Lost somewhere among the noise about the Medicare bill passed by Congress was great news for small businesses. Tucked neatly into the bill was a measure that made Health Savings Accounts (HSAs) permanent and available to everyone. Small business owners fought a decade-long battle for a way to provide affordable health coverage to their employees. Now, everyone can benefit.
Year after year, following passage of HSAs as part of a demonstration project, small businesses lobbied Congress hard to make HSAs permanent and available to everyone. Companies such as Golden Rule (www.goldenrule.com), Aetna (www.Aetna.com) and others are now offering HSAs. This product has already helped small business owners and the self-employed control health care costs.
The concept is simple. With an HSA (in conjunction with a high deductible health insurance policy), money is placed into a health account tax free (maximum contribution is $2,600 for an individual and $5,150 for a family), grows tax free, and can be withdrawn tax free as long as it is used for medical purposes.
As the money in the HSA grows, it builds up resources a patient can use for either routine or future medical care. And, since the money belongs to the individual from day one, HSA users choose their doctors and hospitalsno referrals necessary.
Any money left in the account at the end of the year rolls over to the next year. The leftover funds are the individuals to keep, and more money is added in the new year.
Tax incentives, combined with choice and control, along with the fact that HSAs have a proven track record of helping the uninsured are appealing attributes for small business owners and the self-employed. In fact, three out of every four people who purchased an HSA policy in 2001 were previously uninsured, according to the IRS.
Now, many more small business owners are experiencing the affordability and freedom of HSAs because they have a certain future. Roman Botcharnikov, a small business owner from Tennessee, recently told President Bush that his $485 family premium has been reduced to $277 with an HSA.
An added benefit of HSAs is how people can plan for long-term care. A greater share of income and savings is being used for long-term care expenses, and HSAs are a sound vehicle to meet these savings needs. Even with the limited population involved in the original HSA demonstration project, owners of these accounts have saved more than $150 million.
This is money that would have otherwise gone to insurance companies or administrative costs. Instead, it is growing in HSA accounts tax free and is immediately available to people when they need it.
Employees like HSAs because it maximizes their choice and control over their health care. Employersespecially small business employerslike HSAs because they help keep costs under control and allow them to put more money into their businessesnot into the pockets of insurance companies, doctors and hospitals. Thats a winning combination for health care consumers, employees, employers and our economy.
Karen Kerrigan is chairman of the Small Business Survival Committee based in Washington, D.C. The committee represents more than 70,000 member small businesses across the country.