Daily News Updates - Health Insurance News

HSA’s Intended Purpose Backfiring, Pt.1 -- The Abusers

A radical recent alternative, intended to provide greater flexibility to health insurance plans seems to have backfired. The trendy Health Savings Accounts coupled with high-deductible health insurance, which had a slow start are finally taking off. They have risen some 35% from a year ago (January ’07 to January ’08). What was looking like a great success is now evolving into a giant tax loophole for the wealthy at the expense of the most needy.  Simone Baribeau (TheStreet.com) reports that, a recent GAO (General Accountability Office) report divulged that the average income of those using HSAs was $139,000. This is more than twice the income level of the many with health insurance who could use them, but don’t.  Over half of those eligible don’t participate.  A Congressional hearing of the House Ways and Means Committee Subcommittee on Health has been set to address these findings.

Rep. Xavier Becerra (D-Calif.) noted that those with health insurance are already at a disadvantage because HSAs only benefit those who can afford insurance. But the Ways and Means Committee has found these insurance benefits are drawing more and more of the very rich to be used as tax shelters after they have maxed out their IRA’s and 401(K)s. The program simply does not have sufficient oversight to monitor abuses. These plans were set up and intended to complement High Deductible health insurance plans as a reserve for “catastrophic coverage plans”.  These funds are only to be used toward qualified health care expenses. It is only permissible to save up to $2,900, tax-free, every year, and that only to pay for medical expenses. Whatever funds that are not used one year, roll over into an individual's account the following year.

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