Yesterday, Senator Orrin Hatch (R-Utah) introduced legislation to improve and expand Health Savings Accounts and Flexible Spending Accounts. Companion legislation was introduced in the House of Representatives by Representative Erik Paulsen (R-Minn.). [See Hatch bill would expand HSAs, FSAs]

The Family and Retirement Health Investment Act of 2011 will "provide American workers and retirees with a common-sense way of improving access to quality, affordable health care," said Hatch, Ranking Member of the Senate Finance Committee and a long-time supporter of consumer-directed health care.

Specifically, the legislation would:

• repeal the new restrictions on the use of HSA, FSA, and HRA dollars for the purchase of over-the-counter drugs
• allow seniors enrolled in Medicare Part A but not Part B to continue contributing to their HSAs
• allow spouses to make catch-up contributions to the same HSA
• allow individuals to carry forward up to $500 of unspent FSA funds to the following year
• provide employers greater opportunity to roll over funds from employees' FSAs or HRAs to HSAs
• allow for the purchase of HSA-qualified health insurance policies with HSA dollars
• allow expenses incurred before an individual establishes his Health Savings Account to be reimbursed with HSA dollars
• repeal the recently enacted deductible limits of $2,000 for single coverage and $4,000 for family coverage for plans offered in the small group market
• clarify the use of prescription drugs as preventive care that will not be subject to an HSA-eligible plan deductible
• expand the definition of "qualified medical expenses" by allowing HSA and FSA dollars to be used for gym memberships, meal replacement products, and fees for direct practice physicians
• provide states with the flexibility to create Health Opportunity Accounts for their Medicaid population.

This bill is a long-time coming and is certain to be supported by fans of both HSAs and FSAs. Senator Hatch actually introduced similar legislation three years ago, but the 2008 bill never made it to the floor for a vote. Hopefully Hatch and other supporters will have better luck this time around.