If Wisconsin legislators want to help lower the cost of health insurance for their constituents, allowing a state income tax deduction for premium payments would be a step in the right direction. (“Legislative debate to resume on health savings accounts,” 1/24/05) Wisconsin is well behind the curve on this matter. At last count, 32 states allow the deduction. Eight other states have no state income tax, so it is not an issue.
Consumer response to health savings accounts (HSAs), which offer low-cost insurance plus a checking account from which patients pay their own health care bills, has been very positive. According to the Association of Health Insurance Plans, at least 438,000 people bought an HSA in the first eight months of 2004. Forty percent of all HSA policies have been purchased by the uninsured.
The HSA is something like an IRA for health care. But with an HSA, the funds can be used now, not restricted for future use. Deposits made into HSAs are not taxed. When HSA funds are spent–for everything from office visits to prescription drugs to long-term care–the spending is tax-free. Unused funds are carried forward each year, again tax-free.
By encouraging HSAs with an income tax deduction for insurance premiums, Wisconsin can reduce its uninsured rate, give patients more control over their own health care spending, and save tax money by decreasing the number of residents who depend on Medicaid and other government-subsidized health care programs.
Conrad F. Meier
Conrad F. Meier ([email protected]) is senior fellow for health care policy at The Heartland Institute in Chicago and editor emeritus of Health Care News.