Feb. 1, 2006--Amid rising health-care costs for small employers nationwide, President Bush vowed to extend a program of personal tax-free savings accounts for employee medical expenses during his State of the Union address Tuesday night.

The president also offered business-friendly proposals for energy, research and development, and immigration, among other areas.

Small-business owners and entrepreneurs have cited health care in recent years as the single most important issue they now face.

“Keeping America competitive requires affordable health care, Bush said in his address. “We must confront the rising cost of care, strengthen the doctor-patient relationship, and help people afford the insurance coverage they need.

The move comes at a time when more and more small employers -- faced with insurance premiums rising faster than inflation -- are dropping health-care coverage altogether.

Today, as many as two-thirds of the 45 million Americans without medical coverage are employed by small businesses, according to the National Federation of Independent Business, a lobby group based in Washington, D.C.

Three years ago, the NFIB pushed for the creation of health savings accounts, or HSAs, in response to the rising costs of employer-provided coverage -- which, the group claims, have grown by about 15% a year since 2000.

Signed into law in December 2003, HSAs are tax-free savings accounts for medical expenses with set maximum deposits coming from both individuals and their employers. Last year, taxpayers with high-deductible insurance plans were limited to an annual contribution of $2,650.

By pledging to “extend HSAs, Bush most likely meant raising this deposit limit, according to Jessie Brairton, NFIB’s legislation affairs manager. “That’s a move in the right direction, she said.

Democrats, union leaders, and others have long criticized the program for shifting the burden of health coverage from employers to individual workers, and discouraging them seeking medical treatment.

According the Victor Fuchs, a health-industry economist at Stanford University, HSAs were designed to curb skyrocketing costs by forcing patients to pay for often frivolous medical services out of their own pockets, rather than relying on workplace benefits. The problem, Fuchs said, is “they may cut back on useful things, as well as un-useful ones.

Even worse, Fuchs said, by skipping routine follow-up visits to save money, patients may end up getting sicker and incurring further costs both to themselves and society.

At a speech in Sterling, Va., on Jan. 19, Bush hailed the program for giving employees greater control over personal medical decisions and hinted at expanding the limit of allowable contributions.

On Tuesday night, Bush also said small-business employees need the “same advantages that people working for big businesses now get in buying health insurance.

Stuart Gosswein, director of federal government affairs for the Specialty Equipment Market Association, said he would’ve preferred the president elaborate on associated health plans, or AHPs -- an initiative that would enable small businesses to band together in buying insurance.

“It was a more oblique reference than we would have liked, said Gosswein, whose Diamond Bar, Calif.-based trade group represents some 6,466 small manufacturers, distributors, and retailers across the auto industry.

Unlike large corporations, which can offer national health plans regulated by the federal government, small businesses are bound be local state rules, or a confusing mix of multiple state rules. By pooling together, small businesses would force insurers into offering more competitive premiums and fewer rate increases, business groups say.

The initiative, which is currently contained in two bills before Congress -- including the Small Business Health Fairness Act -- could save small businesses as much as 20% a year on medical insurance costs, NFIB figures showed.

Still, no less than eight bills allowing AHPs have failed to pass through the Senate in recent years.

“This has always been a state-versus-federal-government issue, Gosswein said.

Gosswein’s association has said competitively priced national plans shared by groups of small businesses across state lines could reduce premium costs and remove millions of Americans from the ranks of the working-uninsured.

That would suit Tom Zimmerman just fine. Zimmerman, who runs a Livonia, Mich., automation firm with 25 employees, has seen health-insurance premiums double since 2000. He now pays out more than $20,000 per month for employee health insurance alone. “Until we can cross state lines, that's not going to change, he said.