Commentary
There are some small but potentially important changes in the law concerning medical services and health care in the “One Big Beautiful Bill Act.” They have received very little attention, perhaps because they are complicated and not dramatic.
Even so, they push some small steps that set a path forward for change. The shift is gradual, but it is a shift away from centralized systems and toward empowering decentralized solutions.
The change is not thrilling, but it is encouraging. Thanks to the careful work of the Paragon Health Institute, here is a rundown of what is in the bill. Apologies in advance for the detail here. It seems important to document this because so many are neglecting this crucial topic.
Sec. 110201, “Treatment of Health Reimbursement Arrangements Integrated with Individual Market Coverage”: This section codifies President Donald Trump’s 2019 “individual coverage health reimbursement arrangement” rule and renames it the Custom Health Option and Individual Care Expense (CHOICE) arrangement. This is a tax-free contribution to allow workers to purchase health insurance on their own. It’s an expansion of options for companies to grant employees more control, and possibly a step toward the better goal of removing insurance from the employer’s list of responsibilities completely.
Sec. 110202, “Participants in CHOICE Arrangement Eligible for Purchase of Exchange Insurance Under Cafeteria Plan”: This section allows employees to use pretax income to pay their own share of premiums when selecting a medical insurance plan.
Sec. 110203, “Employer Credit for CHOICE Arrangement”: This section creates a temporary two-year credit for businesses with fewer than 50 employees that offer CHOICE arrangements for the first time—$100 per employee per month in year one and $50 per employee per month in year two. It’s small but a start.
Sec. 110204, “Individuals Entitled to Part A of Medicare by Reason of Age Allowed to Contribute to Health Savings Accounts”: Health Savings Accounts (HSAs) are strictly controlled under tax law now, which is a tragedy because they in theory reduce reliance on insurers. Ideally, they would be available to anyone, even those without health insurance. We aren’t there yet but this allows people enrolled in any part of Medicare to contribute to HSAs. This could dramatically expand availability. This permits more seniors to continue to save money for their health care while not discouraging continued work.
Sec. 110205, “Treatment of Direct Primary Care Service Arrangements”: Direct primary care (DPC) is a system in which people pay a primary care practice a flat monthly fee for access to its services, avoiding the insurance for providers and patients. Current rules prevent people from contributing to HSAs if they have a DPC or are using their HSAs to pay the monthly DPC fees. This provision removes these limitations. It allows people with DPC arrangements to contribute to HSAs and to use HSAs to pay for DPCs up to a $150 monthly limit for individuals and a $300 monthly limit for families. Again, this is far too small but it is something.
Sec. 110206, “Allowance of Bronze and Catastrophic Plans in Connection with Health Savings Accounts”: This provision would make it easier for individuals with coverage through the Affordable Care Act—President Barack Obama’s health care law, known as “Obamacare”—to have HSAs. Currently, many bronze and catastrophic plans are incompatible with HSAs. This provision expands the definition of such plans to include bronze and catastrophic plans, thereby increasing access to HSAs.
Sec. 110207, “On-Site Employee Clinics”: Many employers have historically had doctors on-site at the workplace to help with employees’ medical needs. Individuals are not legally permitted to contribute to HSAs if they receive free or discounted services (other than a limited set) at on-site health clinics. This provision allows individuals covered by high-deductible plans to contribute to HSAs if they have access to specific free or discounted services at on-site health clinics.
Sec. 110208, “Certain Amounts Paid for Physical Activity, Fitness, and Exercise Treated as Amounts Paid for Medical Care”: This provision permits people to use their HSAs for physical fitness memberships and instructional physical activity programs—up to $500 per year for an individual and $1,000 per year for a family. These limits apply monthly, which equates to about $42 per month for a single person and $83 per month for a family.
Sec. 110209, “Allow Both Spouses to Make Catch-Up Contributions to the Same Health Savings Account”: Under current law, individuals aged 55 and older can make “catch-up” HSA contributions of an additional $1,000 per year. But if both spouses are 55 and older, they must have separate HSAs. This provision would ease administrative flexibility and permit both spouses to contribute to a single account.
Sec. 110210, “FSA and HRA Terminations or Conversions to Fund HSAs”: Currently, Flexible Savings Accounts (FSAs) and Health Reimbursement Arrangements (HRAs), which are employer-funded accounts, typically have “use it or lose it” rules that result in wasteful health care expenditures. People with FSAs lose most of their annual contributions if they do not spend them, contributing to wasteful year-end spending. This provision allows an employee to convert FSA and HRA balances into an HSA contribution if the individual is enrolled in a High-Deductible Health Plan. The conversion is capped at the annual FSA contribution limit ($3,300 in 2025). This provision would help more people save and grow funds for future health care expenses.
Sec. 110211, “Special Rule for Certain Medical Expenses Incurred Before Establishment of Health Savings Account”: Currently, HSA funds may be used only to pay for qualified medical expenses that occur after the account has been officially opened. This section would permit HSA funds to be used for medical expenses incurred up to 60 days before the account’s establishment, making those earlier expenses eligible as qualified medical expenses.
Sec. 110212, “Contributions Permitted If Spouse Has Health Flexible Spending Arrangement”: This section allows an individual who is otherwise HSA-eligible to contribute to an HSA if his or her spouse has an FSA. Currently, if one spouse has a health FSA, the other spouse cannot contribute to an HSA.
Sec. 110213, “Increase in Health Savings Account Contribution Limitation for Certain Individuals”: This section would double HSA contribution limits for individuals who make less than $75,000 annually (or $150,000 in case of families), indexed annually for inflation. It would phase down the added contribution limits through $100,000 for singles and $200,000 for joint filers. This provision would provide a significant financial boost to lower- and middle-income individuals and families, enhancing their ability to control their health care and save for future expenses.
The bill further fixes many features of Medicare and Medicaid that made them susceptible to fraud, waste, and abuse (including their use by illegal immigrants), and tightens many eligibility requirements.
There is so much more to do. The system right now is impossibly complex and massively favors insurers over patients. Catastrophic plans with low premiums and high deductibles are mostly restricted to people younger than age 30, with rare exceptions. There is no easy way for employers to be released of their legal obligations to provide health insurance. Pharmacies still cannot do diagnostics and prescriptions as they can in most countries.
Medical practitioners are still heavily penalized for going independent, even with the above changes. And far too many drugs are labeled as prescription when they should be over the counter. I’m thinking of Ivermectin, for example. Some states have made changes but the federal government could encourage more.
Finally, actuaries are still not deployed to assess individual risk and have that reflected in premiums. This is a huge problem because it means that there is no easy-to-discern financial reward for getting healthy. That is ridiculous. Until that is changed, the goal of bringing health back to the United States will be elusive. Note that Americans have gotten far less healthy since Obamacare converted insurance into group welfare. This is what must change. The actuaries who are so busy assessing group rates could get to work on individual solutions.
Not a unifying feature to all the above. They are gradual forms of deregulation, moving from control to permission. This is the main theme and the path toward fixing the U.S. system of medical care delivery. Government simply needs to get out of the way, letting people keep more of their money and control more of their own choices. This is a start—but just that.
That said, I’m all for half-a-loaf solutions, and this bill contains some of them. It’s certainly more than just crumbs and it is a start toward fixing a horribly dysfunctional system. We offer cheers for good changes when we can. And this is one such occasion.
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.
