As
Congress rushes to try to pass a very expensive healthcare reform bill, the
most successful and popular healthcare reform has already taken place starting
in 2004 – Health Savings Accounts. But many people are concerned
that these high-deductible plans and Health Savings Accounts will not be available
after healthcare reform passes. Since there is no final bill yet as
I write this, we can only speculate what will happen. But it does look
like yes, Health Savings Accounts and high deductible health insurance plans
will probably still be available under Obamacare – let’s
look at the details.
Why
HSA Plans are so Popular
While
HSA plans don’t appeal to everyone, they are very popular among
many (including our customers), and for very good reasons. First, these
plans are much less expensive than conventional copay plans that offer first
dollar coverage. When a plan pays for every little doctor visit and
prescription, the insurance company has to take in enough money to not only
pay for the procedure, but also to cover administrative costs in processing
the claim. This is the main reason why high-deductible HSA-qualified
plans are a much better value, and also explains why automobile insurance
doesn’t pay for small expenses like oil changes.
Health
Savings Accounts also appeal to people who are trying to find a solution to
the high cost of health care. This is arguably a much more important
consideration than what percentage of our population carries health insurance.
If there are not mechanisms to control costs, then we are simply building
a system that will crumble under its own weight. HSA plans provide a
tremendous incentive for consumers to shop and compare before spending money
on doctor visits, prescription drugs, and lab work. As we’ve explained
in this newsletter many times, smart consumers can save a bundle by doing
a little comparison shopping.
And
finally, HSA plans encourage consumers to save for the future. Most
people experience increased medical needs as they age, and encouraging them
to save for these coming expenses prevents them from being a financial burden
to the rest of society.
So,
with so much going for them, you’d think Health Savings Accounts would
be at the very center of healthcare reform…
Health
Savings Accounts and the Healthcare Reform Bills
Unfortunately,
the proposals currently being considered do not directly address the future
of Health Savings Accounts, but they do leave a few hints that make us think
that Health Savings Accounts will be part of the future. If we are right
about that, we expect them to be more popular than ever.
The
first clue that these plans will still be available is the minimum benefit
levels defined in the Baucus proposal in the Senate. The bronze benefit
package would allow an out-of-pocket limit up to the HSA current law limit
($5950 for individuals and $11,900 for families in 2010).
The
bill also makes some changes to how distributions from Health Savings Accounts
are handled. Distributions from an HSA that are not used to cover medical
expenses will be subject to a 20 percent additional tax penalty, instead of
10 percent as it now stands.
So
we can see they seem to be thinking about Health Savings Accounts. But
here’s the possible catch. All qualified health insurance plans
“would be required to provide primary care and first dollar coverage
for… physician services, prescription drugs”. Under current
law, an HSA-qualified plan cannot offer first dollar coverage, other than
for certain preventive benefits. So currently a plan cannot comply with
the requirements in the Senate bill, and also be HSA-qualified.
Both
the House and Senate bills give authority to work out this issue to an appointed
official. In the House it is the “Health Choices Commissioner”.
The Senate Finance Committee (Baucus) proposal gives authority to the secretary
of Health and Human Services. What they will decide is anybody’s
guess.
What
Happens Next?
First
of all, if this legislation passes, we believe it will have a serious impact
on anyone who is purchasing individual health insurance. Because all
plans will be “guaranteed issue”, we expect a flood of people
into the insurance market who were previously considered uninsurable.
This is a great opportunity for people who have previously been unable to
obtain health insurance, but the increase in claims that will happen will
cause large rate increases – possibly going up as much as 100% or more.
Those
of us with HSA plans may be buffered from this large rate increase, since
the previously uninsurable will likely be signing up for plans with richer
benefits and lower deductibles. But we believe that it is critical that
wording that ensures the future of HSA plans is in the bill – otherwise,
things are still up in the air. If it is decided that current HSA plans
are not qualified, we could all be looking at much more expensive rates when
we change to a plan that offers “first-dollar” coverage for doctor
visits and prescriptions.
So
we are hopeful and expectant that Health Savings Accounts will be a part of
future healthcare reform legislation. However, at this point it is very
questionable as to whether any bill will be passed. The current legislation
will create a giant government bureaucracy, and in our opinion will result
in increased health insurance premiums, increased taxes, and a declining quality
of available healthcare. Exercise your constitutional right and duty,
and let your Congressional representatives know how you feel about it.
Regardless
how this all works out, remember that most of new laws would not actually
go into effect until 2013. So it still makes sense to get and fund an
HSA plan right now. Anyone who has a qualified health insurance plan
in place by December 1 can make a 2009 contribution, and cut their April 15th
tax bill by up to $1900 or more.
To your health and wealth,
Wiley
Long
President - HSA
for America
P.S. – Next month we’ll talk about some ways price transparency is entering the system, and how you can find and negotiate the best rates for medical services you may need.
