“Those folks need to answer to working families with extraordinarily high medical bills and tell them why Congress can’t find room in a $4 trillion (that’s $4,000,000,000,000) federal budget to provide them with an extra $2,000 or $3,000 of tax relief to pay their bills more easily.”
William G. (Bill) Stuart
Director of Strategy and Compliance
March 15, 2018
March 23 is an ominous date on Capitol Hill. To some, it’s akin to Dec. 7 (1941 – Pearl Harbor), Feb. 3 (1959 – the day the music died), Nov. 22 (1963 – presidential assassination) or Jan. 22 (1973 – Roe v. Wade decision by the Supreme Court). March 23, 2010, is the date that then-President Obama signed the Patient Protection and Affordable Care Act into law, ushering in a new era of federal control over state insurance markets.
This year, March 23 is a critically important date on the congressional calendar. Congress has yet to agree on a final federal budget for the fiscal year that began Oct. 1, 2017. Republicans and Democrats have passed several continuing resolutions (CRs) to keep government funded for short periods of time, thereby buying time to engage in more debate to finalize the budget.
These delays are political opportunities for legislators. Remember in January, when Democrats wanted to tie an immigration deal to the budget deal as the price for gaining the minority support necessary to pass the budget? It’s not just a Democrat maneuver. Republicans and their various factions often use these continuing resolutions to advance their policies as well.
When a government shutdown is imminent, opponents come to the table to negotiate. Deadline pressure becomes a ‘name your price” tool for savvy negotiators who realize that they may be able to slip less polarizing issues into the final bill where they’ll face less opposition as legislators focus on final spending priorities.
The Omnibus Budget Bill
The budget legislation will be an omnibus bill, which means that it will include the budget and a lot of other items that may not pass during regular order. Key Republicans may withhold their votes unless an item that they support – funding for a dinosaur museum in Dubuque or interest-free loans to beet growers in Pennsylvania, to cite but two (fictitious but representative) examples – ends up in the final bill. Democrats in the House are unlikely to benefit from this game because Republicans probably have a sufficient majority to trade within their own party. On the other hand, a handful of vulnerable Senate Democrats– John Tester of Montana, Claire McCaskill of Missouri, Heidi Heitkamp of North Dakota, Joe Donnelly of Indiana and Joe Manchin of West Virginia – are locked into tough re-election campaigns in states that President Trump carried in 2016 and may be able to dictate terms for their support if GOP leaders can’t gather 50 votes among their 51 members.
The bill presents the best opportunity this year for special interests and advocacy groups to have their priorities inserted into legislation that has a genuine chance of quick passage, thanks to the importance of keeping the federal government funded and the tight deadline.
I have spent time this winter on Capitol Hill advocating for legislative language to expand HSAs. I’m part of a small team at the American Bankers Association HSA Council that has identified three key priorities on which we’re focused through the end of next week. We believe that these priorities will help meet the Trump administration’s (and truthfully, to at least some degree, all elected officials’) goals of expanding access to medical coverage, increasing choices and helping to manage costs.
1. Higher HSA Contribution Limits
When Congress passed legislation creating HSAs in December 2003, the minimum deductible on a “high-deductible health plan” was $1,000 for self-only coverage and $2,000 for family coverage. Most plans didn’t impose coinsurance after the deductible. The law limited HSA contributions to the lower of the deductible or a statutory maximum contribution limit of $2,600 for self-only and $5,150 for family coverage – absurdly high limits because very few plans had deductible approaching that figure.
In late 2006, as deductibles rose and some insurers began to introduce in-network coinsurance, Congress changed the law to allow contributions up to the statutory limit, regardless of the deductible level. That change spurred growth of HSAs among individuals with higher incomes (as a savings vehicle) and those with higher out-of-pocket expenses (as a reimbursement account for immediate expenses).
Since implementation of the Affordable Care Act (ACA) in 2014, a growing number of plans sold in the nongroup and small-group markets have high deductibles and coinsurance, with out-of-pocket costs approaching the statutory out-of-pocket maximum of $6,650 and $13,300.
According to the Kaiser Family Foundation, in 2018, the average cost-sharing for self-only coverage was a $4,033 deductible and $6,863 out-of-pocket maximum for Silver plans and $5,777 and $7,058 for Bronze plans.
For family coverage, the averages were $8,292 deductible and $13,725 out-of-pocket maximum for Silver plans and $11,555 and $14,115 for Bronze plans.
Families with high cost-sharing absolutely need higher HSA contribution limits. They’re dealing with a sick child, a spouse trying to manage a chronic condition or a serious accident. Arranging payment terms with providers so that they can continue to receive care is an incredibly stressful exercise.
Congress can make it less stressful by allowing HSA owners to run these higher payments to providers through their accounts so that individuals and families in these situations can pay their high out-of-pocket costs with pre-tax dollars, in effect using their HSAs as a discount card.
The failed Republican bill to amend the ACA that passed the House of Representatives last spring and died in the Senate in late summer included this provision. It should be included in the omnibus bill. Yes, it will result in the loss of some tax revenue, which will be a key talking point for critics of this provision or general opponents of HSAs.
Those folks need to answer to working families with extraordinarily high medical bills and tell them why they Congress can’t find room in a $4 trillion (that’s $4,000,000,000,000) federal budget to provide them with an extra $2,000 or $3,000 of tax relief to pay their bills more easily.
2. An HSA Option for Chronic Conditions
A key feature of HSA-qualified programs is that all services except select preventive visits and tests are subject to the deductible. This provision ensures immediate cost-sharing on all diagnostic services and treatments, which reduces the premiums on these plans.
Unfortunately, this design also excludes a portion of the population that is healthy except for a chronic condition (asthma, COPD and diabetes, for example – see more information here). As a result, employers who want to offer an HSA program as their only benefits offering to save money (and thus compensate employees with higher wages rather than more expensive medical coverage) are reluctant to do so. They’re concerned that an employee about whom they care or an employee’s family member has a chronic condition. Having an HSA-qualified plan as the only option sentences that family to the out-of-pocket maximum every year.
We’re not talking about the fringes here. The Centers for Disease Control estimates that nearly half of US adults suffer from at least one chronic condition.
There is a growing movement in medical insurance to offer Value-Based Insurance Design (V-BID) products. These plans have high deductibles on most services. They reduce or eliminate cost-sharing for chronic conditions so that patients don’t face financial barriers when accessing the care necessary to manage their conditions to reduce or eliminate acute (read: expensive, inpatient) care.
Allowing insurers the option to build V-BID HSA-qualified plans makes sense. The plans would be a more attractive option to individuals with one or more chronic conditions in the family, since these individuals could experience the benefits of an HSA program, become better consumers for all care and not face the out-of-pocket maximum financial responsibility every year because of the chronic condition.
It’s important to note that we seek this legislative solution as an option for insurers and employers. This approach will make sense for some insurers and employers. Some employers – particularly those who want to consolidate down to a single medical plan – will be willing to pay an additional premium to have chronic-care services covered outside the deductible. Other employers who offer at least one non-HSA-qualified plan alongside an HSA-qualified plan may prefer the possible slightly lower premiums of an HSA-qualified plan and steer employees with chronic conditions to another plan.
3 . Medicare for Working Seniors
Prior to HSAs, individuals who continued to work past their 65th birthdays typically enrolled in Medicare Part A. They weren’t required to enroll (unless they were collecting Social Security or Railroad Retirement benefits), but most did. Part A is free for most Americans because either they or their spouses prepaid their Part A premiums through FICA taxes during their working years.
Coverage in any Part of Medicare is disqualifying coverage for anyone who wants to continue to contribute to an HSA. A working senior who remains covered on her employer-sponsored HSA-qualified plan and also enrolls in Part A at age 65 can no longer contribute to an HSA.
Some working seniors understand this requirement and make sure they don’t enroll in any Part of Medicare. Many others don’t understand the rules and are confused by the letter that they receive about three months before they turn age 65, informing them of their eligibility to enroll in Medicare. They often seek the advice of an older relative, friend or co-worker, who often doesn’t understand the interplay of HSAs and Medicare.
In many cases, employees enroll in Part A at age 65, defer other Parts (which require a premium) and remain on their employer-sponsored HSA-qualified plans. If their company has 20 or more employees, the group plan is the primary payer, while Medicare picks up at most a portion of inpatient costs not covered by the group plan.
Once an employee realizes that she’s no longer HSA-eligible, in most cases she drops the group coverage and enrolls in Medicare Part B (outpatient services) and Part D (prescription-drug coverage). If her company employs 20 or more workers, the burden of paying her claims shifts from primarily the employer-sponsored plan to exclusively Medicare.
Since the average Medicare enrollee incurs more than $12,000 in claims annually, the financial shift has a real impact on Medicare claims and the federal budget.
I’ve been closely involved with HSA Council’s effort to allow employees enrolled in Part A or Part B who otherwise are HSA-eligible to remain eligible to contribute to their HSAs. This simple proposal ensures that Medicare remains the secondary payer when the employer has 20 or more employees, thus relieving Medicare of primary responsibility for paying incurred claims.
When the company has 19 or fewer employees, Medicare is always the primary payer. Under this proposal, the federal government would realize slight savings because the employee would be responsible for all claims up to the deductible on the employer-sponsored plan.
Two weeks ago, I met with staff at the House Ways and Means Committee and officials at the Office of Management and Budget. This afternoon, I’m meeting with Trump administration officials representing two key domestic policy agencies and the office of the vice president. Two colleagues and I are presenting this concept with the hope that it’s included in the omnibus bill.
Alternatively, we want to see it included in the president’s proposed 2019 federal budget (the Budget Message of the President, released in February, references a desire to act in this area as part of a broader strategy to reduce the cost of medical coverage, increase flexibility and boost the number of Americans with coverage).
Other organizations are “working the Hill” to try to advance other issues related to medical coverage, either as separate legislation or as inclusions in the omnibus bill. These issues include:
- Appropriating payments to reimburse insurers for Cost-Sharing Reduction payments (reducing out-of-pocket expenses for low-income individuals enrolled in Silver plans through ACA marketplaces).
- Defining COBRA as group coverage to prevent potential gaps in coverage for individuals who transition from COBRA coverage to Medicare.
- Eliminating, rather than merely further delaying, the key remaining ACA taxes: the excise tax on high-cost plans (Cadillac Tax), Health Insurance Tax (HIT) and medical device tax.
- Allowing states to create invisible reinsurance plans that provide specific stop-loss insurance to protect insurers against very high claims (and thus reduce premiums once insurers no longer face this high-claim threat).
- Clarifying HSA eligibility rules with respect to services received at on-site (work) clinics and through direct primary care.
In short, it’s going to be a busy next eight days before the deadline to fund the federal government for (one hopes) the balance of the fiscal year.
What We’re Reading
For those of you who sell Medicare products or plan to live long enough to enroll in some form of Medicare coverage, the Kaiser Family Foundation has projected beneficiaries’ future out-of-pocket costs. The report is sobering – and a call to action to make adjustments in savings now. (By the way, HSAs are the prefect vehicle through which to save.)
Devenir recently published its semi-annual survey of HSAs. It shows HSAs’ continuing to grow – assets up 22% (to $45.2 billion) and accounts up 11% (to 22 million) year-over-year. These figures represent the greatest discrepancy between growth rates of assets and accounts in recent years. Usually the two growth rates are similar. The faster growth of assets indicates that HSA owners are holding larger balances than before – reflecting a combination of natural accumulation of funds as accounts are open longer and the shift to viewing HSAs as investment accounts rather than merely more flexible Health FSAs.