GOP Lawmakers Add Provision to Passing Tax Package
Measure Expands the Amount That Can Be Given Tax-Free to Health Savings Accounts

By Jeffrey H. Birnbaum and Lori Montgomery
Washington Post Staff Writers
Monday, December 11, 2006

Republican lawmakers, with little public debate, quietly added a billion-dollar health-care benefit to legislation that was rushed through Congress just before it adjourned Saturday morning.

Acting at the urging of several major business lobbies eager to reduce their medical-insurance costs and the outgoing chairman of the House's tax-writing committee, lawmakers adopted the provision even though only a single committee had previously approved it.

The provision, which materialized without fanfare late last week inside a massive tax-cut measure, expands the amount of money that can be contributed tax-free to health savings accounts (HSAs). The accounts can be used to pay medical bills and for other health-related coverage.

The legislation allows anyone to shelter thousands of dollars annually in HSAs, regardless of how much that person pays for a health-insurance deductible. Current law limits HSA contributions to the amount of a person's deductible. The expansion would cost the government $1 billion in lost tax revenue over the next decade.

Democrats, who will take control of Congress next month, have generally opposed the expansion. But supporters said that House Ways and Means Committee Chairman Bill Thomas (R-Calif.) championed it and pressed it through to final approval in the wee hours Saturday morning.

A coalition of high-profile corporate organizations, which pushed for the legislation, spent last week deploying lobbyists across Capitol Hill and urging their members back home to write letters and place phone calls to lawmakers. The U.S. Chamber of Commerce, the National Federation of Independent Business, the American Bankers Association, the Business Roundtable and several insurance companies belonged to the coalition, according to Paul Dennett, vice president for health policy of the American Benefits Council, a leading participant in the group.

Even the advocates doubted until the last minute that their provision would succeed.

"We nicknamed [ourselves] the 'Keep Hope Alive Coalition,' " Dennett said. "It seemed that the provision might fall off the wagon."

That it remained in the bill was thanks largely to Thomas, who "quite clearly played the strongest role," Dennett said, adding, "In Democratic offices, this was something they didn't want to do."

Organized labor, a major backer of Democrats, has disparaged HSAs as a way for companies to unload more of the cost of medical coverage on their workers.

The American Benefits Council, meanwhile, has argued that HSAs allow both employees and employers to save money. Dennett said the newly approved provision merely improves the program, which was first enacted in 2003 and now is used by more than 3 million Americans.

"These are modest but sensible kinds of things that need to be done," he added.

The Ways and Means Committee approved the provision in late September, right before Congress adjourned for the midterm elections. The legislation was passed neither in the Senate nor on the House floor until it was okayed as part of the larger bill last weekend.

"This has been a clear Republican priority and there was an opportunity . . . to move this package of good legislation," said Ianthe Jackson, spokeswoman for the Ways and Means Committee. "This is something that Mr. Thomas believes in, and making minor adjustments will help these accounts continue to grow."

HSAs were created to encourage people to choose high-deductible insurance plans, take control of their health-care spending and, ultimately, bring down medical costs. High-deductible plans are increasingly popular among employers because they are less expensive than traditional plans. HSAs allow families enrolled in such plans to sock away money tax-free to pay their out-of-pocket expenses. Under current law, annual contributions to the accounts are limited to the amount of a person's annual insurance deductible and cannot exceed $2,700 for an individual or $5,450 for a family.

Under the new law, if it is signed by President Bush as expected, any health savings account holder could choose to shelter the maximum amount, which is scheduled to increase next year to $2,850 for individuals and $5,650 for families.

The HSA provision was one of several pro-business items that managed to get through Congress at the eleventh hour. The tax measure revived more than 20 tax breaks, at a cost of $38 billion over five years, and nearly a dozen credits promoting alternative energy sources. It also opened 8.3 million acres in the Gulf of Mexico to oil and gas drilling and prevented a 5 percent cut in Medicare payments to doctors from taking effect Jan. 1.

Health savings accounts were not publicly identified as part of those negotiations until Thursday, after House and Senate negotiators, including Thomas and Senate Finance Committee Chairman Charles E. Grassley (R-Iowa), emerged from an early-morning session with an agreement about what the final package would include. Hours later, the Ways and Means Committee released an explanation of that legislation, with the expansion of health savings accounts slipped in among 22 tax breaks, 11 energy measures and nearly 30 "other provisions."

In a news release, Thomas called the package "a bipartisan compromise that is 'must-do' work in Congress this year." He urged "my House and Senate colleagues to approve it quickly."

They did so after midnight Saturday, with both chambers giving overwhelming approval to the legislation. The HSA provision was barely mentioned in the closing congressional debate.

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