Under the Affordable Care Act (ACA), children may remain on their parents' health insurance through age 26. However, this provision of the law inadvertently excluded expenditures from Health Savings Accounts (HSAs) for the same group of young adults. This week, Congressman Bill Owens introduced legislation (H.R. 1140) that would correct this oversight by allowing individuals with HSAs to spend those funds on health services for their children through age 26 without incurring a tax penalty. Owens issued the following statement on the announcement:
"Allowing young people to stay on their parents insurance longer is good policy that can help many individuals get a better start on their adult life," Owens said. "My legislation ensures parents with Health Savings Accounts are able to use those funds to pay for medical care for their children without penalty."
Congressman Owens introduced the legislation after the issue was raised for him by Ticonderoga Town Supervisor Debra Malaney. Supervisor Malaney issued the following statement on the release of the bill:
"We found this "devil in the details' inconsistency after offering the Health Savings Account option to our employees and found that family members previously covered would no longer be insured. This bill will eliminate the discrepancy between IRS regulations and the Affordable Health Care Act and will resolve the issues that arose in offering a High Deductible Insurance policy to our employees, which was put in place to provide quality health insurance for employees while saving taxpayer money."
Although the ACA allows parents to keep children on their health plans through age 26, the IRS has not changed its definition of a dependent for HSAs. As a result, an individual with children under the age of twenty-six on their HSA-qualified high-deductible health plan cannot use funds from the HSA to pay medical bills for their children. Owens' legislation would address this oversight.
"It is only logical that parents who use Health Savings Accounts should be able to spend those funds for a child's care in accordance with the health care reform law," Owens said. "This legislation gets us there."