Legislation that would allow military retirees to opt out of TRICARE and contribute to a tax-advantaged employer-sponsored health savings account would decrease government revenues by $97 million over the next decade, according to a new estimate.
The change in revenue would stem partly from the impact on Social Security payroll taxes for those who decide to put their TRICARE coverage on hold and opt into an HSA for a time, said the Joint Committee on Taxation and the Congressional Budget Office. The estimate concluded that the effects on direct spending and appropriations would be insignificant between 2017 and 2026. “Enacting the bill would not increase net direct spending or on-budget deficits by more than $5 billion in any of the four consecutive 10-year periods beginning in 2027,” the committee and CBO said.
Under current law, TRICARE enrollees cannot contribute to HSAs, which the bill’s supporters have said could result in current and former service members losing out on an important benefit available to other non-TRICARE employees. “For many, the problem occurs after having retired as they begin employment outside of the military,” said a summary of the legislation from Reps. Chris Stewart, R-Utah, and Tulsi Gabbard, D-Hawaii, sponsors of the Veterans TRICARE Choice Act. “These individuals then become eligible for health insurance coverage through their employer.” HSA contributions from employers aren’t subject to income and wage taxes, and accountholders aren’t taxed on HSA balance earnings.
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“Without being afforded the opportunity to opt out of TRICARE, a veteran is automatically excluded from being able to look at an HDHP [High Deductible Health Insurance Plan] and HSA as an option, even if it is the best option for them at the time,” said the explanation of the legislation.
H.R. 5458 would allow retired service members or current members of the Reserves or National Guard to freeze and unfreeze their TRICARE eligibility to take advantage of HSAs by amending Title 10 and the Internal Revenue Code. The legislation, which would not apply to active-duty service members, would allow veterans to opt back into TRICARE during the open enrollment season under the Federal Employees Health Benefits Program.