For Immediate Release
Office of the Press Secretary
August 9, 2004
Fact Sheet: Expanding Access and Increasing the Affordability of Health Insurance Through Health Savings Accounts
August 9, 2004
Expanding Access and Increasing the Affordability of Health
Insurance
Through Health Savings Accounts
Millions of Americans will get help with their out-of-pocket
medical expenses through President Bush's support of health
savings accounts (HSAs). The Medicare bill that President Bush signed
into law establishes new tax-free savings accounts for individuals and
groups who purchase affordable high-deductible health plans. Businesses
and individuals who take advantage of these accounts will save
substantial sums on health insurance premiums and gain more control
over health care expenditures. The tax-free, portable accounts will
help families pay their routine medical expenses and provide a
tax-preferred means of saving for future health care needs.
New health insurance deductions will make coverage more affordable
to millions of Americans whose employers don't provide health
benefits. The President's proposal will allow individuals who establish
HSAs to deduct the premiums they pay for their low-premium,
high-deductible health insurance policies. This new deduction will be
available to taxpayers whether or not they itemize. It will reduce the
net cost of these policies and encourage the use of HSAs for saving for
health care needs and making wise, cost-effective health care choices.
o HSAs are open to individuals covered by a high deductible
health insurance plan. The annual deductible must be at least $1,000
for individual coverage, and at least $2,000 for family coverage.
HSAs are a significant improvement over previous savings vehicles,
which were limited to employees of small businesses and the
self-employed and required health insurance policies with much higher
deductibles. Individuals with existing medical savings accounts (MSAs)
can either retain them or roll the amounts over into a new HSA. o
Contributions to HSAs by individuals are deductible, even if the
taxpayer does not itemize. Contributions by an employer are not
included in the individual's taxable income. Individuals, their
employers, or both can contribute tax-deductible funds each year up to
the amount of the policy's annual deductible, subject to a cap of
$2,600 for individuals and $5,150 for families. In addition,
individuals over age 55 can make extra contributions to their accounts
($500 in 2004, increasing to $1000 by 2009) and still enjoy the same
tax advantages. o The interest and investment earnings generated
by the account are also not taxable while in the HSA.
Tens of thousands of individuals already are saving on their
health care costs through HSAs. These accounts can save families
thousands of dollars on their health insurance premiums. Individuals
can deposit some or all of these savings into their tax-free accounts
and use the money for current health care needs and to save for future
medical expenses. Employers also can contribute to these accounts,
which the employee controls. Instead of sending more money off to
insurance companies in the form of higher premiums, families can keep
their savings in an account that belongs to them, not to their employer
or to an insurance company.
Americans from all income levels are taking advantage of HSAs.
eHealthInsurance, an Internet-based insurance brokerage that offers
coverage in the individuals and small firms throughout the country,
last week published an analysis of people who had purchased HSAs
through its internet portal over the first six months of this year.
Key findings of small sample include:
o The majority of HSA purchasers (52 percent) were 40 years of
age or older. o Nearly half of HSA purchasers (49 percent) were
families with children. o Two-fifths of HSA purchasers (41
percent) had incomes of $50,000 or less. o Three of ten HSA
purchasers (30 percent) had previously been uninsured
HSAs provide a much more affordable, consumer-friendly product for
businesses to offer their employees.
o The National Federation of Independent Businesses (NFIB) says
that "some small businesses have saved up to 42 percent" on their
health care costs through these products. NFIB also says that HSAs
"will help reduce the number of uninsured Americans by allowing small
businesses and their employees more choice in the current small group
market." o Testifying at a Congressional hearing last March, Kate
Sullivan of the US Chamber of Commerce said, "Enactment last year of
HSAs came at a critical time for America's employers and working
families, due to the increasing difficulties of affordable family
health coverage. HSAs offer a great deal, not only to small business,
but to workers at any point in their lives."
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