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May 16, 2011
Health Savings Accounts May Increase With Health Care Reform
Health Savings Accounts may start growing at a faster rate when most U.S. citizens are required to maintain minimum health insurance coverage. However, the Patient Protection and Affordable Care Act only directly addresses Health Savings Accounts with a couple of minor provisions.
Health Savings Accounts can only be combined with certain qualified high-deductible (and often low-premium) individual health insurance plans. Paul Fronstin, director at the Employee Benefit Research Institute (EBRI) says, "It's the only triple tax-advantaged plan out there." In addition to low premiums, Health Savings Accounts offer tax-free earnings and tax deductions.
The Affordable Care Act changed the penalty for using HSA withdrawals for non-qualifying expenses before age 65 from 10 percent to 20 percent. In addition, the act took over-the-counter (OTC) medicines off the list of health care that could be purchased through an HSA. OTC medication now only qualifies as an eligible HSA expense if your doctor will write you a prescription for it.
An EBRI survey showed $7.7 billion in Health Savings Accounts and Health Reimbursement Arrangements in 2010 being held in 5.7 million accounts. While total assets in such accounts have been increasing annually, the average balance per account has remained between $1,320 and $1,419 since 2007. The survey also showed that 37 percent of those who were eligible to open an HSA did not have one, either because they couldn't fund it or did not see a need for one.
Posted by Wiley Long at May 16, 2011 11:49 AM