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Life Health > Health Insurance > Life Insurance Strategies

Panel OKs HSA Bill

By Arthur D. Postal

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The House Ways and Means Committee today voted 24-14 to approve a bill that would encourage workers to roll flexible spending account and health reimbursement arrangement assets into health savings accounts.

The bill, H.R. 6134, the Health Opportunity Patient Empowerment Act of 2006, would apply only to the assets that were in FSAs or HRAs on Sept. 21, 2006. The workers who have those accounts could make a one-time, tax-free transfer of the assets into an employee-owned HSA.

The workers would have to make the transfers before Jan. 1, 2012.

H.R. 6134 also would:

- Let taxpayers shift some individual retirement assets into HSAs without paying income taxes or penalties on the transfers.

- Apply the same indexed limit to HSA contributions from all HSA holders. Today, some HSA holders can make annual contributions up to an indexed limit of $2,700 for individuals and $5,450 for families, but an HSA holder with a deductible that is lower than the indexed limit must contribute an amount that is less than or equal to the size of the deductible.

- Apply the same HSA contribution limits no matter when individuals get HSA-compatible, high-deductible health coverage. Today, HSA program rules impose lower contribution limits on individuals who become eligible to set up an HSA sometime after January.

- Allow employers to make higher HSA contributions for rank-and-file employees.

H.R. 6134 was introduced by Reps. Eric Cantor, R-Va., and Paul Ryan, R-Wis.

The Joint Tax Committee estimates implementing the bill would cost the federal government about $1 billion in tax revenue over 10 years.

Congressional leaders are trying to let members leave town by Saturday, to give members time to campaign.

Current plans call for Congress to hold a one-week session starting Nov. 13, then to consider only must-do legislation in December.

Democrats on the Ways and Means Committee said H.R. 6134 supporters have little chance of getting the bill through Congress, but Rep. Bill Thomas, R-Calif., chairman of the Ways and Means Committee, said he thinks the bill could move forward.

The “Senate is excited about this and is just waiting for us to act,” Thomas said.

Ways and Means Democrats questioned whether the HSA program is doing enough to help the uninsured to justify the effects of HSA tax breaks on federal tax revenue.

In 2004, the average annual household income of HSA holders was about $133,000, according to a U.S. Government Accountability Office official who testified Tuesday at a Senate Finance Committee health care subcommittee hearing.

“Democrats are concerned that HSAs are being used as a tax shelter,” Rep. Richard Neal, D-Mass., said today during the Ways and Means review of H.R. 6134.

Rep. Pete Stark, D-Calif., had an aide pass around small doughnuts, in an effort to persuade Ways and Means members to kill HSA program expansion and instead spend $1 billion on shrinking the Medicare Part D prescription drug program “doughnut hole.”

Another concern that came up during the H.R. 6134 markup is a lack of current, official HSA participation data.

America’s Health Insurance Plans, Washington, estimates that 3.2 million U.S. residents are in HSA plans.

Researchers at the Henry J. Kaiser Family Foundation, Menlo Park, Calif., says 2.7 million U.S. workers are enrolled in high-deductible health plans that offer access to some kind of savings option. Worker enrollment in HSA-compatible plans has increased to 1.4 million this year, from about 800,000 in 2005, the researchers estimate.

But U.S. Treasury Department officials could say only that 113,000 taxpayers have reported HSA contributions on their 2004 returns.

The 2005 contribution data will not be available for several months, and personal tax returns will not provide information about employer contributions to employees’ HSAs, officials said.

The National Association of Health Underwriters, Arlington, Va., and the American Benefits Council, Washington, are two of the groups pushing for passage of H.R. 6134.

Permitting coordination of FSAs and HRAs with HSAs will give employees “more avenues to pay for their out-of-pocket expenses,” NAHU Executive Vice President Janet Trautwein says in a statement.

Kevin McKechnie, government relations director at the American Bankers Insurance Association, Washington, says Ways and Means approval of H.R. 6134 is welcome, even if Congress may not have time to pass the bill.

Ways and Means approval of the bill “signals progress and gives us something to carry forward into the next Congress,” McKechnie says.

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