Today U.S. Sen. Ensign Offers Floor Amendment to Make HSA Qualified Insurance Tax Deductible for Individuals

Today (March 13, 2008) Senator Ensign (R-NV) will offer on the floor of the U.S. Senate, to the Budget Resolution, an amendment to allow HSA Qualified Health Plans to be deductible for individuals whose employer does not provide health insurance.

As a practical matter, HSA qualified health plans are the most affordable health insurance for employees whose employer does not provide health insurance.

This is why the amendment is focused on HSA Qualified Plans.

Furthermore, because the tax deduction is focused on HSA Qualified Plans, the cost of the tax deduction is much less than if the tax deduction were extended to all those who purchase individual insurance.

As a practical matter, the percentage of individuals purchasing an HSA Qualified Plan, as opposed to another type of health insurance, is increasing, and we would expect if HSA Qualified Plans were to receive the tax deduction, that trend would accelerate.

Here is the amendment text, and below is a summary of the bill the amendment is based on, below:






The Affordability in the Individual Market (AIM) Act builds on the foundation of a previously passed law that established Health Savings Accounts. These accounts allow individuals with high-deductible health insurance to set aside tax free savings for lifetime healthcare needs.

Today, individuals trying to build up a nest egg for their retiree health expenses through a Health Savings Account are not able to use their funds to purchase their health insurance, except under limited circumstances.[1] The AIM Act would expand the definition of what is considered a “qualified medical expense” under the Internal Revenue Code to allow individuals and families who purchase high-deductible health plans on their own (i.e., not through their employer) to use their Health Savings Accounts to pay plan premiums.

The following examples demonstrate how the AIM Act would assist individuals, small businesses, and the uninsured afford healthcare coverage:

  • Cindy works for a flower company that does not offer health insurance benefits. She must look for health insurance in the open market. She finds a high-deductible health plan that she can afford and buys the policy. Cindy pays $100 per month for her premium. She also opens a Health Savings Account since her high-deductible health plan qualifies her for that benefit. Under current law, Cindy cannot use money in her Health Savings Account to pay for her premiums. But, if the AIM Act becomes law, she will be able to use the money in her Health Savings Account to pay the $1,200 she pays in premiums each year. The flower company Cindy works for will also be able to make contributions to her Health Savings Account to help defray the cost of her high-deductible health plan premium.

  • John owns and operates a small construction company that has six employees. John is overwhelmed by the process of choosing a health plan for his employees. He does not have a human resources department or human resources specialist to help him choose the best plan for his company. John decides that it is too much of a hassle to pick a plan. John’s employees are forced to obtain health insurance in the individual market. They each choose to buy high-deductible health plans. They also open Health Savings Accounts. John cares about his employees and wants to help his employees with their healthcare costs. If the AIM Act becomes law, John can make contributions to his employee’s Health Savings Accounts to help them pay for their high-deductible health plan premiums.

  • Chris is a 25-year-old college student. He had been covered under a group health insurance plan through his parents but was dropped from the policy due to an age limitation for dependents. Consequently, Chris joined the ranks of the uninsured. His family and friends recognize the importance of health insurance and encouraged him to find a policy in the individual market. Chris finds a high-deductible health plan that he can afford on his college salary and buys the policy. Chris also opens a Health Savings Account since his high-deductible health plan qualifies him for that benefit. If the AIM Act becomes law, Chris can use the money in his Health Savings Account to pay his high-deductible health plan premium.


[1] Under current law, payments for four types of insurance are considered to be qualified Health Savings Account expenses: (1) long-term care insurance, (2) health insurance premiums during periods of continuation coverage required by federal law (e.g., COBRA), (3) health insurance premiums during periods the individual is receiving unemployment compensation, and (4) for individuals age 65 years and older, any health insurance premiums (including Medicare Part B premiums) other than a Medicare supplemental policy.

Please contact your U.S. Senator now to express your support for the Senator Ensign amendment to the Budget Resolution.

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