ASSEMBLY INSURANCE COMMITTEE

STATEMENT TO

ASSEMBLY COMMITTEE SUBSTITUTE FOR

ASSEMBLY, Nos. 671 and 495

STATE OF NEW JERSEY

DATED: SEPTEMBER 16, 1996

      The Assembly Insurance Committee reports favorably the Assembly Committee Substitute for Assembly, Nos. 671 and 495.

      This committee substitute establishes certain standards and provides certain tax advantages for medical savings accounts established in New Jersey.

      The bill requires medical savings account plans to include all of the following: (1) the payment into a medical savings account, which shall, except in the case of a rollover contribution, equal or exceed 65% of the annual deductible of a qualified higher deductible health plan in the case of self-only coverage and 75% of the annual deductible of a qualified higher deductible health plan in the case of an individual who has family coverage; (2) the purchase of a qualified higher deductible health plan; and (3) the appointment of a trustee to administer the medical savings account.

      The bill defines a "higher deductible health plan" as a health plan: with an annual deductible of at least $1,500 and not more than $2,250, in the case of self-only coverage; an annual deductible of at least $3,000 and not more than $4,500 in the case of family coverage; and a limit of $3,000 for self-only coverage and $5,000 for family coverage and further provides that any increases to those amounts that apply under the federal Health Insurance Portability and Accountability Act of 1996, will also apply under this bill.

      The bill authorizes the New Jersey Individual Health Coverage Program Board and the New Jersey Small Employer Health Benefits Program Board to establish a medical savings account plan as one of the standard plans in each of the respective programs.

      Finally, the bill provides that in order to qualify for a deduction from gross income tax in New Jersey for a medical savings account, a person has to qualify as an "eligible individual" under the federal Health Insurance Portability and Accountability Act of 1996. Funds withdrawn from the account to pay expenses, other than eligible expenses, would generally not be deductible from gross income and therefore would be subject to income tax and may additionally be subject to a penalty.