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Medical Accounts May Help Healthy

April 22, 2000

WASHINGTON (AP) _ Medical savings accounts are tax shelters for the wealthy or a panacea for uninsured Americans, depending on who you talk to. With a government test of the accounts set to end this year, Congress must decide which description fits and whether to extend the plan to more Americans.

MSAs, as they are known, allow people to set aside tax-deductible savings to pay routine doctor bills. Account holders get companion health insurance policies _ as protection against expensive care _ that have high deductibles but can cost less than being in a health plan.

They are available to self-employed people and small companies that offer them as an employee benefit under a pilot program established by Congress in 1997.

Kay Heine, a self-employed mother of three, was going without insurance because she couldn’t afford the premiums when she decided to try an MSA. Now she pays $144 a month _ less than half of what she would have paid for major medical coverage _ and squirrels money away for her children’s checkups and dental bills.

``When you have kids, that really helps a lot,″ said Heine, a single mom from Wisconsin.

Republicans and specialty insurance firms believe MSAs are a sure way to provide low-cost health coverage to millions of Americans who don’t have medical insurance and will help more break free of managed care organizations. With the accounts, consumers are free to choose their own doctors without a middleman or gatekeeper.

MSAs can be especially beneficial to healthy people with low doctor bills, marketers say. Not only are premiums lower, but any money not used for medical expenses can be rolled over and accumulate toward retirement. Account holders can invest the money in mutual funds or stocks and not pay taxes on their earnings so long as they don’t touch them until they’re 65.

Individuals are allowed to shelter up to $1,462 from taxes, families up to $3,375. This makes MSAs attractive to lawyers and other well-heeled, self-employed people, said Bill Raynor, MSA manager at Merrill Lynch.

``If you don’t use the money, it grows, it’s tax-deferred,″ said Raynor. ``They will use this as a ’medical IRA.‴

MSA opponents say the accounts will siphon off the healthiest people from traditional insurance plans. When left with a pool of people more likely to file claims, those health plans will raise premiums and insurance will become less affordable, said Ron Pollack, president of Families USA, an advocacy group for universal health coverage.

``MSAs appeal disproportionately to the healthy,″ said Pollack.

There are no studies tracking the incomes or health status of people who have opened MSAs.

Whatever their appeal, MSAs have not taken hold. Currently only self-employed people and workers at small companies are allowed to have the accounts. The Internal Revenue Service estimated that fewer than 45,000 people had MSAs as of last year, far below the 750,000 that Congress was willing to let try the accounts.

About one-fourth of those people were previously uninsured, the IRS reported.

Officials at Golden Rule Insurance Co., a leading MSA provider, put the number at closer to 100,000. Company president Jack Whelan said more people would sign up if Congress removed limits on contributions, allowed large companies to offer MSAs to employees and ease other restrictions.

``Congress didn’t get it right the first time,″ he said.

Golden Rule has lobbied hard on behalf of MSAs. Last September, as GOP House leaders were crafting health care tax breaks that would open MSAs to all Americans, Golden Rule gave $100,000 to a Republican congressional campaign committee. Whelan said the contributions are part of how the company participates in the political process.

The GOP proposal on MSAs is part of a broader House-passed bill that would give Americans some rights when dealing with health plans, a popular issue with patients concerned that HMOs scrimp on coverage to save money.

The matter now rests with a congressional conference committee working to combine the House bill with a similar Senate-passed measure.

Whelan believes MSA expansion has a good chance of making it into the final bill because both Republicans and Democrats are concerned about the 44 million Americans without health insurance.

But President Clinton has promised to veto the bill if it expands MSAs, and it is uncertain whether lawmakers will fight to keep the provision in the bill. However, consumers who have opened MSAs will be able to keep them even if Congress decides to kill the program.

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