Health Savings Accounts Come Under Fire

Health savings accounts were criticized as "tax shelters" that help the wealthy at the expense of those struggling to afford insurance coverage at a Wednesday Congressional hearing.

The House Ways and Means Committee Subcommittee on Health convened the hearing in the wake of a recent General Accountability Office report that found average adjusted gross income for HSA participants was $139,000 -- more than double that of non-participants.

Over half of people eligible for HSAs don't participate in them, according to the report.

HSAs "start off providing assistance to those who already can afford health care coverage period," said Rep. Xavier Becerra (D-Calif.).

Becerra argued that HSAs provided "tax shelters" for the relatively small number of people who had maxed out their yearly savings in IRAs and 401(k)s, and that the program lacked sufficient oversight to guarantee that participants were spending the money on qualified health care expenses.

HSAs allow individuals with only qualified High Deductible Health Plans -- otherwise known as catastrophic coverage plans -- to save up to $2,900, tax-free, every year to pay for medical expenses. Funds not used one year roll over into an individual's account the following year.

More than 6.1 million people have HSA-eligible plans, according to the research arm of industry group America's Health Insurance Plans.

But the number of uninsured has continued to swell even as HSAs become more popular: 47 million people were uninsured in 2006, up from 39 million in 2000, according to the most recent Census Bureau figures. The actual number of uninsured individuals is likely much higher: individuals who have insurance for only part of the year are not counted as "uninsured" by the survey.