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Tax-Free Health Savings Accounts Passes House

For Immediate Release. June 30, 2003On June 26, 2003, the House of Representatives passed by a 237-191 vote the Health Savings Account Availability Act (H.R. 2351).  The measure would help-low income, middle-income, and uninsured families gain greater access to quality health care by creating savings accounts for medical expenses. 

Two new types of health saving accounts are created by the measure.  One would be roughly similar to individual retirement accounts (IRAs) and the other is a modified version of the older Medical Savings Accounts (MSAs).  Both could be used to meet certain health care cost and could also grow tax-free.  Uninsured people could setup, in some cases, these accounts to purchase insurance. 

The reason why more than 40 million Americans are uninsured is that the problems of the health care system are interrelated.   The more general problem is that most health insurance in America is employment-based which has caused uninsurance, limited choice, and the loss of patient control and privacy.  Employer-based health care plans offered to workers is owned and selected by employers.  In comparison to life insurance, homeowners insurance, or automobile insurance, employees are unable to select the policies that best suit the needs of their families.   The best coverage for individual workers or their families may not be selected by employers who are concerned with controlling coverage cost.  Also, for example, in the service sector, employers have little incentive to invest in coverage for employees because it is an industry with relatively high rates of personnel turnover because employees change jobs frequently. 

The reason why health insurance is obtained through the workplace is that there is unlimited federal tax relief for the purchase of health insurance if and only if it is done through the employer.  Compared to any other type of employee compensation or any other type of insurance, there is no such federal tax policy. 

To purchase health insurance outside of the workplace, workers and their families must do so with after-tax dollars which makes such policies for most cost prohibitive. 

As a result the market is distorted and inefficiencies are created since federal tax policy limits workers and their families to employer-based health insurance.  Such plans insulate employees from the true costs of medical services, discourage to pay even for routine medical services with out-of-pocket expenditures, and contribute to medical cost inflation since federal tax policy almost exclusively favors medical services purchased through insurance.  Furthermore, current employer-based health insurance tax treatment favors upper-income families with little or no benefit to lower-income because it is dramatically regressive.  Inequitable and unfair as well as distorting the market is the current tax treatment of health insurance.  

“To correct this unfairness the House of Representatives should be praised for their positive efforts to pass the Health Savings Account Availability Act of 2003,” said Dr. Joel P. Rutkowski, president of the American Voice Institute of Public Policy.  He continued saying, “The Federal government should not continue to compound the current health care insurance problems that they have created by micromanaging the health insurance industry as well as creating large bureaucratic entitlement programs.  Instead as this measure does it empowers Americans to purchase health care policies away from their employer that best suits their needs as well as their families at costs that fit into their budgets.  It is time for the federal government to release its control over the American health insurance industry and allow consumer choice and the market place to determine the type of health insurance policies which best provides health care coverage for individual workers and their families at a cost that they can afford.”  

For Interviews Contact:

Joel P. Rutkowski, P.h.D.
President, The American Voice Institute Of Public Policy

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