OC/DC: Health Saving Accounts
Posted by: Scott W. Graves | 07/31/2007 10:10 PM
By Representative Ed Royce
Health care is an issue that surfaces repeatedly in my discussions with constituents throughout Orange County. Whether it is a personal concern about coverage, growing costs and shrinking availability or a broader concern about the impact that rising health-care costs are having on our economy, everyone worries to some extent about health care.
I have spent my tenure in Congress working to lessen the burden of health-care costs on families. Part of the answer lies in changes to the tax code that enable individuals to have more control over their health dollars.
While Americans increasingly find it difficult to meet rising health-care costs, many current health plans are offering more limited choices. We must give workers more control of their own health-care needs. Through health-banking, individuals are able to manage some of their own health-care dollars and save for future needs.
That is why I am a strong advocate of Health Savings Accounts (HSAs). HSAs work because they give the power of the market place to consumers. Individuals can shop around for the best priced care that fits their needs. Health-care decisions are made by the patient not by third party insurance companies. As consumers begin considering costs in their decision-making process, the market reacts, and costs come down.
Contributions to HSAs can be used tax-free to pay for qualified medical expenses. HSAs are also portable. Assets belong to the individual and can be carried from job to job and into retirement. HSAs can be used during retirement to pay for retiree health care, Medicare expenses and prescription drugs. HSAs provide the most benefit to seniors who are unlikely to have employer-provided health care during retirement. Additionally, individuals still in the work force can make catch-up contributions to build up those accounts before retirement.
HSAs have proven to be another means of obtaining health coverage. Forty percent of those who have HSAs have yearly family incomes below $50,000. When HSAs first became available, more than a third of those who bought them had been previously uninsured.
I helped to create Health Savings Accounts in 2003. And recently, Congress passed the Tax Relief and Health Care Act. This law makes Health Savings Accounts more attractive by substantially increasing the tax-free amount that Americans can contribute to them.
The annual HSA contribution limit in 2007 for individuals with self-only coverage is now $2,850; for family coverage, it is $5,650. Individuals who are at least 55 years of age, but not yet in Medicare may contribute another $800. For 2007, the deductible for self-only coverage was $1,100 (with an annual out-of-pocket limit not exceeding $5,500); the deductible for family coverage is $2,200 (with an annual out-of-pocket limit not exceeding $11,000).
Distributions made for any non-medical purposes are subject to income tax and a 10% penalty. The 10% penalty is waived for distributions made by individuals age 65 and older. Money remaining in a Health Savings Account may transfer to a surviving spouse tax-free, and the funds can become part of your estate. If you already have a different type of account, rollovers are allowed from Flexible Spending Accounts and Health Reimbursement Accounts into HSAs
HSAs help individuals save for their health-care needs and allow them to contribute, invest and then spend on medical needs tax-free. The transition to HSAs hasn't been without problems; however, the idea is a far better alternative than empowering the government to decide how to spend your money on your health care.
With the new changes, HSAs offer more substantial benefits for a greater number of Americans. However, we should continue to make HSAs better and more attractive. Lowering the high-deductible as well as allowing consumers to use HSAs as a savings mechanism for all health-care expenses, like premiums and deductibles will make the market even more competitive and consumer-driven.
Health care is an issue that surfaces repeatedly in my discussions with constituents throughout Orange County. Whether it is a personal concern about coverage, growing costs and shrinking availability or a broader concern about the impact that rising health-care costs are having on our economy, everyone worries to some extent about health care. I have spent my tenure in Congress working to lessen the burden of health-care costs on families. Part of the answer lies in changes to the tax code that enable individuals to have more control over their health dollars.
While Americans increasingly find it difficult to meet rising health-care costs, many current health plans are offering more limited choices. We must give workers more control of their own health-care needs. Through health-banking, individuals are able to manage some of their own health-care dollars and save for future needs.
That is why I am a strong advocate of Health Savings Accounts (HSAs). HSAs work because they give the power of the market place to consumers. Individuals can shop around for the best priced care that fits their needs. Health-care decisions are made by the patient not by third party insurance companies. As consumers begin considering costs in their decision-making process, the market reacts, and costs come down.
Contributions to HSAs can be used tax-free to pay for qualified medical expenses. HSAs are also portable. Assets belong to the individual and can be carried from job to job and into retirement. HSAs can be used during retirement to pay for retiree health care, Medicare expenses and prescription drugs. HSAs provide the most benefit to seniors who are unlikely to have employer-provided health care during retirement. Additionally, individuals still in the work force can make catch-up contributions to build up those accounts before retirement.
HSAs have proven to be another means of obtaining health coverage. Forty percent of those who have HSAs have yearly family incomes below $50,000. When HSAs first became available, more than a third of those who bought them had been previously uninsured. I helped to create Health Savings Accounts in 2003. And recently, Congress passed the Tax Relief and Health Care Act. This law makes Health Savings Accounts more attractive by substantially increasing the tax-free amount that Americans can contribute to them.
The annual HSA contribution limit in 2007 for individuals with self-only coverage is now $2,850; for family coverage, it is $5,650. Individuals who are at least 55 years of age, but not yet in Medicare may contribute another $800. For 2007, the deductible for self-only coverage was $1,100 (with an annual out-of-pocket limit not exceeding $5,500); the deductible for family coverage is $2,200 (with an annual out-of-pocket limit not exceeding $11,000).
Distributions made for any non-medical purposes are subject to income tax and a 10% penalty. The 10% penalty is waived for distributions made by individuals age 65 and older. Money remaining in a Health Savings Account may transfer to a surviving spouse tax-free, and the funds can become part of your estate. If you already have a different type of account, rollovers are allowed from Flexible Spending Accounts and Health Reimbursement Accounts into HSAs
HSAs help individuals save for their health-care needs and allow them to contribute, invest and then spend on medical needs tax-free. The transition to HSAs hasn't been without problems; however, the idea is a far better alternative than empowering the government to decide how to spend your money on your health care.
With the new changes, HSAs offer more substantial benefits for a greater number of Americans. However, we should continue to make HSAs better and more attractive. Lowering the high-deductible as well as allowing consumers to use HSAs as a savings mechanism for all health-care expenses, like premiums and deductibles will make the market even more competitive and consumer-driven.
