Health Savings Accounts

As the availability and use of health savings accounts (HSAs) have grown, various proposals are evolving to help make them more attractive to small businesses and individuals, as well as to ease their use in larger employer settings and create an even better product.

Congress Passes Health Savings Account Improvements Before Adjournment

Before the close of the 109th Congress, several important, technical improvements to Health Savings Accounts (HSAs) were included within H.R. 6111, The Tax Relief and Health Care Act of 2006.  The U.S. Chamber of Commerce, as a leading member of the HSA Working Group – a broad coalition comprised of employers, health plans, and financial institutions – spearheaded efforts to make new consumer-oriented health plans more workable for employers and the individuals participating in them. The Chamber applauds Congress for passing this bill in the end-of-year legislation.  These much needed improvements will become effective by January 2007.  Please click here for a list of HSA improvements:

President Bush has offered several new suggestions as well:

• Small Business Tax Credit—Give special tax credits on HSA contributions to small business owners for the first $500 contribution to an employee's family policy and for the first $200 contribution to an employee's individual policy.
• Advanceable Refundable Tax Credits for the Uninsured—Provide a new kind of subsidy to help the uninsured purchase coverage, called refundable tax credits, to enable these consumers to shop for health insurance including HSAs.
• Above-the-Line Deduction for Premiums Connected with High-Deductible Health Plans—Allow individuals who purchase a high-deductible health insurance policy to deduct the premium from their taxes, to encourage families and individuals to open HSAs.

The Chamber is involved in collaborative efforts to discuss possible improvements to an already important and valuable benefit. Possible improvements include better coordination among multiple health care accounts and benefits, expanding coverage to previously excluded items and categories, and ameliorating administrative obstacles.

• Prescription Drugs—Permit coverage of prescription drugs, or a limited category of drugs such as maintenance medications, below the deductible. The general rule is that prescription drugs must be subject to the deductible (with a limited exception until January 1, 2006) employers would like more flexibility in designing their prescription drug plans (PDPs) to permit drug management apart from medical expenses.
• Retiree Healthcare—Create or expand the ability to save for retiree health care (e.g., Retiree Medical Benefit Accounts or increasing HSA contribution limit above the deductible beyond the current "catch-up" for account holders age 55 to 64). HSAs currently only allow individuals to save for retiree health needs if they do not spend all the money in their HSA in a given year. Employers would like the ability to help employees save a more meaningful amount.
• Preemption of State Mandates—Once the Treasury safe harbor for non-preventative services expires on January 1, 2006, an employer in a state that mandates first dollar coverage for certain services will not be able to offer a qualified, insured high deductible health plan. Extension of the safe harbor protection or a limited preemption provision may be needed to address these non-conforming state laws.
• Health Insurance Portability and Accountability Act (HIPAA) Privacy Regulations—Employers are seeking greater clarity regarding the application of HIPAA privacy regulations to HSAs. According to the statute, HIPAA privacy regulations do apply to HSA. However, this application seems unnecessary and burdensome because employers do not obtain, gain, or have access to employees' protected health information when offering an HSA. Employers will lobby for an agency issuance from the Department of Health and Human Services correct this and state that HIPAA does not apply.