Small businesses would be eligible for a tax credit for contributions made to their employees' health savings accounts (HSAs), and individuals could deduct the premium cost of their individual high-deductible health plans associated with HSAs, under legislation recently introduced in the House and Senate.

U.S. Representative Sam Johnson (R-TX), one of the sponsors of the House bill, said the Health Coverage for the Uninsured Act of 2005 builds on the success of HSAs, which enable people to pay for current health expenses and save for future qualified medical and retiree health expenses tax-free in conjunction with a high-deductible health plan.

The bill would help address a long-standing barrier to affordable health insurance by eliminating the unfair tax bias against people who purchase their own health coverage. Under the proposal, these individuals could deduct the high-deductible health plan premiums--whether or not they itemize deductions on their income tax return, according to Johnson.

In addition, small businesses of up to 100 employees would receive a refundable tax credit for contributions they make to employees' HSAs--up to $200 for an individual employee and up to $500 for a family--if the employer also offers a group high-deductible health plan, according to Representative Paul Ryan (R-WI), another sponsor of the bill.

The U.S. Chamber of Commerce supports the legislation. Kate Sullivan Hare, the Chamber's executive director of health policy, said the proposal provides "meaningful assistance for individuals without employer-sponsored health coverage and for small businesses unable to afford other health plan options."