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PAG LIN
1 1 Section 1. Section 422.7, Code 1997, is amended by adding
1 2 the following new subsections:
1 3 NEW SUBSECTION. 35. Subtract up to one thousand eight
1 4 hundred dollars contributed by the individual, the
1 5 individual's employer, or a public agency, in the aggregate to
1 6 a medical savings account for the individual, or up to four
1 7 thousand two hundred dollars contributed by the individual,
1 8 the individual's employer, or a public agency, in the
1 9 aggregate to a medical savings account for the individual and
1 10 the individual's spouse and dependents. However, the amount
1 11 to be subtracted shall be reduced, but not below zero, by the
1 12 amount of health insurance premiums paid by the taxpayer's
1 13 employer covering the taxpayer or the taxpayer's spouse or
1 14 dependent which premiums were not subject to state income tax.
1 15 NEW SUBSECTION. 36. Subtract to the extent included,
1 16 interest earned in the tax year on a medical savings account
1 17 unless the interest is withdrawn and not used for any of the
1 18 approved purposes described in section 505.23, subsection 1,
1 19 paragraph "f".
1 20 NEW SUBSECTION. 37. Add to the extent not included,
1 21 amounts withdrawn from a medical savings account which were
1 22 not used for any of the approved purposes described in section
1 23 505.23, subsection 1, paragraph "f", and which represent tax
1 24 benefits previously taken by the individual.
1 25 NEW SUBSECTION. 38. Subtract the amount of premiums paid
1 26 by the taxpayer for the renewal of a long-term care insurance
1 27 policy or contract certified by the insurance division
1 28 pursuant to chapter 249G which covers the taxpayer, taxpayer's
1 29 spouse, or dependent children. The taxpayer may elect to take
1 30 for premiums paid during the tax year the deduction authorized
1 31 by this subsection or the credit under section 422.11 to the
1 32 extent the premiums have not been deducted in subsection 32 of
1 33 this section.
1 34 Sec. 2. NEW SECTION. 422.11 LONG-TERM CARE INSURANCE
1 35 CREDIT.
2 1 The tax imposed under this division, less the credits
2 2 allowed under sections 422.11A, 422.11B, 422.12, and 422.12B,
2 3 shall be reduced by a long-term care insurance credit. The
2 4 amount of the credit is equal to the first one hundred dollars
2 5 paid in premiums by the taxpayer during the tax year for the
2 6 renewal of a long-term care insurance policy or contract
2 7 certified by the insurance division pursuant to chapter 249G
2 8 which covers the taxpayer, taxpayer's spouse, or dependent
2 9 children. Any amounts paid in premiums for long-term coverage
2 10 that are claimed as a credit shall not be deducted as a
2 11 medical expense under section 422.9, subsection 2, or as
2 12 health insurance costs of self-employed individuals under
2 13 section 162(l) of the Internal Revenue Code. A credit under
2 14 this section for the premiums paid in the tax year may not be
2 15 taken if the taxpayer takes a deduction under section 422.7,
2 16 subsection 38, for those premiums.
2 17 Any credit in excess of the tax liability for the tax year
2 18 is refundable. In lieu of claiming a refund, the taxpayer may
2 19 elect to have the overpayment shown on the taxpayer's final,
2 20 completed return credited to the tax liability for the
2 21 following tax year.
2 22 Sec. 3. NEW SECTION. 505.23 MEDICAL SAVINGS ACCOUNT
2 23 AUTHORIZED.
2 24 1. A financial instrument known as the medical savings
2 25 account is established. A medical savings account shall have
2 26 all of the following characteristics:
2 27 a. The account is kept in the name of the individual, the
2 28 individual's spouse, or the individual's dependent.
2 29 b. Deposits of up to one thousand eight hundred dollars
2 30 for an individual and four thousand two hundred dollars for an
2 31 individual and the individual's spouse and dependents can be
2 32 made to the medical savings account in the year.
2 33 c. The account earns income or interest.
2 34 d. In the case of death of an individual with a medical
2 35 savings account, the balance may be transferred to the account
3 1 of the spouse or dependent or an account may be set up for the
3 2 spouse or dependent. The balance of an individual's medical
3 3 savings account that transfers to the spouse or dependent at
3 4 the time of death is not subject to the state inheritance tax.
3 5 e. A medical savings account may be used for any of the
3 6 following purposes and payments from the account are
3 7 restricted to the following:
3 8 (1) To receive subsidies from the state or federal
3 9 government to assure access to health insurance or health
3 10 care.
3 11 (2) To receive contributions from employers and others on
3 12 a tax-exempt basis to the extent otherwise permitted by state
3 13 or federal income tax law.
3 14 (3) To receive deposits of pretax income to provide a
3 15 savings vehicle for future insurance premium, copayment, and
3 16 deductible requirements.
3 17 (4) To accrue interest income on a tax-exempt or tax-
3 18 deferred basis to the extent otherwise permitted by state or
3 19 federal income tax law.
3 20 (5) To purchase a private health plan from an insurer,
3 21 nonprofit health service corporation, health maintenance
3 22 organization, or organized delivery system authorized to do
3 23 business in Iowa, either directly or through a health
3 24 insurance purchasing cooperative.
3 25 (6) To participate in an employer-sponsored health benefit
3 26 plan.
3 27 (7) To exercise rights through an employer-sponsored
3 28 health benefit plan provided under the federal Consolidated
3 29 Omnibus Budget Reconciliation Act of 1986.
3 30 (8) To make payments to health care providers necessary to
3 31 satisfy copayment or deductible requirements under a health
3 32 plan.
3 33 (9) To make payments to licensed health care providers.
3 34 (10) To make payments for necessary and appropriate long-
3 35 term care services, and long-term care insurance coverage
4 1 approved by the commissioner.
4 2 f. Amounts withdrawn for any of the following approved
4 3 purposes do not result in income to the holder of a medical
4 4 savings account:
4 5 Payment of costs identified under paragraph "e",
4 6 subparagraphs (5), (6), (7), (8), (9), and (10), for the
4 7 individual, the individual's spouse, and the individual's
4 8 dependents to the extent that the expenditures qualify for the
4 9 deduction for medical care under section 213(a) of the
4 10 Internal Revenue Code without regard to whether the
4 11 expenditures exceed seven and one-half percent of the
4 12 individual's federal adjusted gross income. However, any
4 13 expenditure for an approved purpose which is paid from the
4 14 medical savings account shall not be deducted as a medical
4 15 expense under section 422.9, subsection 2, as health insurance
4 16 costs of self-employed individuals under section 162(1) of the
4 17 Internal Revenue Code, or as costs of health benefits coverage
4 18 or insurance under section 422.7, subsection 32.
4 19 g. A financial institution holding a medical savings
4 20 account shall make an annual report to the department of
4 21 revenue and finance on contributions and withdrawals to the
4 22 account in the year pursuant to rules of the department.
4 23 h. A financial institution administering a medical savings
4 24 account shall be able to process claims against the account
4 25 electronically subject to reasonable terms and conditions as
4 26 determined by the insurance division and consistent with the
4 27 requirements of the community health management information
4 28 system.
4 29 i. If an individual makes a withdrawal from the
4 30 individual's medical savings account in the tax year and the
4 31 withdrawal is not for one of the purposes described in
4 32 paragraph "f", a civil penalty of ten percent shall be imposed
4 33 on the amount withdrawn pursuant to rules of the department.
4 34 2. As a condition of maintaining a medical savings account
4 35 the individual or family must secure and maintain a health
5 1 benefit plan. The plan must provide for copayments,
5 2 deductibles, or out-of-pocket maximums consistent with the
5 3 average balance of the medical savings account.
5 4 3. As used in this section, unless the context otherwise
5 5 requires:
5 6 a. "Account holder" means an individual for whose benefit
5 7 a medical savings account is established.
5 8 b. "Dependent" means the same as defined in section 152 of
5 9 the Internal Revenue Code.
5 10 c. "Financial institution" means a private insurer,
5 11 nonprofit health service corporation, health maintenance
5 12 organization, organized delivery system, health insurance
5 13 purchasing cooperative, or a financial institution approved by
5 14 the insurance division as an investment mechanism for medical
5 15 savings accounts and licensed to do business in this state.
5 16 d. "Internal Revenue Code" means the same as defined in
5 17 section 422.3.
5 18 Sec. 4. MEDICAL SAVINGS ACCOUNTS – STATE PILOT PROJECT.
5 19 1. The department of personnel may develop and implement a
5 20 pilot project making the provisions of a medical savings
5 21 account, in accordance with section 3 of this Act, available
5 22 to employees of the state. The medical savings account shall
5 23 be available to an employee participating in the pilot project
5 24 in lieu of state group health insurance available to the
5 25 employee under chapter 509A.
5 26 2. In addition to the medical savings account provisions
5 27 under section 3 of this Act, the department shall consider and
5 28 include as part of the pilot project any of the following
5 29 provisions deemed prudent by the department:
5 30 a. Providing an opportunity for the employee to buy into a
5 31 state group insurance plan under chapter 509A from the
5 32 employee's medical savings account.
5 33 b. Providing catastrophic loss coverage.
5 34 c. Allowing the account to be used for preventive health
5 35 purchases such as fitness, smoking cessation, and weight loss
6 1 classes.
6 2 d. Providing options for those ancillary health purchases
6 3 available under the state's group health insurance plans,
6 4 including but not limited to purchases of prescription drugs,
6 5 vision care, and dental care.
6 6 3. If the department decides to develop and implement a
6 7 pilot project, the department shall implement the pilot
6 8 project beginning January 1, 1998, and the department shall
6 9 present the pilot project design on or before October 1, 1997,
6 10 to the fiscal committee of the legislative council.
6 11 Sec. 5. EFFECTIVE AND APPLICABILITY DATES. Sections 1, 2,
6 12 and 3 of this Act take effect January 1, 1998, and are
6 13 applicable to tax years beginning on or after that date.
6 14 EXPLANATION
6 15 This bill allows a deduction for amounts of contributions
6 16 to a medical savings account. In addition, the bill allows a
6 17 deduction from adjusted gross income for the interest earned
6 18 on a medical savings account to the extent not withdrawn or
6 19 not used for a nonapproved purpose.
6 20 New section 505.23 is created which establishes medical
6 21 savings accounts to provide for the payment of health care
6 22 costs for certain individuals.
6 23 The bill provides a long-term care insurance credit equal
6 24 to the first $100 of premiums paid for the renewal of a long-
6 25 term care insurance policy or contract certified by the
6 26 insurance division which covers the taxpayer, taxpayer's
6 27 spouse, or dependent children. The credit is refundable.
6 28 The bill also directs the department of personnel to
6 29 establish a pilot project by January 1998 which would make the
6 30 provisions of medical savings accounts available to state
6 31 employees in lieu of the state group health insurance
6 32 available to them.
6 33 Except for the establishment of the state pilot project,
6 34 the bill is effective January 1, 1998, for tax years beginning
6 35 on or after that date.
7 1 LSB 1863HH 77
7 2 mg/cf/24
Text: HF00098 Text: HF00100 Text: HF00000 - HF00099 Text: HF Index Bills and Amendments: General Index Bill History: General Index
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