ii) DIRECT PRIMARY CARE SERVICE

8 ARRANGEMENT.—For purposes of this 

9 paragraph— 

10 ‘‘(I) IN GENERAL.—The term ‘di11 rect primary care service arrange12 ment’ means, with respect to any indi13 vidual, an arrangement under which 

14 such individual is provided medical 

15 care (as defined in section 213(d)) 

16 consisting solely of primary care serv17 ices provided by primary care practi18 tioners (as defined in section 

19 1833(x)(2)(A) of the Social Security 

20 Act, determined without regard to 

21 clause (ii) thereof), if the sole com22 pensation for such care is a fixed peri23 odic fee. 

24 ‘‘(II) LIMITATION.—With respect 

25 to any individual for any month, such 


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1 term shall not include any arrange2 ment if the aggregate fees for all di3 rect primary care service arrange4 ments (determined without regard to 

5 this subclause) with respect to such 

6 individual for such month exceed 

7 $150 (twice such dollar amount in the 

8 case of an individual with any direct 

9 primary care service arrangement (as 

10 so determined) that covers more than 

11 one individual). 

12 ‘‘(iii) CERTAIN SERVICES SPECIFI13 CALLY EXCLUDED FROM TREATMENT AS

14 PRIMARY CARE SERVICES.—For purposes 

15 of this paragraph, the term ‘primary care 

16 services’ shall not include— 

17 ‘‘(I) procedures that require the 

18 use of general anesthesia, 

19 ‘‘(II) prescription drugs (other 

20 than vaccines), and 

21 ‘‘(III) laboratory services not 

22 typically administered in an ambula23 tory primary care setting. 

24 The Secretary, after consultation with the 

25 Secretary of Health and Human Services, 


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1 shall issue regulations or other guidance 

2 regarding the application of this clause.’’. 

3 (b) DIRECT PRIMARY CARE SERVICE ARRANGEMENT

4 FEES TREATED AS MEDICAL EXPENSES.—Section 

5 223(d)(2)(C) of such Code is amended by striking ‘‘or’’ 

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

7 end of clause (iv) and inserting ‘‘, or’’, and by adding at 

8 the end the following new clause: 

9 ‘‘(v) any direct primary care service 

10 arrangement.’’. 

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

12 such Code is amended— 

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

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

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

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

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

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

19 by inserting after clause (ii) the following new 

20 clause: 

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

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

23 years beginning in calendar years after 

24 2026, ‘calendar year 2025’.’’. 


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1 (d) REPORTING OF DIRECT PRIMARY CARE SERVICE

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

3 Code is amended by striking ‘‘and’’ at the end of para4 graph (16), by striking the period at the end of paragraph 

5 (17) and inserting ‘‘, and’’, and by inserting after para6 graph (17) the following new paragraph: 

7 ‘‘(18) in the case of a direct primary care serv8 ice arrangement (as defined in section 

9 223(c)(1)(E)(ii)) which is provided in connection 

10 with employment, the aggregate fees for such ar11 rangement for such employee.’’. 

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

13 this section shall apply to months beginning after Decem14 ber 31, 2025, in taxable years ending after such date. 

15 SEC. 3. ON-SITE EMPLOYEE CLINICS. 

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

17 Revenue Code of 1986, as amended by the preceding pro18 visions of this Act, is amended by adding at the end the 

19 following new subparagraph: 

20 ‘‘(F) SPECIAL RULE FOR QUALIFIED ITEMS

21 AND SERVICES.— 

22 ‘‘(i) IN GENERAL.—For purposes of 

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

24 not be treated as covered under a health 

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


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1 such subparagraph merely because the in2 dividual is eligible to receive, or receives, 

3 qualified items and services— 

4 ‘‘(I) at a healthcare facility lo5 cated at a facility owned or leased by 

6 the employer of the individual (or of 

7 the individual’s spouse), or 

8 ‘‘(II) at a healthcare facility op9 erated primarily for the benefit of em10 ployees of the employer of the indi11 vidual (or of the individual’s spouse). 

12 ‘‘(ii) QUALIFIED ITEMS AND SERVICES

13 DEFINED.—For purposes of this subpara14 graph, the term ‘qualified items and serv15 ices’ means the following: 

16 ‘‘(I) Physical examination. 

17 ‘‘(II) Immunizations, including 

18 injections of antigens provided by em19 ployees. 

20 ‘‘(III) Drugs or biologicals other 

21 than a prescribed drug (as such term 

22 is defined in section 213(d)(3)). 

23 ‘‘(IV) Treatment for injuries oc24 curring in the course of employment. 


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1 ‘‘(V) Preventive care for chronic 

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

3 ‘‘(VI) Drug testing. 

4 ‘‘(VII) Hearing or vision 

5 screenings and related services. 

6 ‘‘(iii) AGGREGATION.—For purposes 

7 of clause (i), all persons treated as a single 

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

9 (o) of section 414 shall be treated as a sin10 gle employer. 

11 ‘‘(iv) PREVENTIVE CARE FOR CHRON12 IC CONDITIONS.—For purposes of this sub13 paragraph, the term ‘preventive care for 

14 chronic conditions’ means any item or 

15 service specified in the Appendix of Inter16 nal Revenue Service Notice 2019–45 which 

17 is prescribed to treat an individual diag18 nosed with the associated chronic condition 

19 specified in such Appendix for the purpose 

20 of preventing the exacerbation of such 

21 chronic condition or the development of a 

22 secondary condition, including any amend23 ment, addition, removal, or other modifica24 tion made by the Secretary (pursuant to 

25 the authority granted to the Secretary 


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1 under paragraph (2)(C)) to the items or 

2 services specified in such Appendix subse3 quent to the date of enactment of this sub4 paragraph.’’. 

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

6 this section shall apply to months in taxable years begin7 ning after December 31, 2025. 

8 SEC. 4. CONTRIBUTIONS PERMITTED IF SPOUSE HAS 

9 HEALTH FLEXIBLE SPENDING ARRANGE10 MENT. 

11 (a) CONTRIBUTIONS PERMITTED IF SPOUSE HAS A

12 HEALTH FLEXIBLE SPENDING ARRANGEMENT.—Section 

13 223(c)(1)(B) of the Internal Revenue Code of 1986 is 

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

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

16 ‘‘, and’’, and by adding at the end the following new 

17 clause: 

18 ‘‘(iv) coverage under a health flexible 

19 spending arrangement of the spouse of the 

20 individual for any plan year of such ar21 rangement if the aggregate reimburse22 ments under such arrangement for such 

23 year do not exceed the aggregate expenses 

24 which would be eligible for reimbursement 

25 under such arrangement if such expenses 


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1 were determined without regard to any ex2 penses paid or incurred with respect to 

3 such individual.’’. 

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

5 this section shall apply to plan years beginning after De6 cember 31, 2025. 

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

8 FUND HSAs. 

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

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

11 ‘‘(2) QUALIFIED HSA DISTRIBUTION.—For pur12 poses of this subsection— 

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

14 HSA distribution’ means, with respect to any 

15 employee, a distribution from a health flexible 

16 spending arrangement or health reimbursement 

17 arrangement of such employee contributed di18 rectly to a health savings account of such em19 ployee if— 

20 ‘‘(i) such distribution is made in con21 nection with such employee establishing 

22 coverage under a high deductible health 

23 plan (as defined in section 223(c)(2)) if 

24 during the 4-year period preceding the 

25 date the employee so establishes coverage 


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1 the employee was not covered under such 

2 a high deductible health plan, and 

3 ‘‘(ii) such arrangement is described in 

4 section 223(c)(1)(B)(vi) with respect to 

5 any portion of the plan year remaining 

6 after such distribution is made, if such em7 ployee remains enrolled in such arrange8 ment. 

9 ‘‘(B) DOLLAR LIMITATION.—The aggre10 gate amount of distributions from health flexi11 ble spending arrangements and health reim12 bursement arrangements of any employee which 

13 may be treated as qualified HSA distributions 

14 in connection with an establishment of coverage 

15 described in subparagraph (A)(i) shall not ex16 ceed the dollar amount in effect under section 

17 125(i)(1) (twice such amount in the case of cov18 erage which is described in section 

19 223(b)(2)(B)).’’. 

20 (b) PARTIAL REDUCTION OF LIMITATION ON DE21 DUCTIBLE HSA CONTRIBUTIONS.—Section 223(b)(4) of 

22 such Code is amended by striking ‘‘and’’ at the end of 

23 subparagraph (B), by striking the period at the end of 

24 subparagraph (C) and inserting ‘‘, and’’, and by inserting 

25 after subparagraph (C) the following new subparagraph: 


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1 ‘‘(D) so much of any qualified HSA dis2 tribution (as defined in section 106(e)(2)) made 

3 to a health savings account of such individual 

4 during the taxable year as does not exceed the 

5 aggregate increases in the balance of the ar6 rangement from which such distribution is 

7 made which occur during the portion of the 

8 plan year which precedes such distribution 

9 (other than any balance carried over to such 

10 plan year and determined without regard to any 

11 decrease in such balance during such portion of 

12 the plan year).’’. 

13 (c) CONVERSION TO HSA-COMPATIBLE ARRANGE14 MENT FOR REMAINDER OF PLAN YEAR.—Section 

15 223(c)(1)(B) of such Code, as amended by this preceding 

16 provisions of this Act, is amended by striking ‘‘and’’ at 

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

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

19 end the following new clause: 

20 ‘‘(v) coverage under a health flexible 

21 spending arrangement or health reimburse22 ment arrangement for the portion of the 

23 plan year after a qualified HSA distribu24 tion (as defined in section 106(e)(2) deter25 mined without regard to subparagraph 


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

2 such arrangement which apply for such 

3 portion of the plan year are such that, if 

4 such terms applied for the entire plan 

5 year, then such arrangement would not be 

6 taken into account under subparagraph 

7 (A)(ii) of this paragraph for such plan 

8 year.’’. 

9 (d) INCLUSION OF QUALIFIED HSA DISTRIBUTIONS

10 ON W–2.— 

11 (1) IN GENERAL.—Section 6051(a) of such 

12 Code, as amended by this preceding provisions of 

13 this Act, is amended by striking ‘‘and’’ at the end 

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

15 of paragraph (18) and inserting ‘‘, and’’, and by in16 serting after paragraph (18) the following new para17 graph: 

18 ‘‘(19) the amount of any qualified HSA dis19 tribution (as defined in section 106(e)(2)) with re20 spect to such employee.’’. 

21 (2) CONFORMING AMENDMENT.—Section 

22 6051(a)(12) of such Code is amended by inserting 

23 ‘‘(other than any qualified HSA distribution, as de24 fined in section 106(e)(2))’’ before the comma at the 

25 end. 


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

2 this subsection shall apply to distributions made after De3 cember 31, 2025, in taxable years ending after such date. 

Æ 


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