House Panel Approves Expanded Health Savings Accounts
HSAs: Health Plan or Tax Policy?
A House tax panel on Wednesday passed legislation that would allow workers to put more money into health savings accounts.
The measure, introduced by Republican Reps. Paul Ryan of Wisconsin and Eric Cantor of Virginia, passed the committee on a 24-14 vote.
Health savings accounts were created in 2004 by the same law that introduced the Medicare prescription drug benefit. They're comprised of a high-deductible health plan with a savings account attached, which consumers can fund with pre-tax dollars and use to pay for their out-of-pocket health expenses.
The bill would let workers transfer money from flexible spending accounts and health reimbursement arrangements into health savings accounts. It would allow one-time transfers from individual retirement accounts, or IRAs, to be used to fund a health savings account.
Also, the legislation would raise the contribution limits for many workers. Currently, taxpayers with a high-deductible health plan are permitted to make deductible contributions equal to the lesser of the deductible or an indexed amount, which currently stands at $2,700 for single coverage and $5,450 for family coverage.
The bill would set the contribution limits at the indexed amounts. The House-Senate Joint Committee on Taxation estimated that the bill would reduce revenues by a total of around $1 billion over 10 years.
"HSAs are still relatively new, but we are already seeing them quickly grow in popularity in the early stages of their existence," said Ways and Means Chairman Bill Thomas, R-Calif. "The adjustments in this bill will make HSAs more attractive as Americans consider their health insurance options."
Democrats charged that the bill amounts mainly to a tax break for wealthy Americans while doing nothing to aid uninsured and under-insured workers.
"HSAs are not health policy, they are tax policy," said Rep. Pete Stark, D-Calif. "Attempts to make HSAs even more attractive - like the one we have before us today - threaten traditional insurance coverage and shift more of the cost burden for health care to workers. We should not be wasting precious time on an expensive niche policy that benefits a few, at the expense of everyone else."
The bill isn't expected to be considered by the full House or the Senate, however, with lawmakers aiming to break at the end of the week for the November mid-term elections. A brief lame-duck session is expected to follow the elections.