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In the constant push for better healthcare options, the recently introduced Helping Our People Everywhere (HOPE) Act is a bipartisan bill that could create a new health savings account referred to as the HOPE Account. This legislation, introduced by Representatives Jimmy Panetta (D) and Blake Moore (R), aims to broaden access to health savings while offering a new form of financial flexibility for millions of Americans.
While the HOPE Act hasn’t yet received widespread attention, it presents some interesting possibilities for healthcare savings. If the bill passes, I’ll be sure to update this blog with the final rules and any changes that may impact you. Let’s break down what the HOPE Act proposes and how it might affect your financial planning.
Key Takeaways
- Broader eligibility: Individuals with any qualifying coverage—including Medicare, Medicaid, and private insurance—can contribute to a HOPE Account.
- Non-tax-deductible contributions: While individual contributions aren’t tax-deductible, employer contributions can be tax-advantaged for those earning under $100,000 ($200,000 for families).
- Significant savings potential: HOPE Accounts offer tax-free growth and withdrawals for healthcare expenses, with annual contribution limits of up to $8,000 for family coverage.
Expanded Eligibility for Contributions
Unlike current health savings accounts (HSAs), which require a high-deductible health plan (HDHP), the HOPE Act would create a new health savings account that expands eligibility. Anyone with qualifying coverage—including those in the commercial market, Medicare, Medicaid, the Indian Health Service, and other sources of healthcare coverage—can contribute to a HOPE Account.
This opens the door for more Americans to benefit from this health savings tool, especially those previously excluded from traditional HSAs.
Non-Tax-Deductible Contributions for Individuals, Tax Benefits for Employers
A key difference with the HOPE Act is that an individual’s contributions would not be tax deductible. However, employers can contribute, and their contributions are tax deductible to the employer. For individuals with an adjusted gross income (AGI) of $100,000 or less ($200,000 or less for families), employer contributions would be exempt from income and employment tax.
This gives individuals a valuable way to build healthcare savings without increasing their tax burden, particularly for those in lower to middle-income brackets.
Employer and State Contributions
The HOPE Act encourages both employers and state programs to contribute to these accounts. They are allowed to contribute up to 50% of the annual contribution limit, providing a significant boost to account holders’ healthcare savings.
This employer contribution is similar to retirement plans, making healthcare savings a shared responsibility between individuals, employers, and government programs.
Contribution Limits
The maximum annual contribution to a HOPE Account from all sources is capped at $4,000 for individuals with self-only coverage or for married individuals with separate HOPE Accounts. For those with family coverage, the limit is $8,000 per year.
It’s important to note that any contributions made to a traditional HSA, Flexible Spending Account (FSA), or Health Reimbursement Arrangement (HRA) in the same year would reduce the maximum contribution to a HOPE Account.
This means that while the HOPE Account offers great flexibility, individuals will need to strategize their contributions if they’re also using other savings vehicles.
Tax-Free Growth and Qualified Withdrawals
Although individual contributions aren’t tax-deductible, the earnings on a HOPE Account grow tax-free. Moreover, when used for qualified medical expenses, the withdrawals are also tax-free.
This mirrors traditional HSAs and makes the HOPE Account a powerful long-term savings tool for future healthcare needs.
The full text of the proposed bill can be found on Representative Blake Moore’s website here ↗.
For more information on savings, see our category page, Savings.