Health Savings Accounts are officially recognized as a tax break for the rich

by Tony Novak, MBA, MT, OnlineAdviser at Freedom Benefits revised 11/16/11

Health Savings Accounts are one solution promoted by the Bush administration to attack on the current national health care crisis. Benefits advisers say that HSAs are primarily a tax break for a few wealthy people rather than a solution for the masses. Other articles by this author on the limitations of HSAs have been posted here and in other publications). This week Wisconsin Governor agreed with the advisers in vetoing a state tax credit for HSAs.

Governor Jim Doyle vetoed a bill that would have provided state income tax credits because it would have encouraged employers to reduce their current level of coverage and offer only policies with high deductibles that would burden middle income families; HSAs are viable only for persons with higher incomes; and the credit has no demonstrable economic benefit for the entire state.

The primary disadvantages of HSAs are: 1) not everyone qualifies for he benefit, 2) few tax-qualified health insurance plans are available, 3) the required health insurance is expensive, 4) enrolling often requires hiring an expensive adviser.

HSAs continue to an average federal tax benefit of more than a thousand dollars per year for the few who qualify and can afford the enrollment costs, but additional state income tax breaks might not forthcoming as originally expected.

Tony Novak is a member of the Pennsylvania Institute of Certified Public Accountants, the New Jersey Society of Certified Public Accountants and an accredited member of the Better Business Bureau.

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