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.