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F I S C A L I M P A C T R E P O R T
SPONSOR: |
Rawson |
DATE TYPED: |
2/21/01 |
HB |
|
SHORT TITLE: |
Direct Payment to Health Care Providers |
SB |
685 |
|
ANALYST: |
Wilson |
APPROPRIATION
Appropriation Contained
|
Estimated Additional Impact
|
Recurring
or Non-Rec |
Fund
Affected |
FY01 |
FY02 |
FY01 |
FY02 |
|
NFI |
|
|
|
|
(Parenthesis ( ) Indicate Expenditure Decreases)
SOURCES OF INFORMATION
Health Policy Commission (HPC)
Taxation and Revenue Department (TRD)
SUMMARY
Synopsis of Bill
SB 685 amends the Insurance Code to clarify under what specific instance eligible medical
expenses are exempt from tax. SB 685l defines how payment can be made to a health care
provider for qualified medical care and reimbursement obligations if payments do not follow
guidelines.
Significant Issues
- Principle contributed to and interest earned on a medical care savings account and money
paid for eligible medical expenses are exempt from taxation under the (State) Income Tax
Act. SB 685 strikes language that refers to reimbursement of the savings account to an
employee.
- SB 685 states that payments can be made to a health care provider with a debit card or
with a check that accesses the employee's medical savings account. Payments for goods
and services, determined by the account administrator to be ineligible, will be reimbursed
to the medical savings account by the employee. In addition the person will be liable for
Federal and State taxes and penalties.
FISCAL IMPLICATIONS
None. TRD has indicated that there will be no significant revenue loss.
OTHER SUBSTANTIVE ISSUES
- A Medical Care Savings Account (Account) is a tax-deferred trust or custodial account,
similar to an IRA, in which a person set aside money to pay for routine, out-of-pocket
healthcare expenses and to build up savings for future medical costs. An employee or
employer contributes money to the Account throughout the year or by making a lump-sum
payment at the beginning of the year. Contributions are 100 percent tax-deductible. Any
insurance company, bank, or similar financial institution is allowed to be a qualified
Account trustee or custodian. Twenty-eight states currently have legislated Medical Care
Savings Accounts;
- Medical Care Savings Accounts are typically set-up by policyholders who match the
following national demographics: 55% of policyholders are families with children, 10%
are single parents; and they are likely to be self-employed in technical, sales, and agricultural fields. The average age of the primary insured is 44 years old.
- Only 100,000 people nationwide have set up accounts and, of those, half are not even
putting money into the accounts. It is believed that more people would open Medical Care
Savings Accounts if the program were marketed better and if transactions were perceived
by the public to be easy. The use of a debit card or check to facilitate transactions may
make such transactions less complicated.
- By striking the word reimbursement and inserting the word paid, when referring to
payment for services, SB 685 appears to be making the policyholder directly responsible
for the transaction. In prior language it appears that the policyholder may have been
allowed to make an out of pocket expense and then would have been responsible for
submitting documentation to the account manager for reimbursement. While the Medical
Care Savings Account manager is still responsible for reviewing transactions for legitimacy, the burden of some of the record keeping may have been alleviated. This may
result in reduced administrative costs for the Account manager.
DW/njw