II 

115TH CONGRESS 

1ST SESSION S. 28 

To amend the Internal Revenue Code of 1986 to expand the permissible 

use of health savings accounts to include health insurance payments 

and to increase the dollar limitation for contributions to health savings 

accounts, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 4, 2017 

Mr. FLAKE (for himself and Mr. JOHNSON) introduced the following bill; 

which was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to expand 

the permissible use of health savings accounts to include 

health insurance payments and to increase the dollar 

limitation for contributions to 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. 

4 This Act may be cited as the ‘‘Health Savings Ac5 count Expansion Act of 2017’’. 


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1 SEC. 2. ADEQUATE FUNDS FOR HEALTH INSURANCE PLANS. 

2 (a) IN GENERAL.—Section 223(b)(1) of the Internal 

3 Revenue Code of 1986 is amended by striking ‘‘the sum 

4 of the monthly’’ and all that follows through ‘‘eligible indi5 vidual’’ and inserting ‘‘$9,000 ($18,000 in the case of a 

6 joint return)’’. 

7 (b) CONFORMING AMENDMENTS.— 

8 (1) Subsection (b) of such Code is amended by 

9 striking paragraphs (2), (3), and (5) and by redesig10 nating paragraphs (4), (6), (7), and (8) as para11 graphs (2), (3), (4), and (5), respectively. 

12 (2) Section 223(b)(2) of such Code (as redesig13 nated by paragraph (1)) is amended by striking the 

14 last sentence. 

15 (3) Section 223(b)(4) of such Code (as redesig16 nated by paragraph (1)) is amended to read as fol17 lows: 

18 ‘‘(4) MEDICARE ELIGIBLE INDIVIDUALS.—The 

19 limitation under this subsection for any taxable year 

20 with respect to an individual shall— 

21 ‘‘(A) in the case of the first taxable year 

22 in which such individual is entitled to benefits 

23 under title XVIII of the Social Security Act, be 

24 the amount which bears the same proportion to 

25 the amount in effect under paragraph (1) with 

26 respect to such individual as— 


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1 ‘‘(i) the number of months in the tax2 able year during which such individual was 

3 not so entitled, bears to 

4 ‘‘(ii) 12, and 

5 ‘‘(B) be zero for any taxable year there6 after.’’. 

7 (4) Section 223(g)(1) of such Code is amend8 ed— 

9 (A) in the matter preceding subparagraph 

10 (A) by striking ‘‘Each dollar amount in sub11 section (b)(2)’’ and inserting ‘‘In the case of 

12 taxable years beginning after December 31, 

13 2018, each dollar amount in subsection (b)(1)’’, 

14 and 

15 (B) by amending subparagraph (B) to read 

16 as follows: 

17 ‘‘(B) the cost-of-living adjustment deter18 mined under section 1(f)(3) for the calendar 

19 year in which such taxable year begins deter20 mined by substituting ‘calendar year 2017’ for 

21 ‘calendar year 1992’.’’. 

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

23 this section shall apply to taxable years beginning after 

24 December 31, 2017. 


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1 SEC. 3. PARITY WITH EMPLOYER-PROVIDED HEALTH IN2 SURANCE; DIRECT PRIMARY CARE. 

3 (a) IN GENERAL.—Section 223(d)(2) of the Internal 

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

5 ‘‘(2) QUALIFIED MEDICAL EXPENSES.— 

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

7 medical expenses’ means, with respect to an ac8 count beneficiary, amounts paid by such bene9 ficiary for medical care (as defined in section 

10 213(d)) for such individual, the spouse of such 

11 individual, and any dependent (as defined in 

12 section 152, determined without regard to sub13 sections (b)(1), (b)(2), and (d)(1)(B) thereof) 

14 of such individual, but only to the extent such 

15 amounts are not compensated for by insurance 

16 or otherwise. 

17 ‘‘(B) DIRECT PRIMARY CARE.— 

18 ‘‘(i) IN GENERAL.—Such term in19 cludes expenses for direct primary care 

20 service arrangements. 

21 ‘‘(ii) DIRECT PRIMARY CARE SERVICE

22 ARRANGEMENTS.—For purposes of clause 

23 (i), the term ‘direct primary care service 

24 arrangements’ means an arrangement 

25 under which an individual is provided cov26 erage restricted to primary care services in 


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1 exchange for a fixed periodic fee or pay2 ment for primary care services.’’. 

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

4 this section shall apply to taxable years beginning after 

5 December 31, 2017. 

6 SEC. 4. FREEDOM FROM MANDATE. 

7 (a) IN GENERAL.—Section 223 of the Internal Rev8 enue Code of 1986, as amended by sections 2 and 3, is 

9 amended by striking subsection (c) and redesignating sub10 sections (d) through (h) as subsections (c) through (g), 

11 respectively. 

12 (b) CONFORMING AMENDMENTS.— 

13 (1) Subsection (a) of section 223 of such Code 

14 is amended to read as follows: 

15 ‘‘(a) DEDUCTION ALLOWED.—In the case of an indi16 vidual, there shall be allowed as a deduction for a taxable 

17 year an amount equal to the aggregate amount paid in 

18 cash during such taxable year by or on behalf of such indi19 vidual to a health savings account of such individual.’’. 

20 (2) Subsection (b) of section 223 of such Code 

21 (as amended by section 2) is amended by striking 

22 paragraph (5). 

23 (3) Section 223(c)(1)(A) of such Code (as re24 designated by subsection (a)) is amended— 


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1 (A) by striking ‘‘subsection (f)(5)’’ and in2 serting ‘‘subsection (e)(5)’’, and 

3 (B) in clause (ii) by striking ‘‘the sum 

4 of—’’ and all that follows and inserting ‘‘the 

5 dollar amount in effect under subsection 

6 (b)(1).’’. 

7 (4) Section 223(f)(1) of such Code (as redesig8 nated by subsection (a)) is amended by striking 

9 ‘‘subsections (b)(1) and (c)(2)(A)’’ and inserting 

10 ‘‘subsection (b)(1)’’. 

11 (5) Section 26(b)(2)(U) of such Code is amend12 ed by striking ‘‘section 223(f)(4)’’ and inserting 

13 ‘‘section 223(e)(4)’’. 

14 (6) Sections 35(g)(3), 220(f)(5)(A), 

15 848(e)(1)(v), 4973(a)(5), and 6051(a)(12) of such 

16 Code are each amended by striking ‘‘section 223(d)’’ 

17 each place it appears and inserting ‘‘section 223(c)’’. 

18 (7) Section 106(d)(1) of such Code is amend19 ed— 

20 (A) by striking ‘‘who is an eligible indi21 vidual (as defined in section 223(c)(1))’’, and 

22 (B) by striking ‘‘section 223(d)’’ and in23 serting ‘‘section 223(c)’’. 

24 (8) Section 408(d)(9) of such Code is amend25 ed— 


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1 (A) in subparagraph (A) by striking ‘‘who 

2 is an eligible individual (as defined in section 

3 223(c)) and’’, and 

4 (B) in subparagraph (C) by striking ‘‘com5 puted on the basis of the type of coverage under 

6 the high deductible health plan covering the in7 dividual at the time of the qualified HSA fund8 ing distribution’’. 

9 (9) Section 877A(g)(6) of such Code is amend10 ed by striking ‘‘223(f)(4)’’ and inserting 

11 ‘‘223(e)(4)’’. 

12 (10) Section 4973(g) of such Code is amend13 ed— 

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

16 (B) in paragraph (2), by striking ‘‘section 

17 223(f)(2)’’ and inserting ‘‘section 223(e)(2)’’, 

18 and 

19 (C) by striking ‘‘section 223(f)(3)’’ and in20 serting ‘‘section 223(e)(3)’’. 

21 (11) Section 4975 of such Code is amended— 

22 (A) in subsection (c)(6)— 

23 (i) by striking ‘‘section 223(d)’’ and 

24 inserting ‘‘section 223(c)’’, and 


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1 (ii) by striking ‘‘section 223(e)(2)’’ 

2 and inserting ‘‘section 223(d)(2)’’, and 

3 (B) in subsection (e)(1)(E), by striking 

4 ‘‘section 223(d)’’ and inserting ‘‘section 

5 223(c)’’. 

6 (12) Section 6693(a)(2)(C) of such Code is 

7 amended by striking ‘‘section 223(h)’’ and inserting 

8 ‘‘section 223(g)’’. 

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

10 this section shall apply to taxable years beginning after 

11 December 31, 2017. 

12 SEC. 5. RESTORING LOWER PENALTY FOR NONQUALIFIED 

13 DISTRIBUTIONS. 

14 (a) HSAS.—Section 223(e)(4)(A) of the Internal 

15 Revenue Code of 1986, as amended by section 4, is 

16 amended by striking ‘‘20 percent’’ and inserting ‘‘10 per17 cent’’. 

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

19 this section shall apply to distributions made in taxable 

20 years beginning after December 31, 2017. 

Æ 


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