Republicans and Democrats in Congress hope a new type of high-deductible health insurance account (Health Savings Account, or HSA) for the self-employed and small businesses will succeed where Medical Savings Accounts (MSAs) failed.
HSAs, authorized in the Medicare bill signed in December, are available as of January 1, 2004, from companies such as Fortis Insurance Co. and Golden Rule Insurance Co., and are more attractive from tax and operational standpoints than MSAs.
In both cases, individuals buy high-deductible health insurance plans, take a tax deduction based on the dollar level of the deductible, then draw money out of the HSA account, tax-free, for out-of-pocket medical expenses. But MSAs had problems: Leftover money couldn't be rolled over, and minimum deductibles and premiums were too high.
HSAs must have deductibles above $1,000 for an individual and $2,000 for a family. Up to 100 percent of the deductible can be put in the HSA, which pays nontaxable interest. Money left over at year-end can be rolled over to next year. And some experts believe the HSA market will be more competitive, meaning lower premiums than for MSAs.
Smart Move
Sen. Olympia Snowe's (R-ME) proposed Small Manufacturers Assistance, Recovery and Trade (SMART) Act would, among other things, create an SBA task force to represent small manufacturers and establish a new Assistant U.S. Trade Representative for Small Business to focus on small-business interests.
Stephen Barlas is a freelance business reporter who covers the Washington beat for 15 magazines.
This story appears in the March 2004 issue of Entrepreneur. Subscribe »
