Legislation
to be Introduced in Wisconsin to Give State Deductibility
for Health Savings Account Contributions
The
Wisconsin House has decided not to add new language
to the debt refinancing bill that would have allowed
citizens of Wisconsin to deduct their HSA contributions
from their state taxes, as federal law already allows.
Assembly
Speaker John Gard, R-Peshtigo, had originally planned
to attach a proposal to debt refinancing legislation
that would make money that people deposit into their
health savings accounts deductible for Wisconsin
state taxes. Health savings accounts are already
deductible from federal taxes, but currently Wisconsin
is the only state in the country that does not allow
tax deductions for HSA contributions.
Without
the support of his Senate Republican colleagues,
Gard said “it became clear that (they) were
not going to be able to match our ability to move
this bill forward on the schedule we had hoped.”
Health
Savings Accounts are tax-deductible savings accounts
which, when paired with a qualifying High-Deductible
Health Plan (HDHP), allow individuals to deposit
tax-deductible funds into an account that they can
use to cover medical costs. Proponents point
out that HSAs enable people to take control of their
own health care decisions, and put market pressures
back into medical pricing.
To
open a Health Savings Account you must first have
a high-deductible health
insurance policy that qualifies to be partnered
with an HSA. These plans are available through
various insurance companies, depending in what part
of the country you live. The plans are all
similar in the fact that they have deductibles between
$1000 and $5100 for singles, and between $2000 and
$10200 for families.
Once
your insurance policy has become effective, you
may fund your HSA account. HSAs allow you
to legally avoid federal income tax by depositing
100% of the health plan's deductible, up to $2650
for singles or $5250 for families, into your HSA
account.
Even
though you have received a tax-deduction by putting
your money into this account, the money is still
yours to spend tax-free, as long as you spend
it on qualified medical expenses. Since you
have a high-deductible plan, this would of course
include any expenses you incur from going to the
doctor, purchasing prescription drugs, or paying
other expenses toward your deductible. Once
your deductible is met, the health insurance covers
your medical expenses as defined in the policy.
In
addition to being able to withdraw your money tax-free
to cover these types of expenses (which might otherwise
be covered by a traditional low-deductible high-premium
policy), you can use your HSA account to cover other
costs that would not normally be covered by a health
insurance policy.
“There
is an opportunity for everybody to win, to pass
a part of the savings on to a taxpayer to refinance
the state debt,” Gard said. “Giving
him what he asks for, in return for something we
think is valuable for the people of Wisconsin.”
Though
Governor Jim Doyle previously vetoed legislation
that would have made the accounts deductible, claiming
this deduction would only benefit the rich, Gard
contends that “regular people in the middle
class would primarily benefit.” Growth
in Health Savings Accounts has been rapid among
self-employed individuals, and many employers are
expected to make the plans available to their employees
in 2006.
Gard
says it is still his intention to move the HSA tax
exemption forward quickly, and adds he expects this
important piece of health care reform to pass within
the next month. To that end he is urging follow
members of the House in Wisconsin “to return
a portion of that money to the taxpayers who earned
it in the first place by making Health Savings Accounts
(HSA) exempt from Wisconsin taxes.”
