NCPA - National Center for Policy Analysis

Tax-Preferred Health Accounts

September 15, 2003

Federal policies toward health insurance often fail to meet the needs of working women. Tying tax benefits for health insurance to employment may have made sense in the 1950s, when most families had a single male breadwinner who stayed at the same job his entire career. Since then, however, families and the workforce have changed.

Because the government has not kept pace, people who do not fit the 1950s mold -- single mothers and working women -- have to work harder just to stay even. Expanding tax-preferred health accounts is a matter of gender equity, say Celeste Colgan and Michael F. Cannon

As part of a bill to expand Medicare, the U.S. House of Representatives recently approved a move in that direction. The House proposal would expand the availability of tax-free health accounts:

  • Funds in these accounts (essentially medical IRAs) would receive the same tax treatment as employer coverage; contributions and interest would be tax-free, and the account holder could keep what she does not spend.
  • The House proposal would create Health Savings Accounts (HSAs), which would make existing health accounts more flexible, more comprehensive and more widely available.
  • It also would create a new, more expansive Health Savings Security Account (HSSA) option; in particular, HSSAs could be joined with more types of health insurance than similar health accounts (even those who do not want or cannot find insurance could open an HSSA).

These accounts are particularly suited to the needs of women who, because of their work patterns, need portable coverage for their health care expenses.

Source: Celeste Colgan and Michael F. Cannon, "Tax-Free Health Accounts: Portable, Flexible Health Coverage for Working Women," Brief Analysis No. 455, National Center for Policy Analysis, September 15, 2003.

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