Tax Relief and Health Care Act of 2006 (H.R. 6111) Means Potential Savings on Health Care

With the Tax Relief and Health Care Act of 2006 taking effect this month, plan sponsors (businesses) and plan members (employees) have new opportunities to save money on the cost of health care.  Businesses who offer High Deductible Health Plans (HDHP) could see savings in the form of lower premiums when more of their employees select a high deductible/health savings account option.

The changes to the law are designed to create greater incentives for both plan members and sponsors to select a health savings account (HSA) to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis.  HSAs were originally created to allow plan members to realize savings in the form of tax deductions while keeping the cost of health insurance basically the same as a traditional health plan. 

Summary of improvements to HSA law includes: 

• Increased HSA contribution limits for all individuals regardless of the deductible for their insurance plan
• Permits one-time transfers from an Individual Retirement Account (IRA) to HSA
• Gives the option to fully fund HSAs regardless of what time of year members sign up
• Consolidation of existing health account funds (Health Reimbursement Arrangements, or HRA, and Flexible Spending Arrangements, or FSA) into HSA
• Higher contribution limits for lower-paid employees
• Earlier cost-of-living adjustments for HSA limits
• Eliminates negative interaction between FSA and HSA rules

Your organization may be able to shed health care costs by offering a variety of plan/contribution combinations.  An innovative contribution strategy paired with a multi-plan design can create savings by scaling costs to consumption.

Orion’s technical experts are available to help you evaluate whether a high deductible health plan and HSA would benefit you and your employees.

Please click or call (626) 737-6088 for more information.