Nick, from Austin writes:
Are HSAs currently a viable form of health care as opposed to a company sponsored health insurance?

Sandy K. Baruah
Thank you for your question Nick. Health savings accounts, coupled with a consumer-directed health plan, are not only a viable form of health coverage, they are an increasingly popular option as well. More than six million people are now covered by health savings accounts, including many low- and moderate-income Americans and those who were previously uninsured.

Health savings accounts are offered by many large and small businesses. As of January 2008, more than 1.8 million small business workers and their dependents were covered by HSA-type plans. That’s a nearly 75 percent increase since last year, and demonstrates that HSAs are an increasingly attractive choice for small businesses.

In order to open a Health Savings Account, you must also have a high deductible health plan. This form of insurance has the advantage of more affordable premiums than traditional insurance. The HSA is also portable, so you can take it with you when you leave your job. If you do not get health insurance through your employer, you can still get a health savings account – as long as you also have a high deductible health plan, which can be purchased in the individual market.

Dan, from Athens Ohio writes:
Once money is put in to an HSA, can it be taken out for purposes other than health care?

Sandy K. Baruah
Money deposited in your HSA may be used tax free for “qualified medical expenses”. This means any expense that is primarily for the prevention or alleviation of a physical or mental defect or illness. For example, you can use your HSA to pay for a visit to your doctor, to purchase a prescription at the pharmacy, or for other medical expenses. Just like an Individual Retirement Account (IRA), you can take the money out to spend on other purposes, but if you are under 65 you will face a tax penalty for doing so and must also pay income tax on the amount withdrawn for non-medical expenses.

Adam, from Rockville MD writes:
Why are HSAs being touted as the way to fix health care?

Sandy K. Baruah
Adam, thank you for your question. With the rising cost of health care, health savings accounts provide individuals and employers – especially small business owners – with an affordable and flexible form of health insurance.

One of the biggest problems in our healthcare system today is cost growth. Since the money in the HSA belongs to the consumer, HSAs help people think wisely about the money they are spending and help control healthcare inflation by cutting back on wasteful spending. HSAs also make healthcare spending more transparent and involve the consumer in the decisions regarding his or her care. By empowering the consumer, HSAs help keep decisions with the family and the patient and out of the hands of the health insurance company or government bureaucrats, where the only way to ration care is by limiting access. We expect that over time the combination of high deductible health care plans and health savings accounts will slow health care inflation and make health care more accessible and affordable for everyone.

In addition, Americans change jobs more frequently these days and a health savings account is portable, meaning the individual continues to hold the account should they change jobs or become unemployed.

Katie, from San Diego, CA writes:
What is the government doing for small businesses?

Sandy K. Baruah
Katie, thank you for your interest in our nation’s small businesses. This administration has been a big supporter of small businesses. We believe that keeping taxes low and providing an environment where entrepreneurs are free to pursue their goals without interference from the government is the best way to keep the American economy strong and help small businesses thrive.

I would like to give you a little insight as to what we do at SBA. SBA is an independent agency of the federal government and protects the interests of small business concerns, to preserve free competitive enterprise and to strengthen the overall economy. SBA recognizes that small businesses are the backbone of the American economy. You can check out our website at www.sba.gov to see all the programs that we offer to help small businesses grow. At SBA, we remain dedicated to helping American entrepreneurs realize their entrepreneurial dreams.

Stephanie, from Pittsburgh writes:
Can you explain how HSA's work? I have heard them explained before but feel like I don't completely understand.

Sandy K. Baruah
Sure, briefly, Stephanie, health savings accounts are accounts that you own that allow you to save pre-tax dollars to pay for medical needs. They operate like an IRA, except that you can contribute to an HSA regardless of your income and distributions from an HSA for medical expenses is tax-free. Both you and your employer can contribute to your HSA. If you don’t spend the money in account right away, you can save and invest the money tax-free, to spend on future medical needs. Since health savings accounts are coupled with a high deductible health plan, you are fully covered just like a traditional plan for expenses beyond your deductible. These plans also have a maximum cost-sharing amount so you have catastrophic protection.

Understanding health insurance options is a complex issue and that is why the Small Business Administration and the Department of the Treasury created www.HSA.gov. This web page is dedicated to educating small employers and the public about the health savings account option. HSA.gov is a valuable resource that features a self-guided online training module, a fact sheet, and a Power Point presentation. It also breaks down the different aspects of health savings accounts so individuals can decide if health savings accounts are the right choice for them.

Jay, from ELLIJAY, GA writes:
WILL THE MAXIMUM ALLOWED CONTRIBUTION TO THE HSA BE INCREASE NEXT YEAR NO MATTER WHO WINS OFFICE AND IF SO, HOW MUCH?

Sandy K. Baruah
Jay, thanks for a good question. Yes, the maximum allowed contribution for health savings accounts will increase. The maximum contribution limits for 2008 are $2,900 for individual coverage and $5,800 for family coverage. These maximum contribution limits will increase for 2009 to $3,000 for individual coverage and $5,950 for family coverage.

Additionally Jay, “catch up contributions” for individuals 55 years and older will also increase. Catch up contributions for 2008 are $900 and will increase to $1,000 for 2009.

Cliff, from Brimfield, Ohio writes:
Administrator Baruah: Health Care for any Business.BIG or SMALL has to be a PROVIDER and COST AFFORDABLE monster. With the way the economy is going at the moment. Are the affects felt more on one than the other? This HEALTH CARE ACCOUNT, will it help all business's? Because I think the ACCOUNT that business's face is trying to pay for health care. Thank You

Sandy K. Baruah
Thank you Cliff for your question. As head of SBA, I have traveled the country and spoken with many small businesses. A topic that often comes up in my discussions is the rising cost of health care.

Health savings accounts are an affordable option for large and small business owners who want to provide some type of health care coverage for their employees. Since there are no contribution minimums, small business owners with limited resources are still able to make contributions to their employees’ accounts, so long as they stay with in the yearly maximum contribution limits.

Another great feature of health savings accounts is that, unlike other forms of healthcare coverage, the individual, the employer and any third party may contribute to an individual’s account, so long as they stay with in the yearly maximum contribution limits.

Sandy K. Baruah

I enjoyed today’s conversation on health savings accounts. If you are a small business owner, self-employed or are an individual interested in a health savings account, www.HSA.gov is a great resource at your disposal to determine if a health savings account is right for you.

President Bush and I both recognize that small businesses are the backbone of our economy. I believe that the resources made available on www.HSA.gov will serve our nation’s small businesses well.