PA Health Savings Accounts Approved by Committee

 

HARRISBURG -- A key item of the 2005-06 Senate Republican legislative agenda unveiled last month -- to provide for Health Savings Accounts in Pennsylvania -- received preliminary approval today, said Senate Banking and Insurance Committee Chairman Gib Armstrong (R-13).

 

The committee approved Senate Bill 300, sponsored by Senator Armstrong and designed to give Pennsylvanians more control of their health care by allowing them to set up Health Savings Accounts exempt from state Personal Income Tax.

 

Health Savings Accounts would apply to high-deductible policies designed to cover big expenses -- freeing up regular health insurance to cover more routine expenses at lower cost, said Armstrong.

 

"Health Savings Accounts will encourage individuals and families to set money aside for their healthcare expenses and, just as importantly, give them the means to pay for healthcare services of their own choosing, without constraint by insurers or employers," said Armstrong.  "Such control also provides a financial incentive for spending healthcare dollars prudently. Working with their doctors, consumers can devote resources to what is really important and avoid expensive add-ons."

 

An employer or employee can contribute to health savings accounts.  The accounts may be established with banks and insurance companies or with other entities approved by the Internal Revenue Service to hold Individual Retirement Accounts (IRAs) or Medical Savings Accounts (MSAs).  Other entities may request approval to be an HSA trustee or custodian.

 

Interest on the accounts would also be tax-exempt, and the accounts can carry over from year to year without limit.

 

Withdrawals from the account are tax free if they are used for the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body.  They include the costs of equipment, supplies, and diagnostic devices needed for these purposes. They also include dental expenses.

 

"The federal government provides for Health Savings Accounts exempt from federal taxes, and more than half the states in the nation are considering the same," said Armstrong.  "Pennsylvania must provide every opportunity for citizens to access quality health care, and Health Savings Accounts can play a major role."

 

Senate Bill 300 was sent to the full Senate for consideration.

 

In addition to Health Savings Accounts, the GOP legislative agenda for health care includes establishing a health care tax credit program for small businesses, and developing a collaborative approach to determine how to best utilize any excess funds that may be held by the Blue Cross plans as they meet their social mission in Pennsylvania.