Since its inception in 2003, health savings accounts havegrown at a phenomenal rate. Today, there are more than 10million accounts nationwide, a figure that’s expected to increasesignificantly in the next few years. Unfortunately, there arealso a number of rules and regulations that, after nearly 8 years,most insurance agents are tired of explaining to their clients.

For instance, individuals enrolled in Medicare Part A, which is an automatic for people who arereceiving Social Security benefits, are ineligible to contribute toan HSA. So are veterans who have used their VA benefits in the last90 days.

And while people over the age of 55 are eligible to contributean additional $1,000 per year in catch-up contributions, if bothspouses are over 55 they must make these contributions to separateaccounts, which of course usually means separate monthly accountfees.

But a new bill introduced by Sen. Orrin Hatch, R-Utah, withcompanion legislation introduced in the House by Rep. Erik Paulsen,R-Minn., would fix all of these problems and more. They wouldsimply make HSAs much more user-friendly. The Family and RetirementHealth Investment Act of 2011 (S. 1098 and H.R. 2010), anew-and-improved version of a bill introduced by Hatch back in2008, would, in his words, “provide American workers and retireeswith a common-sense way of improving access to quality, affordablehealth care” by simplifying and enhancing health savings accountsand health flexible spending accounts.

Roy Ramthun, who was the chief architect of HSAs at the treasurydepartment when they were first enacted, says, “This bill is acommon-sense approach that addresses some of the lingering concernspeople have had about HSAs since their inception and hopefully willmake these products more attractive to employers and employeesgoing forward.”

One of the most exciting changes in the proposed legislation isa repeal of the new restriction on the use of HSA funds forover-the-counter drugs, a provision of Affordable Care Act thattook effect Jan. 1. The bill would also repeal deductible limits of$2,000 for single coverage and $4,000 for family coverage for plansoffered in the small group market.

There are also plenty of long-term fixes. Hatch’s proposal wouldallow seniors enrolled in Medicare Part A but not Part B tocontinue contributing to their HSAs, a welcomed change consideringthe number of Americans who are working past the age of 65. Therule prohibiting veterans from contributing to an HSA if they’veused VA benefits in the last 90 days would be removed for veteranswith a service-connected disability.

And the bill would allow Native Americans who have used medicalservices of the Indian Health Service or a tribal organization tomake HSA contributions. Spouses over the age of 55 will be able tomake catch-up contributions to the same health savings account, andemployers would have a greater opportunity to roll over funds fromemployees’ FSAs or HRAs into HSAs.

The red tape involved in the current process prevents nearly allemployers from taking advantage of this rollover option.Individuals with unspent FSA funds would also have the option ofcarrying forward up to $500 to the following plan year.

Spending HSA money would also become easier as the bill wouldexpand the definition of “qualified medical expenses” to includegym memberships, meal replacement products and the fees fordirect-practice physicians – health care providers who chargeperiodic fees for the right to receive medical care on an as-neededbasis.

And the bill would allow eligible expenses incurred afterHSA-qualified coverage begins but before an individual establisheshis health savings account to be reimbursed with HSA funds,reducing the need for people to immediately set up their accounteven if they’re unable to make a large initial deposit or regularcontributions. Lastly, the proposed legislation would providestates with the flexibility to create health opportunity accounts –the equivalent of a state-funded HSA for the Medicaidpopulation.

This bill is being applauded by a number of organizations,including the American Bankers Association’s HSA Council, theEmployers Council on Flexible Compensation and the NationalAssociation of Health Underwriters.