Proposed legislation expands health savings account eligibility to TRICARE beneficiaries

Representatives Chris Stewart (R-Utah) and Tulsi Gabbard (D-Hawaii), both of whom are veterans, recently introduced the Veterans TRICARE Choice Act, which would allow veterans to temporarily pause their TRICARE benefits in order to contribute to an HSA. An identical bill was introduced in the Senate by Jerry Moran (R-Kansas) and Richard Blumenthal (D-Connecticut).

"As a former Air Force Officer, I know first hand about the sacrifices made by veterans and their families," Stewart told the St. George News. "When they leave the military and enter the private workforce, they shouldn't been denied opportunities given to nonveteran employees. This bill simply allows veterans to pause TRICARE benefits to participate in the same employer-sponsored HSA programs that nonveteran employees are given. It's important that we honor our veterans by ensuring that they have access to the best healthcare options for themselves and their families."

To be eligible to contribute to an HSA, individuals must be enrolled in a high-deductible health plan (HDHP); TRICARE does not qualify as an HDHP. Many retirees and veterans qualify for health insurance other than TRICARE through their employment, but even when they select TRICARE as a secondary benefit, they are still not eligible contribute to an HSA.

Under the proposed legislation, TRICARE beneficiaries could elect at any time to suspend their TRICARE benefits. During the time period when benefits are suspended, individuals could contribute to an HSA. Beneficiaries could then reactivate their TRICARE benefits during a designated special enrollment period. Certain qualifying life events such as a marriage, the birth of a child or being called into active duty service could also trigger an open enrollment period. While TRICARE benefits are suspended, the individual's information will be maintained in the DEERS system.

What is an HSA and what are its benefits?

A health savings account (HSA) is a tax-exempt trust or account, usually managed by a bank or other third party, which allows contributors to pay for or reimburse certain medical expenses. The interest earned by an HSA grows tax-free and the balance carries over year to year. In some cases, employers also contribute money to their employees' HSAs.

An HSA can save money through lower premiums and tax savings, because contributions can be claimed as a tax deduction. The money in the account is used to pay for qualified medical expenses, such as deductibles and out-of-pocket medical expenses. HSAs also serve as a way to set aside money for future medical expenses.

According to the Office of Personnel Management (OPM), individuals whose medical costs are limited to mostly preventive care stand to benefit the most from a HDHPs and related HSAs. Individuals with significant current medical expenses are probably better off in a traditional plan, according to OPM.

One possible downside of suspending TRICARE to open an HSA is that individuals may unnecessarily use their own money to pay for things already covered by TRICARE. It can also be a disadvantage if there aren't adequate funds in the HSA to pay for necessary care.

Under existing rules, there are other ways TRICARE beneficiaries can offset medical costs without an HSA. Flexible spending accounts, for example, allow TRICARE beneficiaries to set aside up to $2500 per year pre-tax for items not covered by TRICARE, such as eye glasses and dental deductibles.