House panel OKs device-tax repeal, bills to expand HSA use

A House panel advanced measures to roll back two unpopular provisions of the 2010 healthcare overhaul and also approved two other bills that aim to expand the use of health savings accounts.

The Ways and Means Committee voted 23-11 to repeal the 2.3% excise tax set to go into effect Jan. 1 on medical devices that are generally available for purchase only by healthcare providers. The measure has garnered some bipartisan support, including two Democrats voting for it in the committee and 11 Democrats among its 239 co-sponsors.

Supporters of the repeal said the tax will drive U.S. devicemakers overseas, costing economic growth and jobs sorely needed during the ongoing sluggish recovery from the recent recession. At least three companies have announced layoffs due to the anticipated tax, according to repeal supporters.

Democrats who opposed the bill said the $29 billion expected from the tax in the first 10 years was needed to help fund the healthcare law, which will in turn benefit those companies.

“The medical device industry is quite profitable and stands to gain millions of new customers through healthcare reform,” Rep. Sander Levin (D-Mich.) said before the vote.

The panel also approved 24-9 a bill to reverse a limitation on the use of funds from health savings accounts—usually used in conjunction with high-deductible health plans—for the purchase of over-the-counter medications.

The users of tax-advantaged health accounts also would benefit from two other measures approved by the committee. The Medical FSA Improvement Act of 2011, approved 23-6, would allow the holders of such accounts to cash out any remaining balance as taxable income at the end of the year, instead of the current requirement that they forfeit such balances.

A final bill, approved 21-7, would increase the tax deductibility of beneficiary and employer contributions to health savings account contributions.

The measures to increase the appeal of such health accounts could have far-reaching effects as their use continues to rapidly expand. For instance, a study issued Wednesday by America's Health Insurance Plans concluded that enrollment in health savings accounts as part of health insurance coverage reached 13.5 million beneficiaries in January, or 1.9 million more than a year earlier.