Recently, the IRS issued Notice 2004-43 allowing individuals to utilize health savings accounts (until January 1, 2006) even though state law mandates might prevent the health plan being utilized from qualifying as a “high deductible health plan” as required under the HSA rules. (Previous posts on the subject are here and here.) An article from the New Jersey Star Ledger— “N.J. gets a break on federal health rule“–highlights the state law mandate issue as follows:
New Jersey is among fewer than a dozen states whose health insurance laws are at odds with the federal HSA rules, according to William Sweetnam, benefits tax council for the U.S. Department of Treasury.In a meeting with small businesses yesterday in Paramus, Sweetnam said a Treasury ruling issued last Friday gives all these states until Jan. 1, 2006, to bring their laws into conformity with the federal rules on HSA.
New Jersey’s lead poisoning mandate can remain in place for the next year and half, Sweetnam said, without invalidating the HSA.
However, as the article notes, states may not be willing to give up their state law mandates (as contemplated by the Treasury) in order to take advantage of the HSA mechanism:
But changing New Jersey’s lead poisoning law may not be the answer, according to State Sen. Joseph Vitale (D-Woodbridge), chairman of the Senate Health and Human Services Committee.Vitale said he is in favor of HSAs, which he said “could be an important tool for providing coverage to the uninsured.”
But rather than changing the New Jersey law, Vitale said the state might consider “whether New Jersey can appeal to the Treasury. New Jersey is being progressive, and we are trying to provide financial help to people who have been exposed to lead paint. I don’t see why the federal government would want us to revise our rules in order to take advantage of the HSA.”
Also, in Pennsylvania, an article here notes how “the House of Representatives will vote this week on legislation sponsored by Rep. John Payne, R-106th Dist., that would exempt from state income tax deposits and withdrawals from health savings accounts for qualifying medical expenses.”