Health Savings Account Blog

To date, the reform proposals voted out of the House and Senate committees have either not addressed Health Savings Accounts or proposed only minor changes. The version of the America’s Affordable Health Choices Act (AAHCA) voted out by the House Energy and Commerce Committee July 31 made no mention of Health Savings Accounts. An amendment sponsored by Rep. Michael Rogers (R-Mich.) would have clarified that Health Savings Accounts were qualified health benefits plans that could be offered through the proposed health insurance exchange. But the amendment was defeated. The House Ways and Means Committee, however, suggested in its version that health accounts (Health Savings Accounts as well as Health Reimbursement Arrangements and Flexible Spending Accounts) could no longer be used to pay for over-the-counter medicines.

The version of the AAHCA voted out of the Senate Health, Education, Labor & Pensions Committee made no mention of Health Savings Accounts. The Senate Finance Committee plans to approve its long-delayed and yet-unseen reform bill by Sept. 9. The committee on May 19 released a list of reform savings and revenue options that included limiting HSA contributions and increasing the additional tax on distributions from Health Savings Accounts that are not used for HSA qualified medical expenses.

Greg Scandlen, director of Consumers for Health Care Choices, contends that “Health Savings Accounts are too deeply entrenched in the market” at this point to be seriously jeopardized, and employers are adopting HSA plans [with Health Savings Accounts] at an increasingly rapid rate.

Red Gillen, senior analyst and HSA watcher at Boston-based financial research and consulting firm Celent, tells ICDC that another reason why Health Savings Accounts will most likely survive is that some members of Congress have said that all Americans should have the same coverage they have. While this is unlikely because of the coverage’s rich benefit design, he points out that “federal employees do have the choice of an HSA option.” He also notes that the days of comprehensive health plans in their current form are numbered because they are too expensive. “Plans with $10 copays are definitely going the way of the buggy whip,” he says.

Jay Savan, a St. Louis-based Towers Perrin consultant, contends that the adoption of account-based health plans, in particular Health Savings Accounts, will accelerate as a result of many of the mandates in the House and Senate proposals.

“A requirement that all Americans acquire health coverage would likely drive substantial interest in relatively low-cost, high-deductible health plans (HDHPs),” Savan tells ICDC. And interest in HDHPs “may be strongest among those individuals and families who qualify for federal premium subsidies.” HDHPs also would be attractive to employers under the requirements that they offer a minimum-value health plan. A tax cap on employer-provided health benefits, he suggests, would drive interest in HDHPs in order not to breach the cap. And while the impact of a guaranteed-issue requirement in the insured market is yet to be defined, Savan speculates that “it may have an inflationary effect on premiums, in general, as carriers seek to counteract the impact of unregulated morbidity on their books of business.” But to the extent that premium levels are impacted, either broadly or with a focus on higher-value/higher-premium coverage, “it is reasonable to expect a migration into lower-premium plans, such as HDHPs,” Savan says.

Some HSA Rules Could Change

While Health Savings Accounts are not likely to disappear, the rules governing them could change. “There is discussion of a return to the original account contribution limits stipulated at [HSA] enactment that called for a maximum annual contribution equal to the lesser of the HDHP deductible or the statutory account contribution limit,“ Randall Abbott, a Boston-based Watson Wyatt consultant, tells ICDC. There could also be increased penalties for HSA withdrawals when the funds are not used for qualified health-related expenses, he says. And while substantiation now is not required, “it is possible that it could be required at the time of distribution. If unsubstantiated, the amount would be immediately included in taxable income.”

Abbott cautions that “Washington watchers know better than to bet on the outcome of emerging debates.” But he asserts that even if HSA plans and/or Health Savings Accounts are affected by changes under reform, none of the changes should be viewed as roadblocks by employers or health plans. “Change is inevitable,” he says, adding that “the degree of change remains to be seen.”

Notably absent from the debate is the role HSA plans with Health Savings Accounts could play in meeting the stated goals of health reform. “Still lost in the discussion is the growing evidence that Health Savings Accounts and other HSA plan solutions are proving effective at doing exactly what advocates had predicted they would do: safely control health care costs while preserving quality of care,” James G. Knight, M.D., tells ICDC. Knight is CEO of Consumer Directed Health Care, Inc. “The current political machinations seem to be ignoring the success of Health Savings Accounts and HSA plans.”

William Giaconia, vice president in charge of consumer-driven products at CIGNA, agrees, noting that “HSA plans are all about affordability and quality, which are the keys to expanding access, improving health and reducing costs.” He says that “well-designed HSA plans that are benefits neutral and reduce, not shift, costs are proven to provide affordable health care coverage without restricting choice or compromising quality.”

Some of the key ingredients of HSA plans have made their way into the current reform proposals, however. For example, the House proposal includes preventive care services with no cost sharing under its list of essential benefits, reflecting the first-dollar coverage benefit typically found with HSA plans. And the proposal also would impose out-of-pocket limits on catastrophic coverage, similar to limits found in HSA plans.

Read more about the Healthcare Reform debate on our special Healthcare Debate Blog.