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Will Legislation Affect the Value of Health Savings Accounts?

             - Al Hombroek

Health Savings Accounts (or HSAs) have enabled employees to save pretax income in special savings accounts that are designated only for certain health and related costs. The pretax advantage, in effect, affords the employee more money for healthcare as well as lower monthly premiums with net healthcare savings averaging 25 percent per year. Also, your health savings account balance rolls over to the next year in the event that an employee’s annual healthcare costs total less than his or her annual contributions.

The benefits of an HSA are almost too attractive. There must be a catch—right? Possibly.

The US House of Representatives recently passed a bill that makes account administrators responsible for substantiating payments through HSAs. In effect, our Representatives want to ensure that individuals use their HSA funds to pay for legitimate healthcare and nothing else. The issue is now in the hands of the Senate.

So what’s the problem if our Senators agree that administrators should substantiate the legitimacy of every receipt from HSAs? The answer is higher costs.

Reporting activity on those accounts will cost money, and vendors are likely to pass the costs along to HSA users. Therefore, the pretax incentive could diminish as costs to use HSAs increase.