The On-going Effort to Expand HSAs and CDH in Washington

The consumer-directed healthcare (CDH) industry, represented by the American Bankers Association HSA Council and ECFC, have been busy testifying before House and congressional committees to ignite legislative efforts that make medical coverage more accessible and more affordable to Americans.

In two separate hearings this week, industry representatives unveiled their vision of an enhanced HSA landscape that would help achieve their goals.

Testimony to the House Ways and Means Health Subcommittee on Health

On June 6, the subcommittee held a hearing on ‘lowering costs and expanding access to healthcare through consumer-directed health plans’ in order to examine trends in HSA enrollment and account holders demographics, the current policies that were designed to give more Americans access to tax-favored HSAs, and the benefits of consumer-directed healthcare.

In its statement, ECFC cited the National Center for Health Statistics’ report that states many employers are moving toward higher deductible health plans or plans that increase the cost-sharing amounts borne by employees. Consequently, ECFC stated, “consumer-directed benefit arrangements, such as FSAs, HRAs and HSAs, are increasingly important to American workers.”

Specific legislation supported by ECFC includes:

  • Expand HSA access to more Americans

    Medicare participants

    Supported changes would allow those working seniors who are enrolled in employer-sponsored HSA-qualified plans and are also a member of Medicare Part A or Part B (or both) to remain eligible to open and contribute to an HSA. By shifting cost responsibility from Medicare to the employer-sponsored plan, this proposal saves the government money.

    Actuarial value

    Today, there is only one path to create HSA-qualified plans. A second proposed path is to define any plan that falls below a determined actuarial value to be HSA-qualified. Actuarial value is defined as the percentage of total average costs for covered benefits that a plan will cover.

    This method would allow up to 40 million Americans who are currently covered by high deductible plans (that aren’t deemed HSA-qualified) to open and contribute to an HSA. It would simplify IRS guidance that the industry seeks around HSA-qualified benefits, such as state mandates that can disqualify a plan, and it would render the chronic-care efforts (discussed below) irrelevant as employers could offer value-based care options under an HSA-qualified plan when the actuarial value of the plan falls below the maximum.
  • Allow HSA-qualified health plans to cover care for medically complex chronic conditions with no deductible

    High-deductible health plans are increasingly popular with no sign of slowing down. They represent the same type of trade-off that Americans make every day when buying homeowners, auto, or disability insurance. One can choose a lower premium in exchange for potentially higher out-of-pocket costs or a higher premium in exchange for lower out-of-pocket costs for claims.

    However, some consumers don’t have the same trade-offs due to a chronic condition, such as diabetes. Current HSA policy requires all services, except preventive, be subject to the deductible. This is a problem when 39 percent of large employers today only offer high-deductible health plans. In this instance, the family with a chronic condition must enroll and budget for high expenses every year.

    If HSA-qualified health plans covered care for medically complex chronic conditions with no deductible, more Americans would elect these plans and open HSAs. They would be able to receive care for their chronic condition outside of the deductible and face the same probability of incurring other deductible expenses like non-chronic enrollees.

    This provision would be an option for health plans, just as employers should have the option to offer or not offer this plan design. A plan design that covers additional services outside the deductible comes with higher costs, so consumers would make trade-off decisions as they do today in other areas of their life. This change would allow the chronically-ill to realize the 30 percent, on average, savings offered by an HSA-qualified health plan, and employers would be more eager to offer HSA-qualified plans as a full replacement to traditional plans. When we look at the total 2018 out-of-pocket healthcare spending of $477 billion, with this one simple change, consumers could save $118 billion in taxes and employers could save $30 billion in payroll taxes.
  • Increase contribution limits to match the statutory limit on out-of-pocket expenses for HSA-qualified plans

    HSAs were conceived to help Americans pay for eligible medical expenses using pre-tax dollars – ultimately saving them, on average, 30 percent on their bills and allowing them to roll-over any unused dollars for future eligible medical expenses. Unfortunately, HSA contribution limits have not kept pace with increased out-of-pocket financial responsibility so consumers haven’t been able to build their balances for future expenses. Think back to the family with the chronic condition. With current contribution rates, they are likely to spend their contributions in full every year.
  • Permit the accounts to be used for over-the-counter medications without a prescription

“These ideas are vetted, bipartisan, and affordable,” McKechnie said. “Some would actually save taxpayer money. Individually and together, they can dramatically strengthen the proven, successful HSA model.”

While we can’t pinpoint any movement in CDH before mid-term elections in November, industry advocates remain diligent to draft and promote legislation. While there is a long way to go, over the next six months, we could see floor time in the House and even a standalone HSA bill move through the House and the Senate.

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