BILL NUMBER: S6895

SPONSOR: BAILEY
 
TITLE OF BILL:

An act to amend the insurance law, in relation to high deductible health
plans and health savings accounts

 
PURPOSE OR GENERAL IDEA OF BILL:

The bill would amend the Insurance Law to clarify that with respect to
the application of any cost-sharing requirements adopted by the state
for health insurance plans, policies, and coverages, if the application
of those requirements would prevent HSA-qualified plans from meeting the
requirements under federal law (26 USC 223), the relevant requirement
would only apply to HSA-qualified plans after the federal required mini-
mum deductible has been met. However, this exception would not apply to
items or services considered "preventive care" by the IRS under federal
law (26 USC 223  
C  
2 
C).

              

 
SUMMARY: OF MAIN PROVISIONS:

Section 1 amends subsection (e) of section 1124 of the insurance law.

Section 2 provides an effective date.

 
JUSTIFICATION:

Health Savings Accounts (HSAs) are trust/custodial bank accounts similar
to IRAs. HSAs are an additional tool for consumers to manage the high
cost of health care for themselves and their families.  Contributions to
an HSA are tax-deductible from income and/or "pre-tax" when made by an
employer or by employees via payroll deduction. HSA funds may be used
tax-free for IRS-approved health expenses. The funds belong to the
account owner, and the HSA is portable.

HSAs were created in 2003 in Section 223 of the federal Internal Revenue
Code. The rules for HSAs are interpreted and administered by the federal
Internal Revenue Service (IRS).

Per IRS rules, adults may contribute to an HSA only if they are enrolled
in an "HSA-qualified" health insurance plan and do not have other cover-
age that disqualifies them. HSA-qualified plans must:

(1) apply a minimum deductible to all covered benefits (medical plus
pharmacy) that are not "preventive care" under IRS Rules, which general-
ly follow the Affordable Care Act definitions based on recommendations
by the U.S. Preventive Services Task Force and other advisory groups;
and

(2) limit annual out-of-pocket expenses, including all cost-sharing, for
covered benefits. Minimum deductibles and out-of-pocket limits are
prescribed by federal law.

State health insurance mandates can conflict with federal requirements
for HSA-qualified plans. Although they may be well-intended, state
mandates can have an unintended impact on HSAs. This takes place when
benefit mandate bills require that health insurers cover certain treat-
ments or services without cost-sharing for enrollees, or otherwise place
restrictions on cost-sharing, whether co-pays, deductibles, etc. Because
federal law only allows zero or reduced cost-sharing for "preventive
care" services, state mandates that require HSA-qualified plans to cover
specific benefits, that are not recognized as "preventive care" by the
IRS, without any cost-sharing, is problematic for these plans.

Through this legislation, New York would join approximately 14 other
states that have already enacted such a provision which was endorsed in
November 2023 at a national meeting of the National Council of Insurance
Legislators. This clarification is necessary to ensure that consumers,
insureds/enrollees, and HSA owners may continue to fund their HSAs to
pay for qualified medical expenses on a tax-advantaged basis.

 
PRIOR LEGISLATIVE HISTORY:

New Bill. While certain bills have included a protective exception for
HSAs with respect to state benefit mandates covering individual
diseases, treatments or services, this bill would create a new provision
embedded in the Insurance Law regarding HSA-qualified plans for all such
state benefit and/or cost-sharing mandates.

 
FISCAL IMPLICATIONS:

None.

 
EFFECTIVE

IMMEDIATELY; PROVIDED, HOWEVER, THAT THE AMENDMENTS TO SUBSECTION (E) OF
SECTION 1124 OF THE INSURANCE LAW, MADE BY SECTION ONE OF THIS ACT,
SHALL NOT AFFECT THE REPEAL OF SUCH SECTION AND SHALL BE DEEMED REPEALED
THEREWITH.