Health Freedom and Flexibility Act

Bill: 118-hr-677
Sponsor: full_name: Rep. Rosendale Sr., Matthew M. [R-MT-2]
Introduced: 2023-01-31
Policy area: Taxation
Latest action: action_date: 2023-01-31
text: Referred to the House Committee on Ways and Means.

Summaries:
action_date: 2023-01-31
action_desc: Introduced in House
text: <p><strong>Health Freedom and Flexibility Act</strong></p> <p>This bill revises provisions relating to health savings accounts (HSAs), including to </p> <ul> <li>eliminate the requirement that a participant in an HSA be enrolled in a high deductible health plan; </li> <li>repeal certain limitations on deductions for contributions to HSAs; </li> <li>repeal rules relating to eligible individuals who participate in HSAs;</li> <li>repeal the limitation on use of HSAs to purchase health insurance; </li> <li>include certain medical items as medical expenses for HSA purposes, including menstrual care products, over-the-counter medicines, and medically necessary items;</li> <li>include as HSA-eligible medical expenses, direct primary care, exercise equipment, and dental care items; and </li> <li>prohibit the use of HSAs to pay for abortions or for insurance that includes coverage for abortions.</li> </ul>

tv_txt: I 118th CONGRESS 1st Session H. R. 677 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. Short title This Act may be cited as the Health Freedom and Flexibility Act . 2. Repeal of requirement to be enrolled in health plan (a) In general Subsection (a) of section 223 of the Internal Revenue Code of 1986 is amended to read as follows: (a) Deduction allowed In the case of an individual, there shall be allowed as a deduction for the taxable year an amount equal to the aggregate amount paid in cash during such taxable year by or on behalf of such individual to a health savings account of such individual. . (b) Effective date The amendment made by this section shall apply to taxable years ending after the date of the enactment of this Act. 3. Repeal of limitations; retention of denial of deduction to dependents (a) In general Subsection (b) of section 223 of the Internal Revenue Code of 1986 is amended to read as follows: (b) Denial of deduction to dependents No deduction shall be allowed under this section to any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which such individual’s taxable year begins. . (b) Conforming amendment Subsection (f) of section 223 of such Code is amended by striking paragraph (3) and by redesignating paragraphs (4) through (8) as paragraphs (3) through (7), respectively. (c) Effective date The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act. 4. Repeal of rules relating to eligible individual; high deductible health plan (a) In general Section 223 of the Internal Revenue Code of 1986 is amended by striking subsections (c) and (g) and by redesignating subsections (d), (e), (f), and (h) as subsections (c), (d), (e), and (f), respectively. (b) Effective date The amendment made by this section shall apply to taxable years ending after the date of the enactment of this Act. 5. Health Savings Account (a) In general Subparagraph (A) of section 223(c)(1) of the Internal Revenue Code of 1986, as amended by the preceding sections of this Act, is amended to read as follows: (A) Except in the case of a rollover contribution described in subsection (e)(5) or section 220(f)(5), no contribution will be accepted unless it is in cash. . (b) Effective date The amendment made by this section shall apply to taxable years ending after the date of the enactment of this Act. 6. Qualified medical expenses (a) Repeal of purchase of health insurance limitation Paragraph (2) of section 223(c) of the Internal Revenue Code of 1986, as redesignated by the preceding provisions of this Act, is amended to read as follows: (2) Qualified medical expenses (A) In general The term qualified medical expenses means, with respect to an account beneficiary, amounts paid by such beneficiary for medical care (as defined in section 213(d)) for such individual, the spouse of such individual, any dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of such individual, but only to the extent such amounts are not compensated for by insurance or otherwise. (B) Menstrual care products For purposes of this paragraph— (i) In general Amounts paid for menstrual care products shall be treated as paid for medical care. (ii) Definition The term menstrual care product means a tampon, pad, liner, cup, sponge, or similar product used by individuals with respect to menstruation or other genital-tract secretions. . (b) Effective date The amendment made by this section shall apply to taxable years ending after the date of the enactment of this Act. 7. Allowance of distributions for prescription and over-the-counter medicines and drugs and other medically necessary items (a) HSAs Paragraph (2) of section 223(c) of the Internal Revenue Code of 1986, as redesignated by the preceding provisions of this Act, is amended by adding at the end the following: (C) Prescription and over-the-counter medicines and drugs and other medically necessary items For purposes of this paragraph— (i) In general The term qualified medical expenses shall include an amount paid for any prescription or over-the-counter medicine or drug and medically necessary items. (ii) Medically necessary items The term medically necessary item means any item for which a doctor or nurse certifies by a letter of medical necessity that the service or medication or item is for a medical diagnosis, treatment, or prevention of a medical diseases or condition. . (b) Effective date The amendment made by subsection (a) shall apply to amounts paid in taxable years ending after the date of the enactment of this Act. 8. Special rule for certain medical expenses incurred before establishment of account (a) In general Paragraph (2) of section 223(c) of the Internal Revenue Code of 1986, as redesignated by the preceding sections of this Act, is amended by adding at the end the following new subparagraph: (D) Certain medical expenses incurred before establishment of account treated as qualified An expense shall not fail to be treated as a qualified medical expense solely because such expense was incurred before the establishment of the health savings account if such expense was incurred— (i) during either— (I) the taxable year in which the health savings account was established, or (II) the preceding taxable year, in the case of a health savings account established after the taxable year in which such expense was incurred but before the time prescribed by law for filing the return for such taxable year (not including extensions thereof), and (ii) for medical care which (but for the fact that it was incurred before the establishment of the account) otherwise meets the requirements of the preceding subparagraphs. . (b) Effective date The amendment made by this subsection (a) shall apply to taxable years ending after the date of the enactment of this Act. 9. Direct primary care; exercise equipment; dental care items (a) In general Paragraph (2) of section 223(c) of the Internal Revenue Code of 1986, as amended by the preceding sections of this Act, is amended by adding at the end the following new subparagraph: (E) Direct primary care; exercise equipment; dental care items For purposes of this paragraph— (i) In general The term qualified medical expenses shall include amounts paid— (I) amounts paid under a direct primary care service arrangement, (II) amounts paid for exercise equipment, and (III) amounts paid for dental care items. (ii) Direct primary care service arrangement The term ‘direct primary care service arrangement’ means, with respect to any individual, an arrangement under which such individual is provided medical care (as defined in section 213(d)) consisting solely of primary care services provided by primary care practitioners (as defined in section 1833(x)(2)(A) of the Social Security Act, determined without regard to clause (ii) thereof), if the sole compensation for such care is a fixed periodic fee. (iii) Exercise or fitness equipment The term exercise or fitness equipment means devices such as motorized treadmills, stair climbers or step machines, stationary bicycles, rowing machines, weight machines, circuit training equipment, cardiovascular equipment, strength equipment, or other similar equipment. (iv) Dental care items The term dental care items includes manual or electric toothbrush, dental floss, and dental mouthwash. . (b) Effective date The amendment made by this section shall apply to plan years ending after the date of the enactment of this Act. 10. Prohibition on use of funds for elective abortions (a) In general Paragraph (2) of section 223(c) of the Internal Revenue Code of 1986, as amended by the preceding sections of this Act, is amended by adding at the end the following new subparagraph: (F) Prohibition on use of funds for elective abortions For purposes of this paragraph— (i) Payments for health insurance with abortion coverage The term qualified medical expenses shall not include amounts paid for insurance that includes coverage for abortions. (ii) Payments For Abortions The term qualified medical expense shall not include amounts paid for an abortion. (iii) Abortion The term abortion means the use or prescription of any instrument, medicine, drug, or any other substance or device— (I) to intentionally kill the unborn child of a woman known to be pregnant, or (II) to intentionally terminate the pregnancy of a woman known to be pregnant, with an intention other than— (aa) after viability, to produce a live birth and preserve the life and health of the child born alive, or (bb) to remove a dead unborn child. . (b) Effective date The amendment made by this section shall apply to plan years ending after the date of the enactment of this Act. 11. Treatment after death if designated beneficiary is spouse or child of account beneficiary (a) In general Subparagraph (A) of section 223(e)(7) of the Internal Revenue Code of 1986, as redesignated by the preceding sections of this Act, is amended to read as follows: (A) Treatment after death if designated beneficiary is spouse or child of account beneficiary If the account beneficiary’s surviving spouse or child acquires such beneficiary’s interest in a health savings account by reason of being the designated beneficiary of such account at the death of the account beneficiary, such health savings account shall be treated as if the spouse or child (as the case may be) were the account beneficiary. . (b) Child defined Paragraph (7) of section 223(e) of such Code, as so redesignated, is amended by adding at the end the following: (C) Child For purposes of this paragraph, the term child means, with respect to an account beneficiary, an individual who bears a relationship to the account beneficiary described in section 152(f)(1). . (c) Effective date The amendments made by this section shall apply with respect to account beneficiaries dying in taxable years ending after the date of the enactment of this Act. 12. Administrative error correction before due date of return (a) In general Paragraph (3) of section 223(d) of the Internal Revenue Code of 1986, as amended and redesignated by the preceding sections of this Act, is amended by adding at the end the following new subparagraph: (C) Exception for administrative errors corrected before due date of return Subparagraph (A) shall not apply if any payment or distribution is made to correct an administrative, clerical, or payroll contribution error and if— (i) such distribution is received by the individual on or before the last day prescribed by law (including extensions of time) for filing such individual’s return for such taxable year, and (ii) such distribution is accompanied by the amount of net income attributable to such contribution. Any net income described in clause (ii) shall be included in the gross income of the individual for the taxable year in which it is received. . (b) Effective date The amendment made by this section shall take effect on the date of the enactment of this Act. 13. Conforming amendments (a) Section 26(b)(2) of the Internal Revenue Code of 1986 is amended— (1) by striking , 223(b)(8)(B)(i)(II), in subparagraph (S), and (2) by striking 223(f)(4) in subparagraph (U) and inserting 223(e)(3) . (b) Section 106 of such Code is amended— (1) by amending subsection (d)(1) to read as follows: (1) In general In the case of an employee, amounts contributed by such employee’s employer to any health savings account (as defined in section 223(c)) of such employee shall be treated as employer-provided coverage for medical expenses under an accident or health plan. , (2) in subsection (e)— (A) by striking paragraphs (3) and (4) and redesignating paragraph (5) as paragraph (4), (B) by inserting after paragraph (2) the following new paragraph: (3) Treatment as rollover contribution A qualified HSA distribution shall be treated as a rollover contribution described in section 223(e)(4). , and (C) by striking to any eligible individual covered under a high deductible health plan of the employer in paragraph (4)(B)(ii) (as so redesignated) and inserting to any employee with respect to whom a health savings account has been established . (c) Section 408 of such Code is amended— (1) in subsection (d)(9)(A) by striking who is an eligible individual (as defined in section 223(c)) and ; and (2) in subsection (d)(9)(C)— (A) by striking Limitations .— in the heading and all that follows through (ii) One-time transfer .— in clause (ii), and inserting One-time transfer .— , (B) by redesignating subclauses (I) and (II) as clauses (i) and (ii) and moving such clauses 2 ems to the left, and (C) by striking subclause (II) in clause (i), as so redesignated, and inserting clause (ii) . (d) Section 877A(g)(6) of such Code is amended by striking 223(f)(4) and inserting 223(e)(3) . (e) Section 4973 of such Code is amended by striking subsection (g) and by redesignating subsection (h) as subsection (g). (f) Section 4975 of such Code is amended— (1) in subsection (c)(6)— (A) by striking section 223(d) and inserting section 223(c) , and (B) by striking section 223(e)(2) and inserting section 223(d)(2) , and (2) in subsection (e)(1)(E), by striking section 223(d) and inserting section 223(c) . (g) Sections 35(g)(3), 220(f)(5)(A), 848(e)(1)(B)(v), 4973(a)(5), and 6051(a)(12) of such Code are each amended by striking section 223(d) each place it appears and inserting section 223(c) . (h) Section 4980G of such Code is amended— (1) by amending subsection (b) to read as follows: (b) Rules and requirements (1) In general An employer meets the requirements of this subsection for any calendar year if the employer makes available comparable contributions to the health savings accounts of all comparable participating employees for each coverage period during such calendar year. (2) Comparable contributions (A) In general For purposes of paragraph (1), the term comparable contributions means contributions— (i) which are the same amount, or (ii) if the employees are covered by a health plan, which are the same percentage of the annual deductible limit under the plan covering the employees. (B) Part-year employees In the case of an employee who is employed by the employer for only a portion of the calendar year, a contribution to the health savings account of such employee shall be treated as comparable if it is an amount which bears the same ratio to the comparable amount (determined without regard to this subparagraph) as such portion bears to the entire calendar year. (3) Comparable participating employees For purposes of paragraph (1), the term comparable participating employees means all employees who are covered (if at all) under the same health plan of the employer and have the same category of coverage. For purposes of the preceding sentence, the categories of coverage are self-only and family coverage. (4) Part-time employees (A) In general Paragraph (3) shall be applied separately with respect to part-time employees and other employees. (B) Part-time employee For purposes of subparagraph (A), the term part-time employee means any employee who is customarily employed for fewer than 30 hours per week. , and (2) in subsection (d) by striking section 4980E and inserting this section . (i) Section 6693(a)(2)(C) of such Code is amended by striking section 223(h) and inserting section 223(f) .