HSA Enhancement Bill Introduced in House

May 4, 2006 – Rep. Eric Cantor (R-Va.) yesterday introduced H.R. 5262, the Tax-Free Health Savings Act of 2006. The bill embodies Health Savings Account (HSA) expansion provisions that have been sought by President Bush.  H.R. 5262 would  

  • link annual contributions to the generally higher health insurance policy out-of-pocket maximum, rather than the lesser of the plan deductible amount or statutory limit,
  • allow individual taxpayers a tax deduction for the premium cost of qualifying high-deductible health insurance,
  • provide a tax credit for certain low-income taxpayers who purchase HSA-compatible health insurance,
  • allow a tax deduction for a healthcare expense incurred prior to establishing and contributing to an HSA if a compatible health policy is in place,
  • allow retired taxpayers to use HSA assets to pay health insurance premiums,
  • give employers latitude to make larger HSA contributions for certain chronically ill employees, and
  • provide a tax credit equal to amounts of payroll tax paid on HSA-compatible health insurance or HSA contributions. 

The bill has the backing of both House Speaker Dennis Hastert (R-Ill.) and Senate Finance Committee Chairman Charles Grassley (R-Iowa). Rep. Cantor has reportedly said he hopes his bill could reach the House floor as early as June. Sen. Grassley has said he hopes to move a package of healthcare tax incentives in the Senate “this year.”