Health Savings Account (HSA) and Health Savings Security Account (HSSA)

The legislation that authorized Medical Savings Accounts will expire at the end of 2003. To replace and expand them, Health Savings Accounts (HSA) and Health Savings Security Accounts (HSSAs) are proposed in the Medicare reform bill that is being debated by Congress as of July, 2003. They have the potential to replace MSAs, but are being hotly contested and their passage is not certain. Their proposed features are discussed here.


Health Savings Accounts (HSA) would be like Medical Savings Accounts (MSAs) but have fewer restrictions. HSAs would have: no restriction on the size of employer than can offer them; no restriction on mixed contributions by both employer and employee; a higher maximum annual tax-deductible contribution (100% of the deductible for the high-deductible health plan); and lower minimums ($1,000 for an individual and $2,000 for family coverage) for the deductible for the high-deductible insurance policy. Money could be withdrawn from an HSA for purposes other than medical expenses after payment of income tax plus a 15% penalty. HSAs would be portable when an employee changes employers.

Health Savings Security Accounts (HSSAs) would be a new type of proposed account that could be accompanied by a high-deductible insurance policy (minimum of $500 for individual or $1,000 for family coverage), but need not be accompanied by high-deductible insurance if an individual is currently uninsured. The possibility of a health account unaccompanied by other insurance differs from all the accounts that we have discussed thus far.

HSSAs would allow an employer, individual (employee), or both to make tax-deductible contributions to the account of up to $2,000 per year for individual coverage or $4,000 per year for family coverage. Money could be withdrawn from an HSSA for purposes other than medical expenses after payment of income tax plus a 15% penalty. The tax deductibility of contributions to HSSAs decreases for individuals with incomes over $75,000 and families with incomes over $150,000. When an account holder turns 65, they can withdraw money from an HSSA for non-medical purposes after paying taxes but no 15% penalty. HSSAs would be portable when an employee changes employers.

If Health Savings Accounts (HSAs) and Health Savings Security Accounts (HSSAs) are approved as proposed in the current Medicare legislation, then they will probably dominate and replace Medical Savings Accounts (MSAs) and Health Reimbursement Arrangements (HRAs). However, as we will discuss, they face strong opposition.