President Bush, Headlines Discuss Health Savings Accounts

Headlines have boasted more than three million consumers currently enrolled in Health Savings Accounts (HSAs). According to a survey conducted by America’s Health Insurance Plans (AHIP), enrollment has tripled since March of last year. While this number may sound significant, it represents less than five percent of health care consumers.

President George W. Bush discussed HSAs during the State of the Union Address on Jan. 31, 2006. Bush said, "We will strengthen Health Savings Accounts – by making sure individuals and small business employees can buy insurance with the same advantages that people working for big businesses now get."

The president wants to expand HSAs by giving individuals that purchased HSA-linked high-deductible health plans on their own the same tax advantages as those with employer-sponsored coverage, which is typically paid on a pre-tax basis through a cafeteria plan. Additionally, he recommended eliminating all taxes on out-of-pocket spending through HSAs, not just the deductible as provided under current law. This would allow patients to cover all their out-of-pocket expenses tax-free through the HSA. It would provide a credit for payroll taxes paid on HSA contributions made by individuals.

President Bush also wants Americans to take health insurance with them when they change jobs, move, become self-employed or leave the labor force. The address provided comments on enabling portable HSA-linked insurance policies, premiums would be tax-free and would not increase based on health status at the time the employee changed jobs, left the labor force or moved. Employers would be able to contribute to a new employee’s Portable HSA insurance policies – no matter where the policy was originally purchased. Employers would have the ability to decide whether or how much to contribute to these plans, but whatever they contributed would be tax-free.

Additionally, the president proposed a refundable tax credit to low-income families and individuals for HSA participation.

Current law limits how employers contribute to an employee’s HSA. Contributions not made through a cafeteria plan must be comparable, either the same amount or percentage for everyone. The president supports allowing employers to make high contributions to the HSAs of chronically ill employees. The IRS is holding a hearing on comparable employer contributions in late February. Infinisource will testify at the hearing on behalf of its clients, encouraging the IRS to provide employers greater flexibility in making these contributions when it finalizes the regulations.

Not all HSA news is as upbeat as the president’s address would seem to indicate. Another survey by Employee Benefit Research Institute (EBRI) examined participants already enrolled and revealed many are less satisfied with the high-deductible health plan (HDHP) than their counterparts on comprehensive health insurance.

Furthermore, these participants are less likely to recommend a HDHP to a friend or colleague. Those with the HDHP linked with an HSA are more likely than those with comprehensive insurance to avoid or delay needed care. Once care is sought, there is a larger financial burden on these participants.

Even though current participants seem to be less than excited about an HSA plan, employers are adding them to their benefit options. A Deloitte Center for Health Solutions survey discovered that 43 percent of employers either currently offer their workforce a consumer-driven health plan or will be offering one in the next two years. Another 51 percent were reviewing these types of plans and would possibly offer one in the future if the plans have employee appeal and appear to save money.

The Council of Insurance Agents & Brokers (CIAB) conducted a survey in the fall of 2005 and discovered that about two-thirds of employers who offer a HDHP with an HSA do so as an option, rather than a replacement for an existing plan. Twenty-nine percent of the typical employers are contributing between $500 and $749 a year to the employee’s HSA. However, 23 percent of employers were not making any contributions to the HSAs.

With all the hype about the plans, one might wonder what is the delay in incorporating these into the benefit realm? According to 86 percent of respondents in the CIAB survey, the most common reason for resistance to HSAs is their complexity. Forty-seven percent cited the inability of those plans to carve out prescription drug coverage.

The President’s initiatives are intended to improve health care through programs that provide increased stability and peace of mind for working families across the country. The options presented by President Bush regarding HSA plans are expected to increase the number of Americans with HSAs from the currently projected 14 million to 21 million by 2010.

Infinisource has introduc ed a new, lower-cost solution specifically designed with the investor in mind. The program provides four free reimbursements per year. This is in addition to the current investment features of The Charles Schwab Trust Company, which is used to house the accounts, making it possible for participants to select from mutual fund options. In addition, the Infinisource HSA may be offered under a cafeteria plan to save tax dollars for both employers and employees. This lower-cost HSA does not carry a debit card option. For assistance starting an HSA contact Infinisource at 800-779-6384 or email solutions@infinisource.net

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