by Fred Adams
Vice President
HSA for America

Wisconsin Health Savings Account Legislation

Legislation to be Introduced in Wisconsin to Give State Deductibility for Health Savings Account Contributions

The Wisconsin House has decided not to add new language to the debt refinancing bill that would have allowed citizens of Wisconsin to deduct their HSA contributions from their state taxes, as federal law already allows.

Assembly Speaker John Gard, R-Peshtigo, had originally planned to attach a proposal to debt refinancing legislation that would make money that people deposit into their health savings accounts deductible for Wisconsin state taxes.  Health savings accounts are already deductible from federal taxes, but currently Wisconsin is the only state in the country that does not allow tax deductions for HSA contributions.

Without the support of his Senate Republican colleagues, Gard said “it became clear that (they) were not going to be able to match our ability to move this bill forward on the schedule we had hoped.”

Health Savings Accounts are tax-deductible savings accounts which, when paired with a qualifying High-Deductible Health Plan (HDHP), allow individuals to deposit tax-deductible funds into an account that they can use to cover medical costs.  Proponents point out that HSAs enable people to take control of their own health care decisions, and put market pressures back into medical pricing.

To open a Health Savings Account you must first have a high-deductible health insurance policy that qualifies to be partnered with an HSA.  These plans are available through various insurance companies, depending in what part of the country you live.  The plans are all similar in the fact that they have deductibles between $1000 and $5100 for singles, and between $2000 and $10200 for families.

Once your insurance policy has become effective, you may fund your HSA account.  HSAs allow you to legally avoid federal income tax by depositing 100% of the health plan's deductible, up to $2650 for singles or $5250 for families, into your HSA account.

Even though you have received a tax-deduction by putting your money into this account, the money is still yours to spend tax-free, as long as you spend it on qualified medical expenses.  Since you have a high-deductible plan, this would of course include any expenses you incur from going to the doctor, purchasing prescription drugs, or paying other expenses toward your deductible.  Once your deductible is met, the health insurance covers your medical expenses as defined in the policy.

In addition to being able to withdraw your money tax-free to cover these types of expenses (which might otherwise be covered by a traditional low-deductible high-premium policy), you can use your HSA account to cover other costs that would not normally be covered by a health insurance policy.

“There is an opportunity for everybody to win, to pass a part of the savings on to a taxpayer to refinance the state debt,” Gard said.  “Giving him what he asks for, in return for something we think is valuable for the people of Wisconsin.”

Though Governor Jim Doyle previously vetoed legislation that would have made the accounts deductible, claiming this deduction would only benefit the rich, Gard contends that “regular people in the middle class would primarily benefit.”  Growth in Health Savings Accounts has been rapid among self-employed individuals, and many employers are expected to make the plans available to their employees in 2006.

Gard says it is still his intention to move the HSA tax exemption forward quickly, and adds he expects this important piece of health care reform to pass within the next month.  To that end he is urging follow members of the House in Wisconsin “to return a portion of that money to the taxpayers who earned it in the first place by making Health Savings Accounts (HSA) exempt from Wisconsin taxes.”

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