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June 21, 2005
New Health Care Bill works with Health Savings Accounts
H.R. 1872, the Health Coverage for the Uninsured Act of 2005, was recently introduced in Congress. It builds on the foundation of a previously-passed law that established Health Savings Accounts (HSAs), allowing individuals with high-deductible insurance to set aside tax-free savings for lifetime health-care needs.
Following are 3 main features of the bill:
1. Premium deductibility. The legislation would allow an individual who purchases a high-deductible health plan (HDHP) combined with an HSA and does not receive health insurance through their employer (or any government program) to deduct from his or her taxable income the amount of the premium. Currently only businesses and self-employed individuals can deduct the cost of their health insurance, while other individuals who purchase their own health insurance are still taxed on those premiums. This eliminates this unfair tax bias in current law against individuals who purchase their own health-care coverage.
2. Small business tax credit. Under this proposal, small businesses of up to 100 employees would receive a refundable tax credit for contributions they make to their employees' health savings accounts (up to $200 for a contribution into an individual HSA or $500 for a family HSA.) In order to be eligible for the credit for contributions to HSAs, the employer must offer a group HDHP. This will encourage businesses to offer their employees HSAs, and to help fund those HSAs.
3. Low-income tax credit for the purchase of health insurance. This legislation provides a subsidy of up to 90% of the cost of the health insurance premium - up to $1,000 for an individual or up to $3,000 for a family plan. This credit would be refundable, advanceable, and assignable - meaning the money could go straight to the insurer of their choice to pay for their health care, on a monthly basis. This would make health insurance more affordable for low-income people.
These are all good proposals that will encourage growth of HSAs. As more and more people own HSAs, their will be greater demand in the health care marketplace for price-transparency. Individuals who are spending money from their Health Savings Account will want to know how much a doctor charges, how much a prescription drug costs, and what their choices are. This will result in more competition among healthcare providers, and lower costs for everyone.
My company, HSA for America, supports this legislation, and I encourage everyone to write their Congressional representative, asking them to support it as well.
Posted by Wiley Long at June 21, 2005 10:02 AM