Analysts Predict HSAs Will Be Popular As Tax Shelters

By Staff Writer

December 02, 2003 at 07:00 PM

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NU Online News Service, Dec. 2, 2003, 12:22 p.m. EST – The health savings account section of H.R. 1, the new Medicare Prescription Drug, Improvement and Modernization Act of 2003, could lead to big sales of HSAs as tax shelters, according to analysts at the Center on Budget and Policy Priorities, Washington.[@@]

Sellers of HSAs could start with 1 million account participants in 2004 and end up with 3 million participants in 2013, Robert Greenstein and Edwin Park write in a commentary about H.R. 1.

Congress recently sent the bill to President Bush, who strongly supported H.R. 1 and has said that he intends to sign the bill into law.

Under MPDIMA, taxpayers can establish HSAs only if they also buy high-deductible health insurance policies. Participants in traditional, comprehensive employer-sponsored coverage cannot use HSAs.

HSA earnings accrue free of federal income taxes, and withdrawals from the accounts that are used on qualified health care expenses also escape federal taxation.

"The new HSA accounts will be extremely attractive to healthier, more affluent workers," Greenstein and Park predict. "Employers may come under increasing pressure to offer HSAs and high-deductible insurance policies either as an option or as their basic form of health insurance coverage."

Greenstein and Park, who have liberal views on health policy issues, object to the HSA provision and warn that it could undermine current comprehensive health plans, by encouraging employers with young, healthy workers to abandon traditional plans.

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