Sacrificing Freedom on the Alter of HSAs

By Greg Scandlen

Our compadre, Bill Boyles, publisher of the Consumer Driven Market Report, argues that ObamaCare is good for HSAs and so repeal would therefore be bad for HSAs.  In a recent e-mail he sent around he said the following:

Repeal Could Hit HSA Market-Wide Definition
Repeal of the health reform act would also eliminate one key provision which expands the definition of all health insurance in the U.S. to include HSA law. The little-noticed section requires that a “minimum essential benefits” package for all insurers include at least the HSA law cost-sharing levels. A national committee at the Institute of Medicine meets this quarter to begin to finalize the details, including several HSA-friendly committee members. The change “Creates an essential health benefits package that provides a comprehensive set of services, limiting annual cost-sharing to the Health Savings Account limits ($5,950/individual and $11,900/family in 2010),” a chart explains. The reform law “Creates four categories of plans to be offered through the Exchanges, and in the individual and small group markets, varying based on the proportion of plan benefits they cover.” Millions would select HSAs.

So, HSA out-of-pocket maximums are the ceiling for all health plans in the proposed Exchanges. That being the case, Bill supposes that most enrollees will choose an HSA level of coverage and the lower premiums that go along with it.

That may be true. But it does not follow that repealing this law would be detrimental to HSAs, for at least two reasons:

  1. The appeal of an HSA level of benefits will hold, with or without ObamaCare. I suppose it is a blessing that ObamaCare allows HSAs to continue, but repealing the reform act would also allow HSAs to continue. And without the reform law, we wouldn’t have to worry about whether there are “HSA-friendly committee members” at the Institute of Medicine. If having HSAs is dependent on the make-up of the IOM committee, what happens next year, or the year after, when those friendly committee members are no longer on the committee? Indeed, what kind of health system is it that depends on the friendship of IOM committee members, or of Kathleen Sebelius, for me to get the kind of health insurance I want to have?
  2. The current design of HSAs is not the pinnacle of consumer-friendly health insurance, to be enshrined for all time. The current OOP limits will be the absolute maximum allowed for any health plan. So, if I decide that I am better served with a $10,000 deductible, I will be forbidden from exercising that option. In fact, one of the foundations of the HSA movement has been that allowable deductibles will be raised over time as the health care system becomes more accustomed to pricing for direct payment by patients and patients build-up balances in their HSAs. That evolution will not be allowed.

I’m afraid that HSAs have become another special interest group, with advocates saying, “we don’t care what happens with health care as long as HSAs are protected.” That is not where I am. I’m an advocate for patients, not HSAs. I am not willing to sacrifice individual freedom on the alter of HSAs, or any other business model.

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8 Responses

  1. I see the PPACA Law as allowed strictly due to an omission in our Consitiution. I wish the founding fathers would have been able to see a situation where a party in power would enact anything, with or without the support of the very people they have been elected to represent, and have inserted a device in which the PEOPLE could remedy it (like a recall or plebicite vote). The PPACA Law signaled the temporary end of representative government in the U.S. and, hopefully, the elections last November, were the beginning of its restoration!

  2. ObamaCare is not HSA frendly! To think otherwise is to put faith in a bureacracy and decision makers who are not consumerism friendly. HHS could make all HDHPs non-HSA eligible if they include a 100% non-preventive care coverage as an essential benefit. Take a look at the under age 30 “catastrophic plan” allowed by ObamaCare. Why didn’t they just define it as an HSA eligible plan? Will the required 3 PCP visits be at 100%? If so, it would not be HSA eligible.

    ObamaCare max deductible for individual and small group in exchanges is $2000. ObamaCare prefers premium payments to cover claims over savings. They do not trust citizens to save or use savings to pay for claims.

  3. “I suppose it is a blessing that Obamacare allows HSA to continue,”. I think this is a very important statement to keep in mind. Call me paranoid, but my experience is that when groups like HMOs, the government, leave incentives to encourage you to enter, they slam the door before you can get back out. I belive they would change the rules as soon as they have a critical mass.
    Bob Hamilton

  4. The fact that the law is tying the out-of-pocket of the qualified health plans to the dollar amount of the out-of-pocket for an HSA qualified plan means little. I would suggest that they just wanted to limit the out-of-pocket in some way. They are also doing this by determining copay amounts. Of course, copays cause a health plan to be nonHSA qualified.

  5. Just a couple points.

    The average deductible in the initial 8 million HSA accounts is barely above the statutory minimum, so all of these arguments in favor allowing consumers to have higher deductibles are moot in the real world. Same goes for investment accounts tied to HSAs, which represent less than 5% of all HSA accounts and declined in 2010. Where are all these consumers who want to contribute more? The answer is they don’t exist now or in the future.

    HSAs are the only thing out there besides a list of House GOP theories that are about to get discredited in public. But HSAs have not seen a rising growth rate, and could very easily be killed by pure high-deductible plans — the existing market that is so highly-praised. Maybe that’s what you guys want to happen in the name of ‘freedom.’ No savings account, just higher and higher deductible.

    This has nothing to do with ObamaCare rules or IoM. The distribution channels will drive adoption, and right now we have a channel that leads over the cliff and down into the chasm of single-payer.

    Having all states offer HSAs to another 30 million people using eHealthinsurance — the central feature of health exchanges — is badly needed to advance individual freedom. Especially compared with the existing market. All of the doctors and protectors of the status quo won’t like that, because it means lower medical incomes. When a large portion of consumers is finally exposed to their own claims costs, medical incomes will definitely fall.

    • Bill,

      First, it doesn’t matter what the “averages” may be. Individual choice demands that we not all be confined to the “average” of anything. This is an example of the “population health” kind of thinking that bases medical treatment on averages, even though there may not be a single patient who is at the average. In fact, averages are nothing but a statistical mean.

      Second, it is not surprising that HSA investment accounts have dipped in 2010. The stock market has been a pretty scary place in the past two years, and people naturally prefer to be in cash right now. I expect HSA contributions have dropped as well as people are hard-pressed to pay for food and gas at the moment. It says nothing about future behavior.

      Third, tax advantaged savings accounts are valuable only to those people who pay taxes — about one-half of the country. For the rest of the country, it doesn’t matter a whit if you have an HSA to go with the high deductible plan.

      Fourth, I have no idea what you mean by “House GOP theories that are about to get discredited in public.” What are those theories and how are they about to get discredited?

      Finally, state exchanges are a fine idea IF they are simple marketplaces. They are not so great if they are yet another level of regulation designed to weed out all but three or four giant carriers.

      I agree with your final point, that “When a large portion of consumers is finally exposed to their own claims costs, medical incomes will definitely fall.” Isn’t that the point of everything we’ve been doing?

  6. The HSA/HDHP combination is the most widely available vehicle by which a working American family can realistically become self-sufficient, and therefore “free”, when it comes to healthcare.

    I purchase my family’s policy and max out my HSA contributions before other savings plans. Already we have enough in the HSA to meet our annual OOP max more than twice over if need be. No employer or social worker made those choices for me nor can any undo them. That’s healthcare freedom.

    Of course that freedom is unnecessarily limited by things like mandated benefits and max deductibles. For example, our premiums support mandated maternity benefits. My wife and I are done having kids. Given the choice, I would self-insure above the current HSA max. As Bill points out, many “group” HDHPs go for the lowest qualified deductible, a choice made by HR not by the individual.

    Let’s support this most “free” option while working to make it more free, more responsive to consumer choice, going forward.

  7. Repeal should be accompanied by a new approach. The new approach should include HSAs or a similar approach. (see my approach)

    If there are enough votes for repeal, then there will likely be votes for a better approach. No need for HSA advocates to be against repeal unless they have a very narrow definition of HSAs.

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