HSAs Health Savings Accounts

State Legislation and Actions on Health Savings Accounts (HSAs)and Consumer-Directed Health Plans, 2004-2015

Updated: June, 2013; material added January 2015

Health Savings Accounts (HSAs) were established in federal law in December 2003, when President Bush signed the Medicare Prescription Drug Improvement and Modernization Act of 2003 (P.L. 108-173). HSAs are tax-free financial accounts that are designed to help individuals save for future health care expenses.  HSAs also are an expansion and evolution of Medical Savings Accounts (MSAs), which were launched in over 20 states and in a federal pilot program in the mid-1990s.

State laws and regulations passed in 2004-09 now play a role in the use of health savings accounts, through insurance regulation, measures that encourage development or offering of HSAs and/or laws that provide state tax exemptions to parallel federal tax treatment.  HSA laws and commercial marketing usually are closely tied to High-Deductible Health Plans and are referred to jointly as "Consumer-Directed Health Plans (CDHPs)."1

Table of Contents


Who is eligible for HSAs? What are the contrubution and out-of-pocket limits? 

There are four federal requirements to be eligible for HSAs:

  1. A person must be covered simultaneously by a qualified “high-deductible” health insurance policy (HDHP). 
    For 2015, participants in qualified HDHPs are required to pay the first $1,300 of their medical expenses ($2,600 for family coverage) before insurance benefits begin. (Conventional insurance plans, whose participants cannot contribute to HSAs, typically have had deductibles of about one-third to one-half these amounts; however many new health plans sold through ACA health exchanges have deductibles of $1,000 to $5,000 for 2014 and 2015.)
  2. The HSA enrollee cannot be covered by any other health insurance plan, such as a spouse’s plan.
  3. The HSA enrollee must be under age 65.
  4. The HSA enrollee cannot be claimed as a dependent on someone else’s federal income tax return.

There are no income, employment or other age limits in the federal law.

2015 HSA financial amounts and limits, The following table compares standards with the standards that applied for the 2013 calendar year.
  • The maximum annual contribution to a self-only or individual HSA for HDHP coverage increased from $3,250 for 2013 to $3,350 for 2015.
  • The maximum annual contribution to a family HSA for HDHP coverage increased from $6.450 for 2013 to $6,650 for 2015.
  • The age 55 and over annual catch up additional contribution remains at $1,000 for 2013 through 2015.
  • The minimum self-only HDHP deductible increased from $1,250 for 2013 to $1,300 for 2015.
  • The minimum family HDHP deductible increased from $2,500 for 2013 to $2,600 for 2015.
  • The maximum self-only HDHP out-of-pocket (OOP) expense amount (which includes deductibles and co-payments as well as other expenses) increased from $6,250 for 2013 to $6,450 for 2015. Starting in 2015, prescription-drug costs also must count toward the out-of-pocket maximum.
  • The maximum family HDHP out-of-pocket expense amount (which includes deductibles and co-payments as well as other expenses) increased from $12,500 for 2013 to $12,900 for 2015 family coverage.
  • There is a similar but separate new 2015 in-network OOP expense limit for group health plans under the ACA. set at $6,600 for self-only coverage and $13,200 for family coverage (2015 plan and tax year)
Source:  IRS Revenue Procedure 2014-30; the IRS announced the new inflation-adjusted increases for Health Savings Account (HSA) contributions and high-deductible health plan (HDHP) deductibles  [Material updated May, 2014]

What is Covered or Allowable for HSA Payments?

Traditional medical costs such as diagnosis and treatment of disease are allowable, as well as routine medical visits. In addition, many expenses that may not be covered by traditional health insurance can be paid for through HSA accounts. These include prescription drugs and some non-prescription drugs, eye care, dental care, COBRA premiums, acupuncture, Braille books, midwife services, seeing-eye dogs, qualified long-term care services, and more. If an enrollee uses HSA money for non-medical expenses and is under the age of 65 or not disabled, he or she will incur a 10 percent penalty in addition to owing regular federal income tax on such amounts.
An employer may elect to contribute financially to an employee HSA as much or as little as they choose (while staying below the annual legal limit on the account of $2,850 or $5,650 for employees with family coverage).

Federal Health Reform Creates New Rules for HSAs

The federal law, PPACA, eliminated the use of HSA dollars to pay for over-the-counter drugs, unless obtained with a prescription or doctor's orders. An additional provision increased the penalty for early withdrawal from 10% to 20%.

The reform law requires that health plans pay at least 60% of the actuarial value of covered benefits. Actuarial value generally includes deductibles, copayments and coinsurance. But high-deductible health plans typically have lower actuarial values than do more traditional types of coverage because they don’t cover medical expenses until the annual deductible is met. To pay for those costs, enrollees can tap their HSA.  Beginning in 2014, employee contribtions may not be counted in the autuarial value -- unless future HHS guidance or regulations specify that they do count. 

  • CMS Bulletin updates HSAs and Federal Reforms.  In a release Feb. 24, 2012 titled Actuarial Value and Cost-Sharing Reductions Bulletin by CMS’s Center for Consumer Information and Insurance Oversight, a bulletin  gave proponents of account-based health plans some good news by suggesting that employer contributions to health reimbursement arrangements (HRAs) and health savings accounts (HSAs) could be taken into account when determining actuarial value of qualified health plans (QHPs) and nongrandfathered small-group and individual policies. But it doesn’t look like contributions made by account owners will be included in the calculation.

Recent Reports and Articles PDF Icon

High-Deductible Health Plans: The Top Revenue Challenge in 2015

Healthcare financial leaders say high-deductible health plans, whether pushed by employers or offered through the exchanges, are rapidly expanding the risk of non-payment. Many consumers choose plans with the smallest upfront cost and largest deductibles, and they often lack a thorough understanding of the plans. [Full text]  Published by HealthLeaders Media, January 5, 2015

HSA Shift Leads to Sustained Reduction in Health Care Spending   (July 2013)

(Report by EBRI; excerpts and link below, July 2013)
A high-deductible health plan linked with health savings accounts reduced health spending initially, and over a four year period, according to new research from the nonpartisan Employee Benefit Research Institute (EBRI).

"In one of the first studies of its kind, EBRI analyzed detailed claims data over a five-year period from a large Midwestern employer that adopted a high-deductible health plan with a health savings account (HSA) for all employees in place of its traditional health care offering.  EBRI found that introducing the full-replacement HSA plan (meaning it was the only type of health plan the employer offered) reduced the plan’s total health care spending by 25 percent in the first year, or $527 per person in the aggregate. Results show that spending was reduced significantly in the inaugural year of the HSA plan in medical, pharmacy, and total-claims categories,” said Paul Fronstin, director of EBRI’s Health Education and Research program, and a co-author of the report. “Results also show the cost savings continued over the succeeding three years—albeit at a slower pace.”
Among the key findings:

  • Each category of health spending experienced statistically significant reductions in the first year of the HSA plan with the exception of spending on inpatient hospital stays. Spending on laboratory services and prescription drugs had the largest statistically significant declines (36 percent and 32 percent, respectively).
  • However, only pharmacy and laboratory spending were statistically significantly lower throughout the entire four years after the HSA plan was adopted.
"Reductions in pharmacy spending were large and mostly sustained over the four years after the HSA was adopted. In the first year of the HSA, pharmacy-spending reductions were 40–47 percent for individuals in all but the highest quintile of spending" 
-Full text - Health Care Spending after Adopting a Full-Replacement, High-Deductible Health Plan With a Health Savings Account: A Five-Year Study,” available online at
  • Why You May Want To Reconsider That Plan With A Health Savings Account.  Health plan deductibles keep getting higher — the proportion of workers with a deductible that topped $1,000 for single coverage nearly tripled in the past five years, to 34 percent.

    Since high-deductible plans often mean you pay more out of pocket for medical care, it might seem like a no-brainer to sign up for a plan that links to a health savings account so you can sock away money tax free to cover your medical expenses. But there are good reasons to think twice before making that choice.

    In order to get the tax advantages of a health savings account, the health plan it’s linked to has to meet certain criteria. In 2013, for instance, an HSA-qualified plan has to have a deductible of at least $1,250 for single coverage and $2,500 for family coverage, and the maximum out-of-pocket limits can be no higher than $6,250 and $12,500, respectively, for single and family coverage.

    But HSA-qualified plans have other limitations that consumers often aren’t aware of. For one thing, even though the Affordable Care Act allows parents to keep their adult children on their policies until they reach age 26, they can’t use funds from their HSA to pay for the child’s care after age 24. That’s because “dependent” is defined differently for HSA purposes than it is under the ACA provisions that extend dependent coverage to adult children.

    In addition, except for preventive care, which is generally covered at 100 percent and is not subject to the deductible, consumers in an HSA-qualified plan may be on the hook for the entire cost of medical care — including doctor visits, medications, tests and treatments — until they reach their deductible. (They will be charged the negotiated rate their insurer has agreed to pay providers for services, however, not the “rack” rate paid by the uninsured.)

    Regular high-deductible plans, on the other hand, offer many more options. In addition to covering preventive care at 100 percent, some function like traditional plans, requiring only a copayment for doctor visits and medicines even before the deductible is met. Or they may offer a limited number of doctor visits with a copayment before people meet their deductible, says Carrie McLean, senior manager of customer care at, an online vendor.  Consumers need to evaluate the full spectrum of costs and benefits for HSA plans, but the advantages may have nothing to do with medical expenses, she advises. “The true benefit you get from these accounts is because you’re putting money away and you get that tax [savings],” says McLean.  [Read full commentary online, posted April 2, 2013]

  • HSA Bank, a commercial firm which specializes in offering and administering health savings accounts, has a new consumer web feature at, with the slogan "Own Your Health." HSA Bank also acquired the health savings account business from JP Morgan Chase in September 2014.  [NOTE: NCSL does not endorse individual commercial products or offerings]
  • Patients in Consumer Driven Health Plans Show More Cost-Conscious Behavior - According to the 2011 EBRI/MGA Consumer Engagement in Health Care Survey, those in CDHPs were more likely to say that they had checked whether their plan would cover care; asked for a generic drug instead of a brand name drug; talked to their doctor about treatment options and costs; talked to their doctor about prescription drug options and costs; developed a budget to manage health care expenses; checked a price of service before getting care; and used an online cost-tracking tool. Published by EBRI, January 2012.
  • Consumer-Directed Health Plans: Health Status, Spending, and Utilization of Enrollees in Plans Based on Health Reimbursement Arrangements - July 16, 2010 GAO-10-616 - [Read summary below]
  • Health Savings Account Enrollment Reaches Ten Million - AHIP survey, June 2010.
  • "Hoosiers and Health Savings Accounts: An Indiana experiment that is reducing costs for the state and its employees." - By Mitch Daniels in the Wall Street Journal, 3/2/2010.
  • Missing HSA Money Raises Questions - National Public Radio, 2/19/10
  • Indiana First to Expand Medicaid Coverage via Health Accounts - The Healthy Indiana Plan (HIP), which began January 1, 2008, is designed to cover up to 130,000 uninsured residents.  Published by Commonwealth Fund, 3/08.

NCSL Resources

"By the Numbers: 2008-2013 Surveys":

ACA Sparks Renewed Interest in CDHPs; FedEx Shifts to Account-Based Plans  (2013)

Reprinted from HEALTH PLAN WEEK (c); Health Business Daily Story, Aug. 26, 2013

The trend toward consumer-directed health plans (CDHPs) got a major convert this month when package delivery giant FedEx Inc. said it would not only offer such plans, but actually switch its entire 400,000-some workforce to account-based insurance starting in 2014. Cigna Corp. and WellPoint, Inc.’s Anthem Blue Cross and Blue Shield will administer the new benefit.
Consultants and industry stakeholders didn’t blink at the news, considering that CDHPs have been around for more than a decade, but did stress that the reform law appears to be accelerating the speed at which large groups are moving away from more traditional coverage.
Tim Finnell, a certified health care reform specialist and president of Group Benefits LLC in Memphis, Tenn., says he sees a lot of large employers at least considering making a change. Finnell says FedEx, which is a bulwark in his hometown of Memphis, is being proactive by announcing its intentions now, well before open enrollment in the fall. “FedEx has always been innovative and ahead of the curve.…But this is part of a trend we are seeing shifting the cost to the claims side from the premium side,” he says. The consumer-directed plans, like the account-based program FedEx will roll out, puts members in a position to help themselves by making healthy choices, joining incentive-based preventive care programs and shopping for services.
FedEx spokesperson Scott Fiedler tells HPW that the reform law “is causing all employers to re-examine how they provide health care benefits to their employees. FedEx is no exception. Like many large employers, FedEx is self-insured and is working proactively to address rising coverage costs.”
CDHP Trend Gains Speed
Industry sources say the FedEx account-based plan likely will offer different levels of deductibles and will be tied to a health reimbursement arrangement (HRA). All prescriptions, preventive care programs and member primary care doctor visits to in-network providers will be covered outside of the annual deductible, with coinsurance instead being used in those instances. A $400 annual HRA contribution will offset the annual deductible for individual workers. Employees with children will have a $650 HRA contribution, while those with family coverage will have an $800 contribution.


The itms below were published in 2011 or earlier and should not be used for current research purposes. They illustrate the rapid spread of interest and regulation of HSAs in the previous decade, but not more recent activity.

TABLE 1: 2009-2011 HSA Legislation (Examples of enacted bills and signed laws, as of March 1, 2011)

State / bill / web link / sponsor

 Description / excerpts of bill text
Bill status may change frequently - check state legislative offices or web sites for the most recent actions.


HB 188
Rep. Clark

Amends the Insurance Code and the Governor's Office of Economic Development Code to expand access to the health insurance market, increase market flexibility, and provide greater transparency in the health insurance market.
(filed 2/6/09; signed into law by governor, 3/11/09)

HB 195
Rep. Lockhart

Expands the definition of trust in the Uniform Probate Code to include health savings accounts as defined by the Internal Revenue Code; clarifies when a health savings account is established in relation to the account holder's federal income tax year.
(filed 3/25/09; signed into law by governor, 3/25/09)

HB 2557
Rep. Nixon

The Department of Human Resource Management shall establish a plan for providing health insurance coverage for state employees and retired state employees.  One of the health coverage options shall be a high deductible health plan that would qualify for a health savings account purusant to Section 223 of the Internal Revenue Code of 1986, as amended.
(filed 1/20/09; signed into law by governor as Chapter 247, 3/27/09).

S 2a
Senate Organization Comm.
Creates a nonrefundable individual state income tax credit for certain amounts relating to health savings accounts (HSAs) that may be deducted from, or are exempt from, federal income taxes.
(Filed 1/25/11; signed into law by governor  as Chapter 2011-1, 1/24/11)


TABLE 1A: 2007-2008 HSA laws

State / bill / web link / sponsor

 Description / excerpts of bill text
Bill status may change frequently - check state legislative offices or web sites for the most recent actions.

HB 170
House Labor and Commerce Committee

States that a health care insurer that offers, issues, delivers, or renews a health care insurance plan in the state may apply deductible or copayment requirements to health care benefits and services that qualify the health care insurance plan as a high deductible health plan.

(Filed 3/1/07; passed House 4/24/07; passed Senate 5/7/07; signed into law by governor as Chapter No. 38, 7/6/07)

HB 2789
Rep. McComish

Requires that the Department of Administration shall design for state employees a program for the use of health savings accounts with a qualifying state-sponsored high deductible health plan, as defined in Public Law 108-173.
(Filed 4/30/07; passed House 5/30/07; passed Senate 6/18/07; signed into law by governor as Chapter No. 263, 6/25/07)

HB 1484
Rep. Maloch

Updates AR tax code to allow continued state tax deduction for HSA contributions.
(Filed 2/13/07; passed House 2/16/07; passed Senate 3/1/07; signed into law by governor as Act No. 218, 3/6/07)

SB 07-01
Sen. Hagedorn

Creates the Colorado Cares Rx generic drug discount program for uninsured residents under 300 percent of federal poverty.  Provides that the program "may expand eligibility" also to "underinsured" residents covered by a high deductible health plan.
(Filed 1/10/07; passed Senate 1/26/07; passed Assembly 2/1/07; signed into law by governor as Act 1, 2/5/07)

H 977
Rep. Knox
Provides for the Commissioner of Insurance to adopt policies to promote, approve and encourage HSA-eligible high deductible plans; provides for health reimbursement arrangement only plans that encourage employer financial support of health insurance or health related expenses; provides for an income tax deduction for high deductible health plans established and used with a health savings account for individuals to employers.
(Filed 1/18/08; passed House and Senate ; signed into law by governor , 5/7/08)

S 383

Provides for the Commissioner of Insurance to promote, approve, and encourage health savings account eligible high deductible plans.
(Filed 1/18/08; passed House and Senate ; signed into law by governor , 5/7/08)
SR 139
Sen. Hill Ju
Urges the Congress of the United States to raise the allowable deduction for health savings accounts, to allow certain older citizens to contribute additional amounts, and to make all health insurance premiums pre-tax; and for other purposes.

(Filed 2/2/07; passed Senate 3/27/07; passed House 4/19/07; signed into law by governor as Act No. 146)

HB 1678
Rep. Brown,
Gov. Daniels
Establishes the new "Indiana Check Up Program" which combines HSA-like "POWER (Personal Wellness Responsibility) accounts" with high-deductible, back-up commercial health plans to expand coverage to an estimated 140,000 low-income state residents. 350,000 residents meet the eligibility requirements. Qualifying enrollees will pay for a portion of the POWER accounts on a sliding scale of 2%-5% of their annual income, up to annual family income of 200% of federal poverty ($41,000 for a family of four). Prescription drugs are covered without a high-deductible. Increases the state cigarette tax  by 44 cents to provide funds for the new Check Up program, estimated to raise $206 million annually.  Requires a federal Medicaid waiver; scheduled to take effect January 1, 2008.
( Signed into law by governor 5/10/07/07)
SB 11
Joint Committee on Administrative Rules and Regulations
States that the legislative coordinating council shall appoint a legislative study committee during the 2007 interim period to study and review various options for tax credits and benefits for the purchase of long-term care insurance, health earned income tax credits, health insurance and health savings accounts.

(Filed 1/8/07; passed Senate 2/15/07; passed House; 4/2/07; signed into law by governor 5/10/07)

S 81
As part of health reform, provides for employer-sponsored cafeteria plan, which " may offer the option of paying all or any portion of the health insurance premium or the option of receiving health insurance coverage through a high deductible health plan and the establishment of a health savings account. Also provides that state employees who choose HSAs & HDHPs are entitled to the state contributing funds equal to the cost of the state's standard contribution, to be deposited by the stte into the HSA.
(Passed Senate and House; signed into law by governor  as Chapter 2008-164, 6/9/08)
SB 6a
Sen. Miller
Establishes a Small Employer Health Benefit Plan Premium Subsidy Program; authorizes the Health Care Commission to alter subsidies; states that contributions to health savings accounts shall be considered premium contributions; also establishes a Health Care Coverage Fund and authorizes the State Health Services Cost Review Commission to assess hospital rates.
(Filed 10/29/07; passed Senate and House; signed into law by governor , 11/19/07)
SB 780
Sen. Currie

Requires the Blue Ribbon Commission (Study Retired Health Care Funding Options) to review alternative vehicles for providing health care benefits to State retirees including Voluntary Employee Beneficiary Accounts (VEBAs), section 401 (h) accounts, Section 115 trusts, health reimbursement arrangements, and health savings accounts.
(Filed 2/4/07; passed Senate 3/22/07; passed House 4/5/07; signed into law by governor as Chapter No. 355, 5/8/07)

SB 1920
Sen. Sparks

Authorizes commercial banks, savings banks, savings associations, credit unions, or industrial loan and thrift companies to act as trustees or custodians for health savings accounts under federal law.
(Filed 3/15/07; passed Senate 4/23/07; passed House 5/1/07; signed into law by governor as Chapter No. 44, 5/4/07)

S 3780
Sen. Lourey

Within a health reform package, provides that  "the health insurance benefit plans offered in the commissioner's plan must include an option for a health plan that is compatible with the definition of a high-deductible health plan .
(Signed into law by governor as Chapter No. 358, 5/29/08)

HB 41
Rep. Janus

Provides that amounts received by an individual which may be excluded from income as foreign earned income for federal income tax purposes shall be excluded from gross income for state income tax purposes. The amount deposited in a health savings account, and any interest accrued thereon, that is a part of a health savings account program as specified in the Health Savings Accounts Act created in Sections 83-62-1 through 83-62-9; however, any amount withdrawn from such account for purposes other than paying qualified medical expenses or to procure health coverage.
(Filed 12/21/07; passed House 2/22/07; passed Senate 3/20/07; signed into law by governor as Chapter No. 443, 3/26/07)

HB 818
Rep. Ervin

Beginning with the 2009 plan year, the board shall offer to all qualified state employees and retirees and participating public entities the option of receiving health care coverage through a high deductible health plan and the establishment of a health savings account.
(Filed 2/8/07; passed House 4/12/07; passed Senate 5/10/07; signed into law by governor 6/1/07)

S 1557
Sen. Vitale
As part of health reform plan, provides that for qualified high deductible health plans with a health savings account, a "deductible shall not be applied for any benefits provided" that represent preventive care.
(Passed House; passed Senate; signed into law by governor as Chapter No. 2008-38, 7/7/08)
H 265
Establishes the North Carolina health insurance risk pool; funds the program from savings to the general fund realized from the repeal of the tax credit for small business employee health benefits and from other sources.  The Pool is required to "offer at least two types of benefit plans  including preferred provider organizations with different levels of deductibles and cost-sharing, and at least one choice of a health savings account.
(Filed 2/19/07; passed House and Senate; signed into law by governor  as Act  2007-532, 8/31/07/07)
HB 1301
Rep. Keiser
Authorizes banks to serve as custodians for health savings accounts and health care cost funding accounts.
(Filed 1/8/07; passed House 1/25/07; passed Senate 3/1/07; signed into law by governor 3/6/07)
H 119
The FY 2008 appropriations bill provides that cities, town counties and other political subdivisions that provide health care benefits for their officers or employees may "establish and maintain a health savings account program in accordance with section 223 of the Internal Revenue Code.  Public moneys may be used to pay for or fund federally qualified high deductible health plans that are linked to health savings accounts or to make contributions to health savings accounts.
(Filed 3/20/07; passed House and Senate; signed into law by governor as Chapter 15, 6/30/07)

HB 1928
Rep. Steele

Requires the State and Education Employees Group Insurance Board to make the health savings account available to eligible employees; specifying time in which certain plan is offered; requires confirmation of health savings account to certain Board by employees; providing for codification; and declaring an emergency.
(Filed 1/22/07; passed House 3/14/07; passed Senate 4/11/07; signed into law by governor as Chapter No. 269 6/04/07)

SB 329
Sen. Courtney

Establishes the Oregon Health Fund program, that includes taking best advantage of health savings accounts and similar vehicles for making health insurance more accessible to uninsured individuals.

(Filed 1/15/07; passed Senate 6/20/07; passed House 6/22/07; signed into law by governor 6/28/07)

S 1093a
Requires the Oregon Health Fund Board to establish a committee to examine the impact of federal law requirements on reducing the
number of Oregonians without health insurance, improving Oregonians' access to health care and achieving the goals of the Healthy Oregon Act, focusing particularly on barriers to reducing the number of uninsured Oregonians, including "Taking best advantage of health savings accounts and similar vehicles for making health insurance more accessible to uninsured individuals."
(Filed 2/08; passed special session , 2/08; signed into law by governor 3/11/08)
HB 377
Rep. Evans
Deleted a special "small business health savings account tax credit" that had granted a 50% credit for employers and a 25% credit for emplotees.
( Signed into law by governor as Act 2008-66, 7/9/08)
H 7390
Rep. Watson
FY09 budget provides that the department of human services is authorized to create consumer directed health care accounts, including but not limited to health opportunity accounts or health savings accounts, in order to increase and encourage personal responsibility, wellness and healthy decision-making, disease management, and to provide tangible incentives for beneficiaries.
( Signed into law by governor as Public Law 2008-100, 7/9/08)

SB 10
Sen. Nelson

Establishes the Medicaid Health Savings Account Pilot Program.  If the commission determines that it is cost-effective and feasible, the commission shall develop and implement a Medicaid health savings account.
(Filed 3/1/07; passed Senate 4/17/07; passed House 5/23/07; signed into law by governor 6/14/07)

HB 8
Rep. Clark
Modifies the State Retirement and Insurance Benefit Act by requiring the office to consult with covered employers in addition to certain state agencies prior to determining the amount of annual contributions to an HSA; also allows changes in plans more frequently than the old "once per three years" standard.
(Filed 1/15/07; passed House 2/5/07; passed Senate 2/23/07; signed into law by governor as Chapter No. 130. 4/2/07)
HB 1569
Rep. Cody

Establishes a Health Insurance Partnership for the purchase of small employer health insurance coverage, evaluating the inclusion of additional health insurance markets in the health insurance partnership, and studying the impact of health insurance mandates.  The health benefit plan must include one high deductible health plan as well as a range from catastrophic to comprehensive coverage.]
(Filed 1/23/07; passed House 3/10/07; passed Senate 4/12/07; signed into law by governor as Chapter No. 2007-260, 5/2/07)

SB 5336
Sen. Murray
Protects individuals in domestic partnerships by granting certain rights and benefits, including opening joint HSA and high deductible accounts.
(Filed 1/17/07; passed Senate ; passed House ; signed into law by governor , 4/21/07)
SB 5640
Sen. Kauffman
Authorizes tribal governments to participate in public employees' benefits board programs; which plans now include HSA options.
(Filed 1/26/07; passed Senate ; passed House ; signed into law by governor as Chapter No. 2007-114, 4/18/07)


TABLE 2: 2005-2006 HSA Laws

State / bill / web link / sponsor

 Description / excerpts of bill text
Bill status may change frequently - check state legislative offices or web sites for the most recent actions.

SB 1416
Sen. Martin

Provides that a corporation, health care services organization, disability insurer, or group or blanket disability insurer may offer health care plans or disability insurance policies that contain deductibles, coinsurance or copayments without any restriction or limitation on those deductibles, coinsurance or copayments or without any limits on the level of reimbursement for contracted health care providers. The bill also allows a health benefit plan intended to qualify as high deductible plan as defined in the federal tax code to include deductibles, copayments and coinsurance to benefits provided under the health benefit plan.
(Filed 1/31/05; passed Senate 3/10/05; passed House 4/12/05; signed into law by governor   as Chapter 111, 4/18/05)

HB 1064
Rep. Bond

Allows an income tax deduction for contributions made to a health savings account; exempts the interest earned on the account from income tax; makes conforming amendments to existing law.
(Filed 1/05; signed into law by governor as Act No. 94,  2/11/05)

SB 1136
Sen. Miller

Authorizes the State comprehensive health insurance pool act to provide for health savings accounts that comply with applicable federal law; appropriates funds.
(Filed 1/05; signed into law by governor   as Act No. 2292, 4/14/05)

AB 115
Assm. Klehs
Amends the Personal Income Tax Law to clarify that contributions to health savings accounts not be excluded from state income tax. "Section 106(d) of the Internal Revenue Code, relating to contributions to health savings accounts, shall not apply."
(Filed 1/12/05; passed Assembly and Senate 9/7/05; signed into law by governor as Chapter 691, 10/7/05)
FL FY 2005-06 budget provides "The State Group Health Insurance High Deductible Plan and the state-contracted Health Maintenance Organization High Deductible Plan shall include a health savings account feature. Such plans and accounts shall be administered in accordance with the requirements and limitations of federal provisions relating to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. The state shall make a monthly contribution to an employee’s health savings account equal to $41.66 for individual coverage and $83.33 for family coverage.
(Passed House and Senate; signed into law by governor    6/05)

HB 811,
HB 1503,
SB 1660

Authorizes health insurance and the Employee Health Care Access Act; and health maintenance organizations to offer high-deductible plans in conjunction with a health savings account; also provides for a healthy lifestyle rebate .
(Filed 2/14/05; HB 811 passed to enrollment 5/6/05; signed into law by governor   as Chapter No. 2005-231, 6/14/05)

SB 424
Sen. Carlton

Requires the establishment of certain insurance plans within the state group insurance program; requires that high deductible plans include a savings account; specifies the monthly payment amounts for certain types of coverage; authorizes the establishment of health savings accounts for full-time and part-time employees.
(Filed 12/3/04; passed Senate and House ; signed into law by governor     as Chapter No. 2005-97, 6/1/05)

SB 660

Exempts assets held in benefit plans from legal process in favor of creditors or other claimants assets held in certain medical savings accounts.
(Filed 1/12/05; passed Senate and House ; signed into law by governor   as Chapter No. 2005-101, 6/1/05)

HB 291
Makes an exception to a requirement for a carry-over deductible for policies or plans designed and issued to be compatible with a health savings account created under  the federal MMA.  Effective 7/1/05.
(Filed 1/05; passed House and Senate ; signed into law by governor   as Public Act 82, 5/2/05)

SB 1198
Judiciary & Rules Comm.

Amends existing law relating to insurance to define individual health savings account (HSA) compatible health benefit plans to reference catastrophic A, catastrophic B and health savings account compatible health benefit plans; and to provide that HSA compatible health benefit plans shall provide a specified lifetime maximum benefit per carrier with cost-sharing features that meet federal qualifications.
(Filed 3/14/05; signed into law by governor   as Chapter No.353, 4/12/05)

SB 173

Authorizes a credit union to act as a trustee or custodian under health savings accounts and similar tax-advantaged plans established under the federal Internal Revenue Code.
(Filed 2/2/05; passed Senate and House 5/5/05;  signed into law by governor   as Public Act 94-0150, 7/8/05)

HB 1001
The 2005 state budget includes language to conform Indiana income tax code with federal HSA exemptions. Effective 7/1/05.
(Filed 1/06; signed into law by governor     as Public Law No. 82, 5/2/05)

HB 1179

Updates references to federal laws and regulations in the Uniform Consumer Credit Code; allows credit unions to offer health savings accounts.
(Filed 1/6/05; signed into law by governor   as Public Law No. 141, 5/4/05)

HB 186
Conforms the Iowa state income tax deduction with the federal code; applies retroactively to January 1, 2003, for tax years beginning on or after that date.
(Filed 1/05; passed House and Senate ; signed into law by governor   4/13/05)

HB 2098,
HB 2276

Authorizes any bank to act as trustee or custodian to manage health savings accounts (HSAs) and  medical savings accounts (MSAs) without needing a special permit.  HB 2276 has the identical effect, but renumbers sections in HB2098.
(Filed 1/20/2005; passed House 2/9/05; passed Senate 3/16/05;   signed into law by governor 3/28/05;
HB 2276 filed 2/3/05; passed House 2/21/05; passed Senate 3/24/05;   signed into law by governor   4/13/05)

SB 257

Provides that contributions to health savings accounts by certain employers (small employers, sole proprietors, business partners and limited partners) are eligible for employers' state income tax credits up to $70 per month in year one;  $50 per month in year two and $35 per month in year three.
(Filed 2/11/05; passed Senate 3/23/05; passed House 4/1/05;   signed into law by governor   4/12/05)

HB 272

Conforms Kentucky state income tax code to federal tax law after 2001. Effective date: 3/18/05.
(Filed 1/05; signed into law by governor   as Public Act 168, 3/18/05)

HP 1418
Provides that mandated benefits for prosthetic devices under health plans issues in combination with HSAs may be subject to the same deductibles and out-of-pocket limits that apply to overall benefits under such plans.
(Filed 1/05; signed into law by governor   as Public Act 168 3/18/05)
SB 521
Exempts HSA-related high deductible health policies from the prohibition of requiring a deductible for certain home visits to mothers and newborns.
(Filed 1/06; signed into law by governor   as Public Act 316, 5/10/05)
H. 4850
Conference Comm.
Creates the Health Care Access and Affordability Act, a multi-prong approach toward universal coverage.  Section 60 enables HMOs to offer high-deductible coverage plans that are linked to health savings accounts, but restricts the maximum deductible to the maximum annual contribution to an HSA (individual coverage $2,700; family coverage $5,450). Such high-deductible policies may only be sold in combination with an HSA.  It also requires all individuals who can afford to do so to maintain health insurance through their employer, a state-run program, or in the individual market; private insurance companies would be encouraged to provide lower-cost plans. 
(Different versions filed 1/05; conference committee redraft passed 4/4/06; signed into law by governor as Chapter 58, 4/12/06)
HB 138
Allows exemption/deduction of HSA contributions from state income taxes.
(Filed 1/05; signed into law by governor as Chapter 4, in special session 7/13/05) 

HB 999,
HB 1128,
HB 1213,
SB 2633

Excludes funds deposited in a health savings account from gross income under the state income tax law; provides that withdrawals for purposes other than paying qualified medical expenses will counted as taxable gross income.
(Filed 1/17/05; HB 999 and HB 1118 died in committee ;
HB 1213 passed House and Senate ;  signed into law by governor   3/29/05;  
SB 2633 passed Senate and House; signed into law by governor 4/6/05)

LB 465
Provides powers relating to health savings accounts; provides and changes provisions relating to exemptions from claims of creditors for medical and health savings accounts.
(Filed 1/13/06; passed legislature; signed into law by governor 6/2/05)
AB 338
Makes changes relating to insurance regulation; provides for the regulation of medical discount plans; allows health insurers to offer policies of health insurance that have high deductibles and are in compliance with federal requirements for health savings accounts.
(Filed 3/31/05; passed Assembly and Senate ; signed into law by governor as Chapter 456, 6/17/05)
A 4543
Assm. Cohen
Concerns availability, deductibles, and certain treatment under high deductible health plans paid through federally qualified health savings accounts. Exempts high deductible policies with HSAs from state mandates for newborn hearing loss screening, measurement for lead poisoning for children and childhood immunizations, but requires HMOs with high deductible policies to offer "care services to any enrollee which include services provided in-network for "medically necessary preventive care as permitted by (the HSA) federal law."
(Filed 12/12/05; passed Assembly and Senate; signed into law by governor as Chapter 248, 12/21/05)

HB 1208

Authorizes excluding high-deductible health plans from mental health, substance abuse and related mandates in order to meet federal requirements for tax qualification of health savings accounts.
(Filed 1/5/05; passed House ; passed Senate ; signed into law by governor   3/15/05)

HB 5,
SB 5

Would permit small employers to offer health care plans without mandated benefits otherwise required by statute,  and providing for the operation of health savings accounts consistent with federal laws, also would limit copayments and deductibles paid by persons insured by health benefit plans.  Effective 3/27/07.
(Filed and sent to committees 1/24/05; SB 5 passed Senate 11/14/06; passed House 12/7/06; signed into law by governor 12/22/06)

HB 46
Rep. Schaffer

Authorizes all political subdivisions (cities, towns, counties, school districts) that provide health care benefits to use increased tax-deductibility of unreimbursed medical expenses and incorporates favorable state tax treatment of new health savings accounts .  Effective date 8/17/06.
(Filed 2/15/05; passed House and Senate ; signed into law by governor 5/16/06)
HB 193
Permits the sale of group life insurance to specified groups; provides that copayments for a high deductible plan linked to a health savings account are reasonable; authorizes higher deductibles for high deductible health plans linked to health savings accounts; relates to payment of premiums, private retirement plans, exclusion, limited coverage and life insurance policies to creditors.
(Filed 4/12/05; passed House and Senate; signed into law by governor as Session Law 34, 8/16/05)
HB 1535
Authorizes and encourages the creation of the Health Savings Accounts, redefines employer's insurance and mandate exemptions.
(Filed 1/21/05; passed House and Senate; signed into law by governor   as Chapter 129, 5/9/05)
HB 1848
Creates the Health Savings Account Act; provides requirements for health savings accounts; provides for tax treatment; provides that withdrawal of money for any other purpose is classified as income. Provides that a transfer under a divorce or separation instrument and the interest after transfer shall be treated as a health savings account.
(Filed 1/21/05; passed House and Senate; signed in to law by governor , 6/6/05)

HB 107
Rep. Payne

Authorizes the establishment and maintenance of health savings accounts and specifies restrictions on HSAs under state law.  Eliminates previous mandated requirement that insurers provide coverage of at least one home health visit for new mothers who are discharged from the hospital less than 48 hours following a normal delivery or 96 hours after a Caesarean delivery. Also changed required coverage of medical foods for the treatment of several health conditions.  Applies to tax years beginning with 2005.
( Deleted from final bill : Would provide for special tax exclusions from state personal income tax)
(Filed 1/24/05; passed House and sent to Senate 5/24/05, signed into law by governor   as Act 48, 7/14/05) 
(See partial repeal contained
in SB 300 of 2006, below)

SB 300
Sen. Armstrong
Repeals part of 2005 HSA law (section 4) that exempted "any income of a health savings account" or any amount paid or distributed out of an HSA.
(Deleted from final bill: Would have exempted HSA deposits and contributions from state income tax.)
(Filed 2/15/05; passed Senate 4/20/05; passed House 6/30/06; signed into law by governor as Act 67, 7/6/06)

HB 5228

Modifies state health mandate law to provide that a deductible and coinsurance factor may be applied to early intervention services covered by high deductible health plans issued in conjunction with health savings accounts.
(Filed 2/1/05; passed House and sent to Senate 5/4/05, signed into law by governor    6/28/05)

HB 330
Rep. Berman

Exempts health savings accounts from seizure in legal cases for satisfaction of debts. Effective on signing, 5/24/05.
(Filed 1/7/05; passed House 3/31/05; passed Senate 5/10/05; signed into law by governor   5/24/05)

HB 1602
Amends the definition of high deductible health plan in state Insurance law; provides that no other provision of law, including mandates, may be construed to prevent use of deductibles or co-payments to qualify a policy or certificate of coverage as a HDHP.
(Filed 1/05; signed into law by governor   5/24/05)

HB 2772
Rep. Farabee

Requires an evaluation of the long-term impact of implementing a health reimbursement account program or a health savings account and high-deductible health plan program as a part of the group benefits program for state employees, retirees and their dependents.
(HB 1795 filed 3/1/05; passed House ; held in Senate 5/16/05; HB 2772 passed House and Senate 5/27/05; signed into law by Governor   6/17/05)

HB 76
Rep. Daw
Requires a High Deductible Health Plan and HSA option for Public Employees Benefit and Insurance Program (PEHP).
(Filed 1/4/06; passed House 2/13/06;  passed Senate 3/1/06;  signed into law by governor as Chapter 276, 3/17/06)

HB 1492,
SB 1097

Requires the Department of Taxation and the State Corporation Commission to amend the Virginia Medical Savings Account Plan to address the provisions of federal law that permit eligible individuals to establish health savings accounts to be called the Virginia Health Savings Account Plan; amends provisions facilitating the sale and use of high deductible health plans.
(Filed 8/5/04; passed House & Senate; signed into law by governor as Acts of Assembly Chapters 503 &. 572, 3/22/05)  

SB 6090
Sen. Prentice
FY05-07 operating budget includes provision for a non-binding study by the Health Care Authority of health savings account option state Public Employees plan.
(Filed 3/22/05; passed House and Senate 4/24/05; signed into law by governor   as Chapter 518, 5/17/05)



TABLE 3: 2004 HSA Laws

State / bill / web link / sponsor

Description / excerpts of bill text
Bill status may change frequently - check state legislative offices or web sites for the most recent actions.


SB 94

Concerns the implementation of health savings accounts; eliminates medical savings accounts for basic health benefit plans for small employers; converts the tax provisions for medical savings accounts to apply to health savings accounts.
(Filed 1/12/04; passed by Senate and House; signed by Governor Owens 5/17/04)

HB 5204

Amends Insurance statute provisions regarding high deductible health plans, medical savings accounts, by adding “health saving accounts” and “Archer MSAs” to existing medical savings accounts as not subject to deductible limits under state law.
(Filed 2/11/04; passed House and Senate; signed by governor as Public Act 04-174, 6/1/04)

HB 1629

Creates the Florida Health Insurance Plan; creates Discount Medical Plan Organizations; provides for insurance rebates for healthy lifestyles. Requires Blue Cross and 11 other insurers that sell to small businesses to offer HSAs as an option.
(Passed House and Senatesigned by Governor Bush 6/15/04)

HB 2545

(In  §2) Provides for conformance with federal law regarding health savings accounts; pertains to the effect of health savings accounts on certain types of coverage .
(Passed House and Senate; signed by governor )

HB 1610
Rep. Morrish

Authorizes the LA Office of Group Benefits and political subdivisions such as cities and parishes to establish health savings accounts and similar accounts for their employees; requires political subdivisions to utilize a third party administrator.
(Filed 4/21/04; passed House and Senate; signed by governor as Act 890, 8/2//04)

SB 538

Makes nominal changes relative to health insurance policies, clarifying health savings accounts and high deductible health plans. Certain policies and plans will be exempt from laws on premium rating of small group and individual health insurance policies for small employers.
(Filed 3/19/04; passed by House and Senate; signed by governor as Act 662, 7/7/04)

HB 933 &
SB 3143

Repeals a requirement that the Maryland Health Care Commission develop a modified health benefit plan for medical savings accounts; also repeals a requirement that the Commission adopt regulations that specify a modified health benefit plan for medical savings accounts that meet specified federal qualifications; provides that the rate cap on the Comprehensive Standard Health Benefit Plan in the small group market does not apply.
(Filed 2/11/04; passed House and Senate4/04; signed by governor as Chapter 386, 5/11/04)


ARCHIVE: State Laws and State Obstacles to HSAs

According to an analysis of existing laws conducted by insurers, there are three broad categories of state laws related to state tax treatment of HSAs.  An updated analysis including NCSL data shows the following:

 HSA Policy  States  Totals
States that conformed to federal Internal Revenue Code for HSA purposes,
prior to the federal law12/04
AZ, CO, CT, DE, GA, HI, ID, IL, IN, IA, KS, LA, MD, MI, MO, MT, NE, NM, NY, NC, ND, OH, OK, OR, RI ('04), SC, UT, VT VA, WV
(+ see below)
States that changed laws in 2005 to conform to federal IR Code for HSAs AR, FL, GA, IN, IA, KY, MA, MN, MS, NV, NJ, OK, PA     
(as of 12/31/05; effective dates vary)
States that changed laws in 2006 for HSAs MA, OH, UT 2
States that do not provide state tax exemption(*) AL*, CA*, NJ*, PAD, WI -2011 E
[These states are not necessarily out of conformity with the federal law.  This list is not intended as an analysis of state income tax status]
States that do not have state income tax AK, FL, NH, SD, TN, TX, WA, WY 8
States with HSAs for High Risk Pool plans AL, AR ('05), CO, ID ('05), KY, LA, MD, MN, MO, NE, SD, WY 12
States with HSAs for state employees - examples AR ('04), FL ('05), KS ('06), OK ('05), SC ('05), SD ('04), UT ('06), WA ('06)  


NOTES: A) Although HSA contributions are exempt from federal taxes, as of the 2005 tax year, six states — Alabama, California, Maine, New Jersey, Pennsylvania and Wisconsin — did not exempt HSA dollars from state taxes,  [5]
B) See STATE INDIVIDUAL INCOME TAXES, 2006 ; HSA State Income Tax Chart, 1/2007 
C) NH State Income Tax is Limited to Dividends and Interest Income Only.
D) PA excludes from taxation HSA contributions by employers but not by individual employees, based on language in their 2005 law, HB 107
E) Wisconsin comforming law enacted in 2011, effective 2012.

State Conformity: An evolving Issue
On Jan. 1, 2004, when HSA-based health plans became available, laws in 17 states included "structural impediments" that made it difficult to pair an HDHP with an HSA, says Larry Akey, a spokesperson for America's Health Insurance Plans (AHIP), the trade association for health insurers. 

As of October 2006, "Inside Consumer-Directed Care" Newsletter reported that "just four" states have structural impediments to HSA-HDHP pairing: Alabama, California, New Jersey and Wisconsin.   Three other states - Illinois, Missouri and New York - have "HMO deductible limitations and/or mandated benefit impediments to offering an HSA-based plan according to AHIP spokesperson Mohit Ghose. 

Earlier, in August 2005,  Inside Consumer-Directed Care reported that, "Insurance commissioners in Rhode Island, Pennsylvania and Florida reported that lawmakers in their states recently removed legal roadblocks that would have made it impossible, or at least difficult, to pair a health savings account (HSA) with a high-deductible health plan (HDHP). But the clock is ticking for legislators in several states that still have laws on the books that could prevent or impede the adoption of HSA-based health plans on Jan. 1, 2006, when a two-year "transition period" granted by the Treasury Dept. comes to a close."

(Note that there are differing interpretations of what change is needed.)  While some states — including Illinois, Maine and Missouri — allow insurers to pair high-deductible PPOs with HSAs, they can't couple the accounts with a high-deductible HMO. "Our HMOs cannot be used with an HSA because the deductibles are too low. By our definition, a plan that has a high deductible is not an HMO," says Sue Hofer, a spokesperson for the Illinois Division of Insurance. "We expect that employers that want to offer HSA-qualified plans will do so by offering a [high-deductible] PPO."

For a 2006 analysis of state laws, especially the impact of existing state mandate and "first-dollar coverage" requirements, see HSA State Implementation Issues Report by CAHI, January 2006.

State Fiscal Impacts of HSA Tax Law Changes
When a state adds an HSA-specific income tax exemption the resulting tax savings for the individuals also mean loss of state revenue.  In the start-up phase of 2005-2006 it has been relatively difficult for states to know the tax impact of HSA exemptions.  However, for the NCSL study of 2005 State Tax Actions, staff author Bert Waisanen reported the following:

 State  HSA Tax law  Revenue loss
FY '06 (millions)
Revenue loss 
FY '07 (millions)
 KY  H.B. 272. Adopt federal provisions for health savings accounts.  -$2.6  -$3.0 mil
 MN  Federal update to health savings accounts. Effective 1/04.  -$5.2 -3.0 


Medicaid: Health Opportunity Accounts (HOA)
The federal Deficit Reduction Act (DRA) enacted in February 2006,  provided states with "much of the flexibility they have been seeking over the years to make significant reforms to their Medicaid Programs."  CMS provides the following summary: "Section 6082 of the DRA allows for States to operate Medicaid demonstrations programs to test alternative systems to deliver Medicaid benefits through a Health Opportunity Account (HOA) in combination with a high deductible health plan (HDHP)."  Since HOAs were designed for Medicaid recipients, the maximum out-of-pocket costs in HOAs are relatively low: $250 for adults and $100 for children.  Once the deductible is reached, Medicaid covers the cost of health care services.  

The financial structures of these accounts have several parallels to the private market HSAs. CMS has restated that only ten states will be approved to operate HOA Medicaid State Plan Amendments for the first five years of the program. The demonstrations will provide States with the option of allowing individuals to voluntarily assume greater responsibility for their own care by enrolling in flexible consumer-based accounts. Beneficiaries are given the tools to take a greater role and responsibility in their health care."

Medicare Offers Medical Savings Accounts 
In 2007, for the first time, "virtually every" Medicare beneficiary was able to select a Medical Savings Account" (MSA) within Medicare.  For the 2008 enrollment period (11/15/07-12/31/07) HSA supporters are spreading the word on this less-publicized option.  Greg Scandlen, head of Consumers for Health Care Choices provided a feature in "Health Care News" for January 2008, describing the somewhat difficult-to-navigate web site sponsored by CMS/HHS, that provides the details.  Note that most Medicare MSAs do not cover prescription drugs. SEE Medicare MSAs online (state level data.) 

News, Opinions, Reports and Useful Links 


HRAs: An Alternative Health Account

HRAs are medical care reimbursement plans established by employers that can be used by employees to pay for health care. HRAs are funded solely by employers. Employers typically commit to make up to a specified amount of money available in the HRA for expenses incurred by employees or their dependents. HRAs are accounting devices, and employers are not required to expend funds until an employee incurs expenses that would be covered by the HRA. Employees may use the HRA to pay for medical expenses and premiums. Unspent funds in the HRA usually can be carried over to the next year (sometimes with a limit). Employees cannot take their HRA balances with them if they leave their job, although an employer can choose to make the remaining balance available to former employees to pay for health care.

HRAs often are offered along with a HDHP. In such cases, the employee pays for health care first out of his or her HRA and then out-of-pocket until the health plan deductible is met. Sometimes certain preventive services are paid for by the plan before the employee meets the deductible. (Source: Employer Health Benefits 2005 Annual Survey by Kaiser & HRET, 9/14/05)

  • Compiled by Richard Cauchi, NCSL Health Program, Denver,
    with additional material from NCSL researchers Brittany Howe (2007),  Madeline Kriescher (2006) in Denver and Kala Ladenheim (2000-D.C. office).


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