HSA Wonkery

HSA WONKERY….President Bush was light on details when he talked about Health Savings Accounts in his State of the Union address, but the White House site has more. This is a little long, but here are all five of his proposals for expanding and improving HSAs:

  1. Giving Individuals That Purchase HSAs On Their Own The Same Tax Advantages As Those With Employer-Sponsored Insurance. The President proposes making premiums for HSA-compatible insurance policies deductible from income taxes when purchased by individuals outside of work. In addition, an income tax credit would offset payroll taxes paid on premiums paid for their HSA policies.

  2. Eliminating All Taxes On Out-Of-Pocket Spending Through HSAs. The President proposed allowing Americans with HSAs and their employers to make annual contributions to their accounts to cover all out-of-pocket costs under their HSA policy, not just their deductible as provided under current law.

  3. Enabling Portable HSA Insurance Policies. Employers would have the ability to offer workers a Portable HSA insurance policy that the employees would own, control, and be able to take wherever they went. Their premiums would be tax-free and would not increase based on their health status at the time that they changed jobs, left the labor force, or moved.

  4. The President Proposes Extending The Benefits Of HSAs To Low-Income Families And Individuals Through Refundable Tax Credits. A family of four making $25,000 or less will be able to get a refundable tax credit of $3,000 from the Federal government to help buy an HSA-compatible policy that covers them for major medical expenses.

  5. The President Supports Allowing Employers To Make Higher Contributions To The HSAs Of Chronically Ill Employees. Under current law, employers must contribute the same amount to each employee’s HSA. This prevents employers from providing extra help to their chronically ill employees ? employees who are more likely to use their HSAs to pay for their higher-than-average out-of-pocket expenses. Permitting employers to make higher contributions to HSAs of chronically ill employees will help those workers fund their HSAs and pay their out-of-pocket expenses tax-free through their accounts.

I’ll probably have more to say about this later, but for now I just wanted to put this on the table. My point from Tuesday stands: these proposals sound pretty good, don’t they? Needless to say, I agree that this is a pitifully inadequate answer to a big problem, and I can already think of several good ways to make that point. Still, big picture arguments aside, these changes are going to appeal on their merits to a lot of people. Just sayin.

POSTSCRIPT: There’s another point here too. These are incremental changes, and that’s the main avenue of attack against them. But that only works if our proposals aren’t incremental. If it’s just their small wonky proposals against our small wonky proposals, everyone will fall asleep. So who out there is willing to step up to the plate and start arguing for something big?