New health savings account perk pushed

An insurance tax break would heighten interest in HSAs, which are already catching many employers' attention, proponents say.

By Joel B. Finkelstein, AMNews staff. June 14, 2004.

Washington --A legislative effort is under way to build on the momentum of health savings accounts by allowing a tax deduction for health insurance purchased in conjunction with these products.

"Health savings accounts have real promise as a tool to transform the way America relates to health care," Sen. Larry Craig (R, Idaho) said at a recent hearing of the Senate Special Committee on Aging. "Much work lies ahead, but ... we are off to a good start."

Created as part of last year's Medicare reform law, HSAs became available as of Jan. 1. An expanded rollout of HSA products is expected this summer, but widespread availability might not begin until 2005 when the next cycle of insurance enrollment starts for many companies.

A March survey of nearly 1,000 employers found that two-fifths were likely to offer an HSA option next year, and nearly three-quarters said they were likely to do so in 2006, testified Kate Sullivan, director of health care policy at the U.S. Chamber of Commerce. About one-fifth of respondents said they already offer a high-deductible health plan to workers.

Encouraged by the savings accounts' current popularity, Craig and other lawmakers suggest the next step might be to create an added tax incentive to encourage HSAs' spread.

While the Senate has yet to see such legislation, a House bill was introduced in March to amend the tax code so individuals could write off the premiums for high-deductible health insurance purchased in conjunction with the savings accounts.