One of the key topics in the State of the Union address concerned Health Savings Accounts (HSAs), a concept introduced by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 and first effective for 2004. Health Savings Accounts combine a high-deductible health insurance policy with a savings-type account to pay medical costs not covered by insurance on a tax-advantaged basis. They are a consumer-driven approach to health coverage that the President hopes to expand in several key ways:

  • Create Association Health Plans to allow small businesses access to low-cost insurance in the same way now available to large corporations and unions.
  • Improve deductibility for HSAs (e.g., allow tax-deductible contributions for all out-of-pocket expenses rather than limiting them to the insurance deductible).
  • Add an income tax credit for any payroll taxes on high-deductible health care premiums.