President Bush Signs Bill to Make Health Care more Affordable, Accessible

Washington, DC- President George W. Bush signed the Health Opportunity Patient Empowerment Act of 2006 today, enhancing Americans' access to tax-advantaged health care savings. The law, part of the Tax Relief and Health Care Act of 2006, provides new opportunities for health savings account (HSA) participants' to build their funds.

"Health savings accounts are improving the way Americans obtain the care they need. This bill makes HSAs more flexible and makes it easier for participants to put money aside for their personal health care," said Treasury Assistant Secretary for Tax Policy Eric Solomon.

Allow rollovers from health FSAs and HRAs into HSAs through 2011. Employers can transfer funds from Flexible Spending Arrangements (FSAs) or Health Reimbursement Arrangements (HRAs) to an HSA for employees switching to coverage under an HSA-compatible health plan. The amounts rolled over to HSAs from FSAs or HRAs are over and above the amounts allowed as annual contributions. The maximum contribution is the balance in the FSA or HRA as of September 21, 2006, or if less, the balance as of the date of the transfer. The provision is limited to one distribution with respect to each health FSA or HRA of the individual. If an individual does not remain an eligible individual for the 12 months following the month of the contribution, the transferred amount is included in income and subject to a 10 percent additional tax.

Increase in annual HSA contribution. Previously, the maximum HSA contribution was the lesser of the deductible of the individual's HSA-eligible plan or a statutory maximum. The new rules make the limit the statutory maximum contribution, regardless of the individual's deductible. For 2007, the maximum contribution for an eligible individual with self-only coverage is $2,850, and the maximum contribution for an eligible individual with family coverage is $5,650. These limits are indexed for inflation.

Full HSA contribution regardless of month individual becomes eligible. Normally, the HSA contribution is pro rated based on the number of months that an individual during the year a person was an eligible individual. The new provisions provide an exception to this rule that will allow individuals who become covered under an HSA-eligible plan in a month other than January to make the maximum HSA contribution for the year based on their coverage in the last month of the year. This eliminates a common barrier to switching to HSA-eligible coverage. If an individual does not stay in the HSA-eligible plan 12 months following the last month of the year of the first year of eligibility, the amount which could not have been contributed except for this provision will be included in income and subject to a 10 percent additional tax.

One-time transfer from IRAs to HSAs. The new rules allow for a one-time contribution to an HSA of amounts distributed from an Individual Retirement Arrangement (IRA). The contribution must be made in a direct trustee-to-trustee transfer. The IRA transfer will not be included in income or subject to the early withdrawal additional tax. The transfer is limited to the maximum HSA contribution for the year, and the amount contributed is not allowed as a deduction. Generally, only one transfer may be made during the lifetime of an individual. If an individual electing the one-time transfer does not remain an eligible individual for the 12 months following the month of the contribution, the transferred amount is included in income and subject to a 10 percent additional tax.

Certain FSA coverage treated as disregarded coverage. Under previous law, if an FSA had a grace period following the end of the plan year allowing participants to incur additional reimbursable expenses, participants were treated as having disqualifying coverage, reducing their HSA contribution for that year, even though they had switched to HSA-eligible coverage at the first of the year. The new rules treat certain FSA coverage during a grace period as disregarded coverage, eliminating any resulting reduction in the HSA contribution for the year. First, the coverage is disregarded if the balance in the health FSA at the end of the plan year is zero. Second, the coverage is disregarded if the year-end balance is transferred directly to an HSA fom the FSA, as noted above.

Earlier indexing of cost of living adjustments. Previously, indexing was based on a 12-month period ending on August 31. The new rules change the base period to the 12-month period ending on March 31 and require that adjusted amounts for a year be published by June 1 of the preceding year. This change will provide employers and health plans with more time to design qualifying HSA-eligible plans and individuals with more time to make decisions about their health care for the next year.

Allow greater employer contributions for lower-paid employees. Previously, employer contributions under the comparability rules had to be the same amount or percentage of the deductible for all employees with the same category of coverage. Consequently, employers could not contribute higher amounts to lower-paid employees. The new rules provide an exception to the comparability rules allowing employers to contribute more to the HSAs of non-highly compensated individuals. For this purpose, the definition of "highly compensated employee" is based on same definition used for qualified retirement plans.

"My point is that it's not going to happen. All of the demand side solutions that are even remotely on the table are plans to increase demand, or perhaps to shift demand from one group to another. There isn't really anyone who's pressing for significant increases in deductibles as a solution."

I clarified I meant demand side and not supply. That said the ENTIRE purpose to the health savings account model is a reduction in utilization/demand and increased efficiency when utilized. This is not driven by increasing the deductible to save premium. It is a entirely separate buying decision.
Example: family premium on a PPO at $1100 per month with the possibility of spending another $8000 in out of pocket costs for the year. Family premium on the high ded. $650 with a deductible of $4800 but a max out of pocket of $5500 which is less than the out of pocket on the expensive PPO. You save $450 per month in premium which you dump in the savings account pre tax costing you $300 per month. Now you're sitting there having spent net $950 per month vs the original $1100 for a small savings. Now however you have $5400 in a savings acct and a max out of pocket of $5500....your bills are all paid with not even a single office visit charge to boot. Easy math. The trick then becomes going to the doctor means taking money out of your retirement savings acct to pay the bill or paying for it with after tax dollars. You wonder why I'm sitting here with a chest cold and not going to the doctor. The $150 I'd spend will be $1000 by retirement and I'm not that sick. This is just an example but the concept is purely to limit demand and improve efficiencies....this is not your dad's high deductible. Thank you GWB.

I don't know what's going on in other states but here in Fla., the governor finally put two and two together. They approved opening two more medical schools here in Fla. The first one opens in 2009. It's going to be a long time before the dividends arrive, obviously, and by then the problem will be much worse than it is now. But at least someone has figured out what the problem is, and has actually done something to try to address it.

Of course, even if they do produce more doctors in Fla., there is nothing to prevent them from moving out of state. So I am hoping that other states will follow suit and do the same instead of raiding our state to satisfy their doctor shortages.

The worse this problem gets, the more likely it is that Hillarycare or something like it is eventually going to be forced down our throats.

Here's an area of immigration I'll support. Qualified professionals who help in measurable ways. We already steal doctors from Canada at a phenomenal rate. While Canadians are waiting in line for basic services their doctors are over here making the big money. Soon we'll be able to steal doctors from Florida as well. Oh that's right, we Californians are about to tax our doctors an additional 2% on top of everything else. We need Walmart or Starbucks to get into medical schools...we'd have one on every corner. I'll take a double tall latte with that chest xray please.

In addition to tax cuts which I expected, President Bush has DONE things I NEVER thought I would see in my lifetime.

1. Militarily confront radical Islam.
2. Touch the "third rail" of politics...social security.
3. Promote HSA's.
4. Put immigration reform on the table.

Please click on FReeper Southack's name for a much more expansive list of this President's accomplishments.

Hooray President Bush!

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