Looking ahead: What last year’s healthcare legislation means for CDH in 2020

Last year saw dozens of legislative and regulatory changes that directly impacts consumer-directed healthcare (CDH). From increased tax-advantaged account options to more robust commuter benefits, let’s review some of the proposed or passed healthcare legislation as well as what you can expect in the year ahead.

Health Savings Act

Status: Introduced in the Senate, Jan. 3, 2019; further action is up in the air in an election year

Details: The Health Savings Act aims to allow individuals with Medicare Part A to continue contributing to a health savings account (HSA). Currently, once individuals reach retirement age, in order to receive Medicare and Social Security benefits, they can’t contribute to their HSA.

Impact in 2020: If enacted, approximately 56.5 million more consumers would be eligible to save tax-free dollars in an HSA. In addition, consumers not currently enrolled in an HSA (including those approaching retirement) would have more incentive to do so.

Bonus benefit: The Health Savings Act also proposes changing the name “high-deductible health plan” (HDHP) to “HSA-qualified health plan.” This change in terminology would be a step in the right direction for increasing consumer engagement. Currently, fear around the term “high-deductible” often prevents consumers from selecting an HSA-friendly plan that could save them more money in the long-run.

Improved Transparency and Access to HSAs

Status: Executive Order 13813 was signed June 24, 2019

Details: While most of this order relates to price transparency for hospitals and health systems, it includes a provision that calls for improved guidance on the use of HSAs in combination with HDHPs. A section of the order also calls for expanded access for those with chronic conditions. Effective July 17, the Treasury and the IRS, in consultation with HHS, issued Notice 2019-45, which classified certain medical care services and prescription drugs related to a chronic condition as preventive care for someone with said condition.

In addition, this healthcare legislation called for increased flexible spending account (FSA) funds that can carry over without penalty at the end of the year.

Impact in 2020: For CDH to work, consumers must be financially accountable for their healthcare. With greater transparency, they will have a better understanding of how to use a HDHP and feel empowered to make decisions. Broader access to HSA-friendly plans, plus expanded HSA-eligible items for those with chronic conditions, will allow more consumers to reap the benefits of pre-tax savings. The FSA carryover limit increased to $500 at the end of 2019, and consumers have until March 31, 2020, to use those funds.

Introduction of ICHRAs and EBHRAs

Status: Final ruling June 13, 2019; effective now

Details: The Individual Coverage HRA (ICHRA) and Excepted Benefits HRA (EBHRA) went into effect on Jan. 1, 2020. Under ICHRA, employers of any size that do not offer a group coverage plan can fund an HRA for these employees to buy individual market insurance, including insurance purchased on the public exchanges formed under the ACA. Under EBHRA, businesses can finance an HRA up to $1,800 (pre-tax) in addition to offering a traditional group health plan.

Impact in 2020: These two measures give businesses more options to provide health insurance coverage to their employees. As we see small businesses start to offer these HRAs in 2020, we hope a large employer will come along and set the trend for others to follow. (Read more on ICHRA and EBHRA.)

Expanded Transit Benefits

Status: Measures in New Jersey and Seattle take effect in 2020

Details: Similar to commuter benefits mandates in New York, San Francisco and Washington, D.C., the mandates in New Jersey and Seattle will require businesses with 20 or more employees to offer pre-tax transportation benefits.

Impact in 2020: Both ordinances require the use of benefit programs that already exist, so the biggest impact will likely be an increased focus on transportation benefits within human resources departments, and more consumers saving on their commuting costs. Other metropolitan areas across the country will observe how these mandates play out and may consider adopting similar measures.

Repeal of Cadillac Tax

Status: Enacted and signed, Dec. 20, 2019, as part of the Consolidated Appropriations Act

Details: The Cadillac Tax, a controversial part of the Affordable Care Act (ACA), would have placed a 40 percent excise tax on high-cost employer-sponsored health plans. The tax was originally conceived to discourage the purchase of more benefit-rich health plans that would drive up healthcare costs and to help pay for the expanding benefits under the ACA. It was quick to become viewed as a potential burden for consumers. (Read more here)

Impact in 2020: Although the Cadillac Tax wouldn’t have taken effect until 2022, its repeal will bring relief to employers and benefits administrators who may have started looking this year at less optimal plan options to avoid the penalty. It also gives industry associations, like the Employers Council on Flexible Compensation (ECFC), the opportunity to pivot the focus of their lobbying efforts in Washington in an election year.