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Hastert-Backed Bill Would Boost Allowable HSA Contributions

DECEMBER 16, 2005 -- Eric Cantor, the House GOP Chief Deputy Majority Whip, has offered a bill that would increase the amount of money companies could contribute to employee health savings accounts (HSAs)—a change backers say would encourage more Americans to sign up.

"Early studies show that while HSAs have enjoyed high adoption rates among the uninsured and small businesses, there seems to be a lag in adoption among employees of medium-to-large companies," said a press release issued by the Virginia Republican's office.

Authorized under the Medicare overhaul law (PL 108-173), HSAs are the centerpiece of GOP health reform efforts. The HSA approach aims to restrain health care spending by having consumers pay more of the costs of care and by giving them an incentive to shop more carefully for health care because the accounts build up more quickly if they do.

HSAs have two components: a high-deductible health insurance plan that shifts more of the costs to consumers, and the accounts themselves, funded by contributions from employers or individuals themselves. Money in the accounts grow on a tax deferred basis, and can be withdrawn tax-free to pay health care expenses not covered by the high-deductible insurance plan.

But many employees in mid-to-large companies are reluctant to sign up, believing they would get less money for health care with the accounts than they would with traditional benefits, Cantor said at a press briefing Wednesday.

Cantor said changing contribution limits would alter that perception and fuel a rapid increase in employees selecting HSA options.

Under current law, employers can contribute a maximum of $2,700 for an individual or $5,400 for families for HSAs. But if the deductible for the health insurance plan sold with the HSA is less than those amounts, employers can contribute no more than the deductible. Deductibles can be as low as $1,000 for individuals and $2,000 for employers.

Cantor's bill (HR 4511) would allow contributions of $2,700 for an individual or $5,400 for families regardless of the deductible amount. Those contributions are more in line with what employees get for traditional coverage in mid-to-large companies, Cantor said.

The bill also would permit flexible spending accounts to be used to pay for expenses not covered by the high-deductible plans opened in conjunction with HSAs.

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