NCPA - National Center for Policy Analysis


February 17, 2006

President Bush praised health savings accounts in his State of the Union address last month and urged lawmakers to expand their use. But while Congress mulls his proposals, some states are already taking steps to make HSAs more prevalent.

Last year, five states enacted legislation exempting HSAs from state income taxes, according to the American Legislative Exchange Council, an organization of conservative state lawmakers:

  • In Maine, the Legislature authorized a similar measure last year, but state appropriators were reluctant to include room for it in the budget, says Tarren Bragdon of the Maine Heritage Policy Center. Bragdon also pushed a bill that would have required private insurers with high deductible plans to pair them with an HSA. The measure died in committee.
  • South Carolina and Florida both proposed allowing Medicaid recipients to participate in an HSA-like plan. Florida's program is set for implementation, but South Carolina's is awaiting federal approval, say observers.
  • At least two states, Oklahoma and Florida, passed measures last year calling for municipal and state agencies to offer an HSA option to employees. Similar bills were introduced in at least seven other states, say observers, and they could return this year.

But Bernie Horn, senior director of the Center for Policy Alternatives, an organization of liberal state lawmakers, cautioned such proposals would increase health care costs. "You're taking the healthiest people out of the pool" paying into more traditional plans, he said, "Why would a state want to increase its own costs?"

Some state lawmakers share Horn's skepticism, says Richard Cauchi, who tracks the issue for the National Conference of State Legislatures. But he says he has not yet seen proposals seeking to curb the influence of HSAs gain serious traction in a state, perhaps because of the federal government's embrace of the accounts.

Source: Alyson Klein, "With Federal Momentum, States Mulling Health Accounts," CongressDaily, February 13, 2006.

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