$1,500 Direct Payments Proposed for Millions of Americans

Beginning in January, healthcare costs are scheduled to rise for more than 23 million Americans as lawmakers continue to debate whether or not to renew the Affordable Care Act (ACA) tax credits that are set to expire on Dec. 31. However, it sounds like some relief could be on the way.

As lawmakers remain deadlocked about the future of the ACA tax credits that millions of Americans rely on, two lawmakers have proposed some legislation that would offer direct payments of up to $1,500 into healthcare accounts for millions of Americans.

Direct Payments Proposal

Sen. Bill Cassidy of Louisiana, who chairs the health committee, and Idaho Sen. Mike Crapo of Idaho, head of the finance panel, have worked together to come up with a proposal that would send payments of $1,000 or $1,500 to millions of Americans.

"Americans cannot afford health care. They need a serious solution that provides real relief to a broken system," a summary of the proposal reads, via Newsweek, adding that the plan proposes "redirecting money going to insurance companies back to patients."

Under the proposal, ACA enrollees earning below 700 percent of the federal poverty level would receive $1,000 in a Health Savings Account (HSA) if they are between 18 and 49, and $1,500 if they are 50 to 64.

This year, the federal poverty level has been set at $15,650 for a single person, increasing by $5,500 for each additional person in the household. Using this information, a single person earning below $109,550 would receive the direct payment under this proposal.

What is a Health Savings Account?

It's worth reiterating that the direct payment would not come to millions of Americans as cash in a bank account, but in the form of a Health Savings Account (HSA).

An HSA is a tax-advantaged savings account that people can use to pay for qualified medical expenses. It is typically paired with a high-deductible health plan and can help cover healthcare costs that the high-deductible plan does not cover.

Money contributed to an HSA is tax-free and grows at a tax-free rate. Withdrawals for eligible health care costs are also untaxed. Users can also roll over unused funds from year to year, allowing the account to grow over time.

All in all, an HSA gives people a tax-advantaged option and flexibility to determine how they want to use their money to meet all of their healthcare needs.

The Next Steps

While this certainly is a noteworthy proposal, there are still several steps before it would actually come to fruition.

The first step would be gaining the approval of the 53-member Senate Republican conference, which is set to review this and other proposals on Tuesday during a closed-door lunch.

We'll have to see whether or not the proposal moves forward.