HSAs Under Attack in Obamacare Exchanges

The Obama administration is using its last year to try to kill the option that has the most promise to engage consumers in transforming our health sector around higher value, greater efficiency and lower costs.

Liberals have a knee-jerk opposition to Health Savings Accounts, but until now, they have tolerated them and even allowed HSA plans to be offered in the ACA exchanges, largely because they are so popular.

Now, however, the Obama administration has published final regulations that “will make it impossible to offer HSA-qualified plans in the future” in the ACA exchanges, according to HSA expert Roy Ramthun.

The Department of Health and Human Services published final regulations last month that will make it virtually impossible for plans offered in the exchanges to comply with both HSA and ACA rules.

The new rule governs the “standard benefit designs” for Bronze, Silver and Gold plans in the exchanges.  According to Ramthun’s analysis, the new rules mean that 1) the specified deductibles for the plans and out-of-pocket limits to be offered in the exchanges will be outside the requirements for HSA-qualifying plans, and 2) plans will have to cover services below the deductible which are not allowed under the legal definition of HSAs.

Ramthun believes it is unlikely any HSA plans will be offered in the exchanges in 2017 as a result.

This is one more way in which the ACA is limiting options to those obtaining coverage through the Obamacare exchanges and giving enrollees fewer of the options available to those with private and employer coverage outside the exchanges.

Nationwide, nearly 20 million people were enrolled in HSA-qualified plans last year. More than three-fourths of the top performing companies in America offer HSAs, and a least 80% of them contribute to their employees’ accounts. People with HSAs must first purchase high-deductible health insurance plans that meet certain specifications, including deductible caps. The insurance policies generally have lower premiums than standard insurance, and people can put the savings into their HSA.

Health Savings Accounts are special tax-preferred accounts that people can use to pay healthcare expenses below their plan’s deductible. Before the ACA’s excessive mandates and suffocating regulations, HSAs were particularly attractive to people trying to afford health insurance: The premiums were lower for the catastrophic insurance policies, and consumers, often with their employers, could put premium savings into their HSAs.  Any money left in the account at the end of the year rolls over to the next.

In 2014, the average monthly premium for HSA-qualifying insurance was $486 for single coverage and $1,142 for families, according to America’s Health Insurance Plans. States with the highest enrollment were Texas, Illinois, Pennsylvania, Ohio and Minnesota.

The average account balance at the end of 2014 was $1,933. Average account balances increased with the age of the owner of the account. Account balances averaged $655 for owners under age 25 and $5,016 for owners ages 65 and older.

A number of studies have shown that people with HSAs received higher levels of recommended care, were more likely to engage in wellness programs, reduced total medical costs, and were more savvy healthcare consumers.

One company found that consumer-directed plans saved employers $208 per member per year and that employees in these plans spent less on healthcare, while increasing their preventative care visits. This kind of innovation gives consumers the power to transform the health sector to offer higher quality and lower costs.

Unfortunately, those writing the Obamacare legislation created the worst of both worlds.  People obtaining health insurance through the exchanges face ultra-high deductibles, plus high premiums and co-payments, but most face these costs without savings accounts to help pay first-dollar bills.

Enrollees in the Obamacare exchanges often pay $500 or more a month for premiums for policies with deductibles of $3,000-$6,000. That can mean spending $12,000 a year before insurance kicks in. Most might as well be uninsured.

Obamacare got it very wrong in divorcing high-deductible plans from the savings accounts that could provide a cushion. And now the Obama administration is doubling down on the mistake with the new regulation that would bury HSAs as an option in the exchanges.

Fifty years ago, Americans paid nearly half of their health spending out of pocket. Today, they pay just 11%, and only 3% for hospital bills. And because they rely on insurance and government health plans to pay most of their bills, they have no idea what a medical product or procedure actually costs. This lack of price transparency leads to hospitals charging $19 for an aspirin or $300 for an ankle brace that costs $21 at the drugstore.

If patients were able to see and compare the real cost of the products and services, the healthcare sector would innovate around things the consumers value: lower costs, more options, and providers who are more responsive to patients’ needs than they are to those of bureaucrats.

Sen. Bernie Sanders and others are promising Americans they can have low out-of-pocket costs, low premiums and access to unlimited healthcare if only we had a single-payer health system run by the federal government.

But after being burned by politicians’ promises, Americans have learned the hard way they can’t have it all. The low out-of-pocket costs that Sen. Sanders promises are an illusion hiding the reality of the high taxes, high premiums and lost wages that Americans face to pay for unnecessarily-expensive healthcare.

Unfortunately, the Obama administration is using its last year to try to kill the option that has the most promise to engage consumers in transforming our health sector around higher value, greater efficiency and lower costs.

Members of Congress are keeping a close watch on the administration’s regulatory maneuvers. As the House task force completes its work on a consensus health policy plan, expect new flexibility with Health Savings Accounts to play a prominent role in the consumer-centric policy proposal to be offered in June.

Read the article in Forbes


About the author

Grace-Marie Turner is president of the Galen Institute, a public policy research organization that she founded in 1995 to promote an informed debate over free-market ideas for health reform.

Full biography