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Bill would enhance attractions of FSAs, HSAs


Employer advocates are cheering House passage of legislation that would restore employees' ability to tap their flexible spending accounts, health savings accounts and health reimbursement arrangements to pay for over-the-counter medications.

While the measure also would nearly double maximum annual HSA contributions to $6,500 for single coverage and $13,100 for family coverage, observers say it has little chance of being enacted into law.

In a surprise move, the House of Representatives earlier this month on a 243-164 vote approved H.R. 1270, which would repeal a provision in the 2010 health care reform law that bars employees from tapping their FSAs, HSAs and HRAs to pay for OTC expenses.

The measure, which would go into effect in 2017, also would allow employees with a spouse who is 55 or older to make an additional $1,000 catch-up contribution to their HSAs.

Employer advocates hailed the bill.

“It is very much common sense for employees to be able to use their accounts for OTC medications without having to get a prescription from their doctors, which only adds to costs,” said Martin Trussell, executive director of the Employers Council on Flexible Compensation in Washington.

But observers say the bill faces an uphill battle for several reasons.

One obstacle is last month's White House warning that if the bill passes Congress, President Barack Obama would veto it.

The legislation would repeal provisions “that help fund the health care reform law's improvements and expansions,” the Obama administration said in a statement. It also would “provide additional tax breaks that disproportionately benefit those with higher income by expanding tax-preferred health savings accounts.”

Given paltry Democratic support of the measure — just 10 House Democrats voted for the legislation — it's unlikely Congress could override a veto, observers say.

“Democrats don't really like this bill very much,” said Geoff Manville, a principal at Mercer L.L.C. in Washington. “My take is the bill is too contentious to move this year.”

Another factor weighing against congressional approval is the short time left in the current session. Lawmakers, who began their summer recess last week, will not return until September, with few legislative days left for the Senate to consider the proposal prior to the November congressional and presidential elections.

“Time is not working in the measure's favor,” said Ann Marie Breheny, a senior legislative adviser at Willis Towers Watson P.L.C. in Arlington, Virginia.

“There is so much other 'must-pass' legislation,” added James Gelfand, senior vice president of health policy at the ERISA Industry Committee in Washington.

Still, the proposal could be voted on in the lame-duck session after the elections.

“It is a long shot possibility in a lame duck session, perhaps as part of a must-pass bill,” Mr. Trussell said.

Even then, the measure would face another obstacle: The Joint Committee on Taxation earlier this month estimated that the bill would reduce revenue by more than $24 billion over the next decade.