In a bipartisan effort, Congresswoman Michelle Steel (R-CA), Congressman Ami Bera (D-CA) and Congressman Schweikert (R-AZ) have introduced the WEAR IT Act, a pivotal step towards modernizing healthcare spending for millions of Americans. This new legislation would clarify that you can use flexible spending accounts (FSAs) and health savings accounts (HSAs) to purchase life-saving software and wearable devices with multiple functions. The bill would simplify healthcare expenditures and provide greater access to technologies that yield the best outcomes now, and in the future, especially for middle-income earners.
Every year, workers with FSAs miss out on $4.2 billion from their own paychecks due to the IRS’s outdated regulations, which haven’t kept pace with digital health technology, leaving workers unable to spend their funds on eligible healthcare expenses before the year’s end.
Of the approximately 32.5 million Americans with HSA accounts, 69 percent earn between $30,000 and $90,000 annually, while nearly 78 percent earn less than $100,000 per year.
The tax-exempt funds in HSAs and FSAs are currently reserved for qualified health expenses, often excluding devices, apps, or software platforms that perform multiple healthcare functions. For instance, wearable devices with multiple functions such as monitoring heart rate, EKG, and catastrophic fall detection may not be eligible for HSA and FSA funds. The WEAR IT Act addresses these issues by clarifying that HSA and FSA coverage includes health-related devices and software that collect and analyze multiple parameters for multiple health conditions.
Support for the WEAR IT Act is driven by several key factors:
- Simplicity for taxpayers: The legislation would streamline healthcare spending by covering multiple functions in a single device, reducing the need to purchase separate items.
- Middle-income earners: HSAs and FSAs primarily benefit middle-income earners, with 69 percent of HSA holders earning between $30,000 and $90,000 annually.
- Embracing the future: WEAR IT Act would ensure that life-saving innovations are included as long as they collect and analyze physiologic data to prevent, mitigate, or treat medical conditions.
- Enhanced technology: The multi-function devices covered by WEAR IT are often FDA-listed and more effective than competing, single-purpose devices.
- Precedent: The IRS has previously clarified that FSAs and HSAs can be used for expenditures with both medical and non-medical purposes, as long as they are attributable to healthcare-related purposes.
The WEAR IT Act represents a significant step toward improving healthcare outcomes and costs for millions of Americans, addressing critical gaps in the current system.