Democrat calls HSAs a poor substitute for ACA tax credits

The Affordable Care Act change fight

Sen. Martin Heinrich, D-N.M., says proposed HSA options do too little to help low-income and middle-income families. (Photo: Heinrich) Sen. Martin Heinrich, D-N.M., says proposed HSA options do too little to help low-income and middle-income families. (Photo: Heinrich)

The top-ranking Democrat on the Senate side of the Joint Economic Committee says expanding the health savings account program would do little to help ordinary Americans cope with cuts in Affordable Care Act coverage expansion programs.

Sen. Martin Heinrich, D-N.M., makes the case against seeing HSA expansion as a substitute for ACA coverage expansion programs in a response to the House Republicans' American Health Care Act proposal.

The AHCA proposal would wind down the ACA Medicaid expansion program and replace the income-based ACA premium tax credit with an age-based premium tax credit. Drafters have tried to compensate for that by letting people contribute more to HSAs. Lawmakers could propose additional HSA program expansion provisions as the proposal makes its way through the House and the Senate.

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People who combine HSAs with high-deductible health coverage that meets HSA program standards can avoid paying federal income taxes on contributions to the accounts, or on the withdrawals used to pay for eligible health care products and services.

The 2017 HSA contribution limits are $3,400 for an individual and $6,750 for a family.

Heinrich argues that the AHCA proposal to increase the maximum HSA contribution limit would do little good for ordinary families, because ordinary families have no way to max out their HSAs, even under the current limits.

"Only 53 percent of American families save at all, and families who are wealthier are more likely to be able to save," Heinrich writes. "Less than half of low- and middle-income families are able to save."

An individual would have to save $214 per month for a year to cover the cost of a year of treatment for Type 1 diabetes, and $508 per month for a year to cover the cost of an appendectomy, Heinrich writes.

U.S. Treasury Department figures show that even families with annual gross income of $100,000 to $200,000 have an average of less than $5,000 in their HSAs, according to a chart accompanying the commentary.

The only taxpayers with an average HSA balance of more than $8,000 are those with more than $500,000 in annual income, according to the chart.

HSAs "allow Republicans to claim they provide families freedom of choice, while providing another way for the wealthiest among us to pay less," Heinrich writes. 

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