Lawmakers Balk At HSA Expansion Price Tag

By Staff Report

Apr. 4, 2006

President Bush’s effort to expand health savings accounts may have stalled just weeks after he introduced his proposal, thanks to Capitol Hill resistance to the price tag.

Bush devoted only a couple lines to the issue in his January State of the Union speech. But he followed up with a budget proposal that called for tax breaks related to the accounts that would cost nearly $2 billion in fiscal year 2007 and $29 billion between 2007 and 2011.

The White House wants to raise the maximum amount of money that participants can add annually to their accounts from $2,700 to $5,250 for individuals and from $5,450 to $10,500 for families. Contributions and withdrawals could be made tax-free. The accounts, which were created as part of a Medicare reform bill in 2003, must be combined with high-deductible health plans.

The power of the bully pulpit not­withstanding, one of the most influential figures in tax policy doused the Bush plan with cold water. Sen. Charles Grassley, chairman of the Senate Finance Committee, has indicated that there is not enough Democratic support to pass HSA legislation this year.

He is concerned about the politics and costs of enhancing the accounts.

“Too often here in Washington, people try to solve problems by throwing money at them,” Grassley, R-Iowa, said at a hearing in early March. “Before we add more tax subsidies, we first should look to see if we can make the incentives we have today work better.”

The Senate Budget Committee put another obstacle in the path of HSA expansion when it drafted a 2007 budget resolution that ignored Bush’s proposals.

HSA policy changes haven’t gained much traction in the House either. A bill that would allow HSAs to be used in conjunction with flexible spending accounts and health reimbursement accounts has attracted six co-sponsors since it was introduced at a December press conference featuring House Speaker J. Dennis Hastert, R-Illinois.

Business interests continue to push for HSA expansion. Pending pension legislation contains a provision that would allow as much as $500 in a health care flexible spending account to be transferred to an HSA. Corporations also advocate legislation to convert HRAs into HSAs and a Treasury Department rule change that would allow employers to vary their HSA contributions depending on an employee’s income and health condition.

“We’re still encouraged that something can be done this year either legislatively or through the regulatory process,” says Maria Ghazal, director of public policy for the Business Roundtable, an association of CEOs of large corporations.

Only 7 percent of companies with 20,000 or more employees offer HSAs, according to a report by Mercer Human Resource Consulting. But the concept is touted as a way to reduce company costs by putting individuals in charge of their health care spending.

Deere & Co., a manufacturer of heavy equipment and power systems, will introduce an HSA-based insurance system in January. “The outcome will be better health and better health care decisions,” company spokesman Ken Gold­en says. “This will have a great impact on managing the long-term costs of health care.”

Mark Schoeff Jr.

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