The Kaiser Health Network has a good article on legislation going through Congress right now on a proposed tweak to the HSA rules:
some insurers and employers are easing the strain on consumers’ wallets by covering certain benefits like doctor visits or generic drugs before people have reached their plan’s deductible. But there’s a hitch: Under Internal Revenue Service rules, high-deductible plans that are set up to link to health savings accounts can only cover preventive services like vaccines and mammograms until patients buy enough services on their own to pay down their deductible.
A bipartisan bill was introduced in Congress in July that would allow high-deductible plans that can link to health savings accounts (HSA) to cover care for chronic conditions like diabetes and heart disease before plan members have met their deductibles….
“We need to spend money differently,” said Dr. A. Mark Fendrick, director of the University of Michigan Center for Value-Based Insurance Design. “We should put a very high deductible on those things we don’t need and incentivize consumers to get the care they need.”
For example, he pointed to people with diabetes who need to have annual eye exams to prevent adult-onset blindness, “yet the fastest growing type of health plan, HSA high-deductible plans, covers those exams not at all,” he said.
This is an improvement over the status quo and it should be supported. We know that high deductible plans lead to people indiscriminately cutting reducing utilization without reference to whether or not the the foregone care is high value, low value or counter-productive. The evidence is more mixed on whether or not this leads to lagged healthcare cost explosions. Even if there are no social cost savings, suffering savings should be a priority.
But I don’t think this goes far enough.
The original round of high deductible health plans (HDHP) were basically the only low actuarial value plans out there. Co-insurance and co-pays were tweaked and slowly made worse but none were jacked up suddenly when the HDHP/HSA rules were written for the first time. Today, a low actuarial value plan can be made with a smorgasbord of cost-sharing design choices. It is easily possible to create plans that have the same actuarial value with a $3,000 difference in deductible. It is easy to create plans with the same deductible but wildly different actuarial values because of what services are covered by deductible.
So how do we make this better?
Allow HSA’s to be attached to any plan that has less than 80% or 85% actuarial value without caring about the cost-sharing configuration. CMS would need to create an actuarial value calculator for different market segments with some type of regional cost variation but that is fairly “straightforward”.
Am I reading this right that Republicans are going to support an improvement to ObamaCare?
This is a pretty fucking big deal I’d think.
@jharp: nope, merely an improvement in tax preferences that overwhelmingly benefit the upper 20%
(DON”T TELL THEM IT COULD HELP OBAMACARE… it’s our secret)
@jharp: Well, according to govtrack.us the bill has a 2% chance of being enacted in this Congress — no idea whether govtrack.us is reliable, just putting this out there.
My wife and I have had an HSA from the beginning, and before that an Archer MSA. We did this mainly because the HDHP plans had the cheapest premiums. We were relatively healthy (knock wood) and we always had sufficient income to pay our medical expenses so we have been using the HSA primarily as a tax-advantaged savings account. I would love to see HSA’s unlinked from the high deductible restriction as Richard suggests. Obviously, though, none of these sorts of tweaks will be possible unless/untill the Dems control Congress.
Veering slightly OT, back in the day we had private market insurance (I being self-employed and my wife working part time). This insurance sucked — we notice that every single claim (typical sort of things — twisted ankle, infection getting worse, cough lingering, etc.) came back “this plan does not cover this procedure”. Every. Single. One. So these expenses were not accruing towards our (high) deductible. So at one point we simply dropped health insurance altogether — we had a goodly amount in our HSA and were able to save the cost of the premiums for a plan that was not covering anything and that we had no belief would ever cover anything.
Enter the ACA, and we once again have a HDHP with an HSA. And, as long as I am OT, we live in WV which uses the healthcare.gov exchange. We have only one (1) provider, Highmark WV BCBS. I would love to have a Medicare-buy-in public option! I trust government, being at least somewhat accountable to we citizens, far more than I do private business — the exception being, I am sure, Mayhew Insurance, were it available to me!
As someone who grew up in Europe, can I just say that HSAs are a stupid fucking idea that are a band-aid to cover up for the lack of proper government support for healthcare in this country? I stopped using my HSA because I was always over-estimating how much I would spend and losing the unspent money. How about just allowing me to claim the amount of HSA as a deduction when I file a tax return?
@Taylor: Was that an HSA or some other weird contraption trying to be a help?
One thing I would like to see is medication cost covered by insurance no matter the deductible. That was, by far, the largest increase in expense when my company shifted us all over to high deductible plans.
Wait…if this is internal rulemaking then Congress can just propose a rule change instead of changing the law. Unless I’m missing something.
I agree 100%. An insurance model is absurd for health care. It is impossible to choose in advance among all the varying types of coverage available (HD/HSA, Co-Pay, Cost-Sharing, ad nauseum). In our household in the last 2 years we had diabetes come out of nowhere (expensive meds, when before there were none), and gall bladder flare-up that resulted in expensive surgery.
We need some sort of government managed single payer system.
@Taylor: HSA contributions are deducted from taxable income. What change are you looking for in the tax code?
The benefit of an HSA is that earnings grow tax-deferred and can be used toward qualified medical expenses, tax-free. The HSA can be used towards Medicare premiums and long-term care premiums, expenses that are often a shock to those accustomed to lower premiums.
If you can afford to pay medical expenses out-of-pocket, you can save your medical receipts and pay yourself back down the road decades later after the HSA has built up in value, tax-free.
After 65, you can use HSA funds towards any expenses, not just medical, without penalty. It functions like an IRA at that point as taxes would apply to non-medical withdrawals.
Given the HSA is allowed to build up over time, you could potentially benefit from tax-free contributions, tax-free gains, and tax-free withdrawals with regards to medical expenses.
Lower the cost of healthcare and these problems correct themselves. I’m not talking about reducing the rate of medical inflation. I am talking about lowering the cost of healthcare.
If we paid what we did 15-20 years ago, no high deductible plans would not have needed to come into existence.
Are you confusing an HSA with an FSA?
You do not lose the money in an HSA. It stays with you for as long as you want and when you are 65 you can cash it out, like other pre-tax investments.
FSA, on the other hand, are use it or lose it accounts, where if you do not use the funds in the fiscal year you lose the unspent money.
It is a slight but important difference.
@gene108: Ah, I was wondering what he was talking about with regards to losing money. Yes, that’s the FSA.
A difference compared to other tax-deferred programs is that HSAs don’t require minimum distributions at age 70.5 at unlike traditional IRAs, 401k, etc., and aren’t subject to income limits like those work plans.
@Will R: One main diff HSA vs IRA is that if when you die, for the non-spousal beneficiary of your HSA its then-present value is considered 100% taxable income on the day they inherit it; with an IRA they have the option of withdrawing just their RMD each year. Bottom line: unless you want your beneficiaries to take a big tax hit, as you age draw down from your HSA before your IRA.
Standard disclaimer: I am not an accountant or tax specialist nor do I play one on TV. YMMV.
@Hafabee: Yes, good point. I looked into it and it seems non-spousal heirs can reduce that tax hit by paying off any medical expenses of the deceased, within a year of death.
I am a tax accountant but this isn’t my area of expertise either. Still, some general knowledge goes a long way.
@gene108: Okay, how?
And once we get to that How? How do we get the votes?