FROM THE OFFICE OF PUBLIC AFFAIRS

Thank you all for coming here today.

We’ve gathered in this historic building to talk about something that I think might be the beginning of an historic change in the way we look at health care coverage.

As most of you here today know, Health Savings Accounts were created by the Medicare bill signed by President Bush on December 8th. They are a product that is designed to help individuals take more control over how their health care dollars are spent and save for future medical and retiree health expenses on a tax-free basis. 

At a time when health care costs are rising rapidly and individuals, families and employers are struggling to find lower-cost alternatives, HSAs are a terrific option that I think every American ought to consider.

I hope, in particular, that HSAs will appeal to the small-business community, which faces the highest hurdles when it comes to affording coverage for their employees and families.

Everywhere I travel in this great country, I meet small-business owners who are working so hard and contributing so much to our economy. Collectively, small-business is the most important engine in our economy and by far the biggest job-creator. Yet they are at an extreme disadvantage in the health insurance marketplace. Everywhere I go, every small-business owner I speak to, I hear the same question: “what can you do to help us afford health insurance?”

I’m pleased to say that HSAs will be helpful for small-business owners, their families and their employees. The ability for both individuals and employers to contribute to the accounts provides a lot of options, a lot of flexibility for a small group struggling to keep costs reasonable for both parties. Employer contributions to employee HSAs are not subject to FICA taxes, and individual contributions can be deducted on their taxes.

My thanks go out to our colleagues at the SBA who are helping to spread the word to their constituency at small-business roundtables all over the country. They are a target constituency for this great new product.

Among its many benefits, an HSA puts the individual in charge of their health care purchasing decisions, and that’s one of the reasons why I think they are historic. Consumers often find traditional health insurance plans frustrating because there are so many rules about what is covered and what is not. For those who are covered under their employer’s plan and are therefore one step removed from the plan purchase, the rationale behind coverage options can be a real mystery. To the consumer at the bottom of this structure, it feels like decisions about their health are being made by several other parties… not themselves.

If an individual is using an HSA, health purchasing decisions are made by that individual, in conjunction with the counsel of their physician. And that’s something a lot of people have been asking for.

It also gives consumers the opportunity to budget for their health expenses over many years. Money that is not spent in one year can roll over to the next, indefinitely. It’s something that makes a lot of sense and will prove to be empowering for consumers.

As with any new product, one of the greatest challenges is getting the word out and helping people understand how it works. I’m pleased to see so many partners in this effort here in the room today.

For those of you who represent employers, especially small businesses, I encourage you to let your membership know about HSAs as a health coverage option. Please refer them to the Treasury Department website for more information – we have a page dedicated to HSAs that includes Frequently Asked Questions that I think they will find helpful.

And for those of you in the insurance and financial community, the Treasury Department is offering additional guidance from the IRS. We issued our first guidance in December, just a few weeks after the enactment of the Medicare bill. At that point we asked the public to comment and help us resolve any outstanding issues.

Today we are issuing our next guidance in response to those comments that we received. Issues covered by the new guidance include a definition of “preventive care” and determining whether prescription drugs can be covered on a first-dollar basis or be subject to the high deductible under the high-deductible health plan that must accompany an HSA.

An individual can only make a contribution to a HSA if the individual is covered by a High Deductible Health Plan and no other coverage. Generally a high deductible health plan only pays for benefits after the deductible is met. Our guidance states that this deductible applies to prescription drug coverage as well as other types of health coverage.  Therefore, a plan that provides first-dollar benefit coverage for prescription drugs by either a flat dollar amount or percentage co payment for all prescription drug expenses, even those underneath the deductible will not be considered a high deductible plan and a person covered by such a plan could not make a contribution to an HSA.

However, we understand that some have been selling such policies to individuals thinking that the individuals could make contributions to an HSA. We have provided transition relief so that those people who purchase a high deductible health plan with a separate lower deductible prescription drug policy will be able to contribute to contribute to an HSA in 2004 and 2005. We do not want to penalize those people who bought products thinking that they could contribute to an HSA.

There are still issues outstanding, and we want to make sure both communities – those who offer and those who use HSAs – have all the guidance you need.  We will work closely with those who, like we at the Treasury, are interested in making sure HSAs are as widely used and available as permitted by law.

I think you will all find the HSAs page on our website helpful and informative. We have also set up an e-mail address – hsainfo@do.treas.gov – where you can submit questions, as well as a voice mailbox: 202-622-4HSA.

We have an excellent panel assembled today so we can start answering some of those questions right away.

Again, thank you all for coming. I truly believe we will look back on this day as an important piece in a larger health-care purchasing revolution.

Thank you very much.