hsa council health savings accounts: account-based solutions for affordable health care a joint...
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HSA CouncilHealth Savings Accounts:
Account-based solutions for affordable health care
A joint effort of the American Bankers Association and its insurance subsidiary, the American Bankers Insurance Association
Kevin McKechnie Renee GalbraithDirector Policy [email protected] [email protected]
June 27, 2012
The President on Health Care Reform and HSAs
President Obama in a March 2, 2010 letter wrote:
“I believe that high-deductible health plans could be offered in the exchange under my proposal, and I’m open to including language to ensure that is clear. This could help to encourage more people to take advantage of HSAs.”
To read entire letter: http://www.whitehouse.gov/the-press-office/letter-congressional-leaders-health-insurance-reform
June 2012 HSA Council www.aba.com/Issues/HSA
HHS on Health Care Reform and HSAs
In a February 10, 2011 op-ed in the Washington Post, Secretary Sebelius wrote:
“The Affordable Care Act puts states in the driver's seat because they often understand their health needs better than anyone else . . . States have discretion, for example, to offer a wide variety of plans through their exchanges, including those that feature health savings accounts.”
Entire op-ed available at: http://www.washingtonpost.com/wp-dyn/content/article/2011/02/09/AR2011020905682.html
June 2012 HSA Council www.aba.com/Issues/HSA
Legislation the HSA Council Supports:Senate Bills
S. 1098 Sen. Hatch “Gold-Standard HSA Bill” [email protected]
S. 1049 Sen. Kyl Contains “Deeming” Clause [email protected]
S. 312 Sen. Hutchison Repeals OTC prescription requirement [email protected]
S. 1368 Sen. Roberts Repeals OTC prescription requirement [email protected]
S. 1031 Sen. Coburn Provides states flexibility to improve Medicaid and SCHIP, including HSAs
S. 1171 Sen. Schumer Equalizes tax treatment of health care benefits (including HSAs) for domestic partners
House BillsH.R. 2010 Rep. Paulsen “Gold-Standard HSA Bill” House Companion to
Hatch bill (S. 1098)[email protected]
H.R. 605 Rep. Paulsen Repeals OTC prescription requirement [email protected]
H.R. 2676 Rep. Schweikert Contains “Deeming” Clause [email protected]
H.R. 2013 Rep. Nunes Provides states flexibility to improve Medicaid and SCHIP, including HSAs
June 2012 HSA Council www.aba.com/Issues/HSA
Legislation the HSA Council Supports:House Bills
H.R. 103 Rep. Blackburn Medicare voucher dollars deposited directly into Medicare beneficiaries’ health savings account established by such individual
H.R. 524 Rep. Quayle Repeals the 20% out-of-pocket penalty and prescription requirement for OTC medicines
H.R. 536 Rep. Cole: Allows Indian Health Services to offer an HSA option [email protected]
H.R. 2077 Rep. Price Repeals the Medical Loss Ratio (MLR) provision [email protected]
H.R. 369 Rep. Austria Allow tax deduction for health insurance cots, increase rollovers from FSA & HRAs, additional catch-up contributions for 55+, allow payment of premiums from HSA, treat as QME fitness programs, and more
H.R. 450 Rep. Reichert Repeals the 20% out-of-pocket penalty and prescription requirement for OTC medicines
H.R. 2529 Rep. Jenkins Repeals OTC prescription requirement [email protected]
H.R. 2088 Rep. McDermott Equalizes tax treatment of health care benefits (including HSAs) for domestic partners
H.R.1051/ H.R. 2435
Rep. Johnson Allows Seniors to opt out of Medicare Part A and continue to participate in an HSA
June 2012 HSA Council www.aba.com/Issues/HSA
Legislation the HSA Council Supports:House Bills
H.R. 99 Rep. Dreier Expands deductible and HSAs after beneficiary’s death [email protected]
H.R. 2649 Rep. Brady Adds sports and fitness expenses to definition of “qualified medical expenses”
H.R. 3000 Rep. Price Repeals PPACA [email protected]
H.R. 397 Rep. Herger Repeals PPACA; allows payment of HDHP premiums from HSAs
H.R. 364 Rep. Latham Repeals PPACA; allows payment of HDHP premiums from HSAs; allows self-employed to deduct health insurance cost from income
H.R. 3728 Rep. Schock Would make members of health care sharing ministries eligible for HSAs
H.R. 3682 Rep. Duffy Repeals PPACA; adds Hatch/Paulsen provisions [email protected]
H.R. 3819 Rep. Huizenga Allows the transfer of required minimum distributions from a retirement plan to an HSA
H.R. 4064 Rep. Mulvaney Repeals numerous PPACA provisions, including OTC prescription requirement and 20% penalty for non-qualified HSA distributions
June 2012 HSA Council www.aba.com/Issues/HSA
Legislation the HSA Council Supports:House Bills
H.R. 4224 Rep. Broun Repeals PPACA; repeals HDHP requirement for HSAs; increases HSA contribution limit; allows seniors to participate in HSAs; allows HSA funds to be rolled over to Medicare MSAs
H.R. 5842 Rep. Jenkins Repeals prescription requirement for OTC medicines [email protected]
H.R. 5858 Rep. Herger
(Passed W&M Committee. Awaiting Floor Action by the House)
Allows HSA contributions to qualify for the savers credit; allows qualified medical expenses incurred before the HSA establishment date to be reimbursed tax-free if the account is established within 60 days after HDHP coverage begins; allows both spouses to make catch-up contributions to same HSA; allows full HSA eligibility for veterans with a service-connected disability; allows individuals 55-64 to pay premiums for employer-sponsored coverage tax-free with HSA funds if they are a former employee or surviving spouse
H.R. 436 (passed House)
Rep. Paulsen
(passed House. On Senate Calendar, ready for Floor Action)
Repeals prescription requirement for OTC medicines [email protected]
June 2012 HSA Council www.aba.com/Issues/HSA
How the MLR Regulation Impacts HSAs
• The Medical Loss Ratio (MLR) regulations’ mathematical formula discriminates against HSA-qualified health plans by not allowing medical costs incurred by the patient below the deductible to be accounted for in the MLR formula.
• Given that 94% of those with an HSA will spend less than $5,000 in medical expenses annually, roughly only 6% of all expenditures by those with an HSA will be counted in the MLR formula.
• This is the biggest reason why the MLR percentages are in the 40-60% range for HSA-qualified health plans is that the HHS formula to compute MLR discriminates against HSAs by not counting dollars that an individual spends towards their deductible.
• The simplest, most straight forward fix for this problem is to count a patience’s expenditures below the deductible in the MLR formula for HSA-qualified health plans.
• Given HHS’s refusal to amend their MLR formula, regulatory relief will have to come from either the U.S. Congress or the U.S. Supreme Court.
June 2012 HSA Council www.aba.com/Issues/HSA
How Actuarial Value Regulation Impacts HSAs: • Like the MLR formula, the rule on how to calculate a health plan’s actuarial value discriminates against HSA-
qualified health plans by not including the full value of contributions by the employer and employee. HHS has stated their intention in the AV rule for HSA-qualified health plans “to adjust” both the employer and employee contributions to the account by not counting all of the contributed dollars. They have not said what the adjustment will be.
• In its comment letter to HHS dated May 16, 2012, the American Academy of Actuaries said the following:
“This adjustment . . . could have the effect of discouraging employers from contributing to HSAs/HRAs. For a given amount of employer spending toward health insurance, a higher [actuarial value] likely would be achieved by devoting more of those dollars directly toward a health insurance program than to an HSA/HRA. To the extent that HSAs encourage plan enrollees to seek cost-effective care, discouraging this option may run counter to goals of achieving more effective use of health care dollars.”
• Likewise, in its 2008 report analyzing major health insurance proposals, the Congressional Budget Office (CBO) said that:
“. . . the actuarial value of consumer-directed plans would include the expected value of any contributions that an insurer or employer sponsoring the plan would make to an enrollee’s account—so that contribution could be set to make the overall actuarial value of the consumer-directed plan equal to the value of a conventional health plan.” • If this consensus formula had been followed by HHS, then the current AV problem for HSA-qualified health plans
would have been eliminated. Given HHS’s refusal to amend their AV rule, regulatory relief will have to come from either the U.S. Congress or the U.S. Supreme Court.
June 2012 HSA Council
www.aba.com/Issues/HSA
Mandated Benefits and HSAs
HSA Council www.aba.com/Issues/HSA
• It is a simple fact of life that the more mandated benefits there are in any exchange-qualified or non-exchange-qualified health plan, the higher the premium will be. A one-size-fits-all benefit package that drives premiums higher, thereby eliminating the nearly one-third discount for most HSA-qualified premiums, will wipe out the savings normally used to fund the accounts. For every 1% increase in premium cost, 300,000 Americas become uninsured.
• In MA there is no difference in the price of a $5,000 deductible plan and a $500 deductible
plan, because of the many mandates. • We believe that the standard HSA policy now on the market, which covers all expenditures
above the deductible, effectively meets any mandated benefit criteria, while allowing the economics of HSA-qualified health plans to work in the marketplace.
• It should be noted that HSAs are being looked to provide low-cost health plans and costly
mandated benefits forced on HSA-qualified health plans will destroy this low cost option – forcing people to pick higher cost plans and driving up the cost of the subsidies for those higher cost plans. Furthermore, forcing someone else’s choices on what should and should not be covered and making them pay for it, is a politically dangerous position for those doing the forcing.
HSAs are the Most Effective Vehicle to Promote Prevention
American Academy of Actuaries “Monograph” of four previous studies found:
Generally, all of the studies indicated that cost savings did not result from avoidance of appropriate care and that necessary care was received in equal or greater degrees relative to traditional plans. All of the studies reviewed reported a significant increase in preventive services for CDH participants. Three of the studies found that CDH plan participants received recommended care for chronic conditions at the same or higher level than traditional (non-CDH) plan participants. Two studies reported a higher incidence of physicians following evidence-based care protocols.1
0%
10%
20%
30%
40%
50%
Health Screenings
Exercise Nutrition/ Diet Health Coaching
Higher Use of Free Preventive Care in HSAs
HSA Traditional Health Plans
1. AAA Study “Emerging data on Consumer Driven health Plans” May 20092. The Kaiser Family Foundation and Health Research & Educational Trust 2010 Annual Survey-Employer Health Benefits3. Chart: Blue Cross and Blue Shield Association: Consumer Driven Health Plans Member Experience Survey
92% of employers offering HSA plans cover preventive care at 100% with no deductible2
June 2012 HSA Council www.aba.com/Issues/HSA
HSAs Help Consumers Save• Annual premium costs for families come down an average of $2,350 for an HSA
plan versus a PPO¹. • The premium savings cover nearly 60% of the average HSA
“high deductible”¹.• HSAs must have an out-of-pocket limit to protect against bankruptcy. The average
out of pocket limit is $6,066¹.• Over 65% of covered employees’ accounts receive an average of $1,546 per family¹
from employers into their HSA.• RAND Corp: If CDHP with HSA/HRAs accounted for half of all employer-sponsored
insurance, health costs could drop by $57 billion annually3.• HSA plan members hold a range of $1,470 to $1,841 in their HSA accounts that
they can use toward their current and future medical out of pocket costs.4,5
• Fidelity Investments Reports: “The average annual contribution to an HSA rose to $2,677 in 2011, up from 2,620 in 2010.”6
1. The Kaiser Family Foundation and Health Research & Educational Trust 2010 Annual Survey-Employer Health Benefits2. OptumHealth Financial Services – total estimated U.S. HSA deposits divided by 4.4 million accounts as of Feb 20103. RAND Corporation May 2012 study, “Growth of Consumer-Directed Health Plans to One-Half of All Employer-Sponsored Insurance Could Save $57 Billion Annually.”4. Devenir 2011 HSA Research Report, January 31, 20125. EBRI, “Health Savings Accounts and Health Reimbursement Arrangement: Assets, Account Balances, and Rollovers, 2006-2011” January 20126. Fidelity Investments Reports, April 12, 2012
HSA Council www.aba.com/Issues/HSA
HSA Trends in the Marketplace• Over 3.0 million previously uninsured people are covered by HSAs¹ because such plans are
affordable.• “High-deductible healthcare plans are no longer a novelty – they are becoming
mainstream….Half of all workers in ‘small’ businesses (up to 199 workers) who have health insurance have these plans.”2
• From 2012 Towers Watson Employer Survey: “ABHP enrollment has nearly doubled in the last two years, from 15% in 2010 to 27% in 2012. Nearly 40% of companies consider HSAs an active part of their retiree strategy.” 3
• Aetna HealthFund: Employers that replaced their traditional health benefit plans with consumer directed plans saved $21.8 million over a five year period per 10,000 lives covered. Enrollees spend 7% less on overall health care cost and received more preventative care than members with traditional plans.4
• Cigna Study of Employees and Dependents with Consumer Directed Health Plans: Individuals covered had a medical cost trend 16% lower than traditional health plans during the first year. Over five years, the savings were $9,700 per employee. These covered lives had consistent or higher use of over 400 evidence-based medical best practices.5
1. The Kaiser Family Foundation and Health Research & Educational Trust 2010 Annual Survey-Employer Health Benefits2. Kaiser Family Foundation survey released April 20123. 17th Annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health care, 20124. Aetna HealthFund study released January 20125. Sixth Annual Cigna Choice Fund Experience Study, February 2012
June 2012 HSA Council www.aba.com/Issues/HSA
More HSA Trends in the Marketplace
• Cigna believes that if the share of Americans enrolled in account-based health plans rose to 50 percent and achieved the same results as this study, the U.S. could save $350 billion over 10 years—and the level of patient care would improve.1
• The State of Indiana has been offering account-based health plans to state employees since 2006. In 2012, its seventh year for account-based plans, 90 percent of Indiana state workers with its health insurance coverage participate in an account-based health plan. The state says these plans have already reduced the state’s overall health benefit costs by more than 10 percent, and only 2 percent have switched back to a traditional plan.2
• The consulting firm Towers Watson states that nearly 60 percent of employers have implemented account-based health plans, and that number will increase to 70 percent by 2013.3
• Twelve percent of employers now offer “total replacement” plans—where account-based health plans are the only option offered to employees—up from 7.6 percent in 2010.3
• The most recent survey by EBRI suggests that enrollees in account-based health plans are more likely to: (1) check whether their plan would cover their care; (2) talk to their doctor about treatment options and costs; (3) talk to their doctor about prescription drug options and costs; (4) ask for a generic drug; (5) check the price of service before seeking care; (6) use an online cost-tracking tool; and (7) develop a budget to manage health care expenses. Similar findings have been reported by insurance carriers.4
1. Sixth Annual Cigna Choice Fund Experience Study, February 20122. Testimony of Roy J. Ramthun, before the Subcommittee on Health, Employment, Labor, and Pensions, in the Committee on Education and Workforce, U.S. House of Representatives, May 31, 20123. 17th Annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health care, 20124. Use of Health Care Services and Access Issues by Type of Health Plan: Findings from the EBRI/MGA Consumer Engagement in Health Care Survey, June, 2011
June 2012 HSA Council www.aba.com/Issues/HSA
March 2005
January 2006
January 2007
January 2008
January 2009
January 2010
January 2011
January 2012
1.0
3.2
4.5
6.1
8.0
10.0
11.4
13.5
Small Group Large Group Other Group Other Total
Sources: AHIP Center for Policy and Research, 2005 – 2012 HSA/HDHP Census reports.* For this census, companies reported enrollment in the large- and small-group markets according to their internal reporting standards,
or by state-specific requirements for each state. The "Other Group" category contains enrollment data for companies that could not break down their group membership into large- and small-group categories within the deadline for reporting.
** The “Other” category was necessary to accommodate companies that were able to provide information on the total number of people covered by HSA/HDHP policies but were not able to provide a breakdown by market category within the deadline for reporting. 15
HSAs are the Fastest Growing Health or Finance Product
0 – 1926%
20 – 2912%
30 – 39
13% 40 – 49
18%
50 – 59
21%
60 +10%
Source: AHIP Center for Policy and Research.Notes: Most enrollees in the 0 – 19 age group were dependents covered under family plans.
Age Distribution of People Covered by HSA-Qualified High-Deductible Health Plans, January 2012
Families and 50+ yrs Equals 75% of Total Covered Individual Population
16
Number of Lives Covered by HSA-Qualified High-Deductible Health Plans, by State, January 2012
Source: AHIP Center for Policy and Research. 17