Getting to 60 on HSA Expansion

“Democrats will point to statistics showing that most HSA owners don’t accumulate large balances because they don’t have sufficient discretionary income to contribute to the current statutory limits. . . But for many, an HSA is merely an alternative to a Health FSA. . . No one criticizes Health FSAs because participants don’t build balances over time (they can’t under current law). HSAs should be held to the same standard.”

William G. (Bill) Stuart

Director of Strategy and Compliance

August 23, 2018

Now that the Senate is in possession of two HSA expansion bills passed July 25 by the House, it’s time to take stock of the prospects that the bills entitled Increasing Access to Lower Premium Plans and Expanding Health Savings Accounts Act of 2018 and Restoring Access to Medication and Modernizing Health Savings Accounts Act of 2018 become law.

First, a quick civics lesson. The House forwarded both bills to the Senate, where they were assigned to the Finance Committee. The committee will call witnesses to testify both for and against provisions of the bill. Committee members then will “mark up” the bill, the process by which they make changes to the law that reflect their priorities that might differ from the House majority’s views of the most important HSA expansion measures.

The Finance Committee, headed by retiring Sen. Orrin Hatch (R-UT), a long-time HSA supporter and sponsor of HSA expansion legislation, will choose from a variation of one or more of the options below either before or after Finance marks up the bills and takes a committee vote.

ONE: Introduce the two bills as separate legislation as they are now, likely with some modification to the sections approved by the House and perhaps with entirely new sections that address other HSA expansion issues or other topics related to medical finance. The goal here would be to preserve the bills in as nearly the fashion that the House agreed as is possible.

TWO: Consolidate key provisions into a single bill, including only those sections that received bipartisan support in the committee voting. The idea here is to score a legislative victory without a defeat by voting on a bill with only those sections that are likely to pass on the floor of the Senate, rather than win on one bill and lose on another, or lose both.

THREE: Consolidate the two bills into one, remove some provisions that don’t have any bipartisan support and then add other sections that address other issues related to medical delivery and finance. This strategy would represent an attempt to woo a handful of Democrats who feel strongly about certain reform measures that aren’t included in the HSA expansion legislation.

If the Senate passes any of the legislation in a form other than what the House sent, the two chambers go to conference to resolve the differences. The conference committee is composed of representatives chosen by the majority and minority leaders of both chambers. The conference committee drafts a single bill that then goes back to both chambers for another vote. Once both the House and Senate pass identical bills, the legislation goes to the president for his signature. If it fails in either chamber, the process starts over or is abandoned (and the latter is the more likely action with mid-term elections approaching).

Framing the Conversation

The Senate presents a serious challenge to supporters of HSA expansion. Although bills can pass in the Senate with 51 votes, supporters must find 60 votes to bring the bill to the floor for a vote if the minority party (Democrats in the 115th Congress) threatens a filibuster. Republicans, who hold 51 seats, face a challenge in attracting the 9 or 10 Democrats needed to pass either bill. Despite the difficulty, there is a path.

It’s imperative that supporters of the bill burn into public consciousness that the HSA expansion bill is just that, provisions to make HSAs more accessible to more people and to allow more people to enjoy the benefits of owning an HSA.

To do so, they must explain to the public, and skeptical Democrats in the Senate, that an HSA has two functions.

First, it’s really a discount card that allows owners to receive between a 20% and 35% discount on every medical, dental, or vision expense they incur. Democrats will point to statistics showing that most HSA owners don’t accumulate large balances because they don’t have sufficient discretionary income to contribute to the current statutory limits. And they’re right. But for many, an HSA is merely an alternative to a Health FSA: an opportunity to pay today’s expenses with today’s pre-tax deposits. No one criticizes Health FSAs because participants don’t build balances over time (they can’t under current law). HSAs should be held to the same standard.

Second, it’s a forced savings program, like a bank’s Christmas club, that allows ordinary Americans to make regular payroll deductions on a pre-tax basis (so that every $20 deduction reduces net pay by about $15, but deposits the full $20 into the HSA) to accumulate balances over time. This point is critical. Most Americans live paycheck-to-paycheck and don’t have the financial resources to pay an unexpected $1,000 bill to fix a transmission, repair a broken home HVAC system, or pay a medical provider. An HSA program, particularly with employer contributions, which remains the norm,  allows owners to build balances consistently so that they have money available when the inevitable medical bill arrives.

The Role of the ACA

Supporters also need to make clear that HSA expansion legislation is not an alternative or in any way tied to the Affordable Care Act. Republicans generally believe that the ACA is a bad law that sows the seeds of its own financial destruction. They haven’t supported outright repeal (despite the rhetoric of some and the claims of many in the media) in this Congress, but they want to repeal many provisions and replace them with a more market-focused approach.

Democrats view President Obama’s signature domestic legislation as sacrosanct and argue that it merely needs some legislative tweaks and more funding to run properly. They decry various Trump administration initiatives from reducing ACA marketplace marketing and shortening annual enrollment periods to loosened regulations on limited-duration plans and association health plans that they claim siphon off healthy individuals at the expense of ACA risk pools to undermine the law.

If Democrats are able to portray the HSA expansion effort as another attempt to undermine the ACA, the bills won’t pass. If the bills’ supporters are able to show that they represent an effort to help people manage their increasing out-of-pocket expenses and aren’t an assault on the ACA, the likelihood of passage increases dramatically.

The Treacherous Path in the Senate

The Republicans hold 51 Senate seats. Unfortunately for them, Sen. John McCain (R-AZ) is gravely ill and has been absent from the Capitol for months. He may be able to make the trip for a vote (or he may pass away and have a replacement appointed by GOP Gov. Doug Ducey before the vote) to get the Republicans back to 51 votes. For now, though, the best that the GOP can muster is 50, and that requires the support of two Republican senators, Susan Collins from Maine and Lisa Murkowski from Alaska, who joined with McCain to defeat ACA amendment legislation in September 2017 after it passed in the House.

So, 50 votes leave the GOP 10 votes short. Where do they get those votes?

First, they approach the five vulnerable Democrats up for re-election this year in states that President Trump won in 2016 and where he polls at well north of 50% in favorable ratings The list: Claire McCaskill of Missouri (Trump won by +19 points) , Jon Tester of Montana (Trump +20%), Heidi Heitkamp of North Dakota (Trump +36%), Joe Donnelly of Indiana (Trump +19%), and Joe Manchin of West Virginia (Trump +42%). A vote in favor of HSA expansion may help them in their re-election bids by drawing independent moderates.

Here, Sen. Chuck Schumer (D-NY), the minority leader, has a dilemma. He can demand that Democrats stick together and vote as a bloc against any legislation that would give Republicans and President Trump a victory in health care. This stance has to be attractive to him with the approaching mid-term elections and national polls’ showing growing support for the ACA. On the other hand, those national polls don’t reflect the sentiment in these states, and these senators’ voting against HSA expansion may increase the likelihood that they lose their seats to strong Republican challengers. That outcome would reduce the Democrats’ presence in the Senate in the 116th Congress.

The other option is to allow these senators to vote as they must on this legislation to ensure re-election. Their five votes wouldn’t be enough to pass the legislation, but their support could help them retain their seats and bring the Democrats closer to the elusive majority in the upper chamber.

This latter option isn’t risk-free. If the five Democrats support the bill, they by themselves won’t secure passage, but the split in the Democrat ranks may prompt enough other Democrats who are attracted to provisions in the bill to cast favorable votes that lead to passage.

Side note: Schumer faces the same dilemma in the strategy around the confirmation of Judge Brett Kavanaugh, President Trump’s choice for the Supreme Court vacancy. The Kavanaugh nomination requires only 50 votes, so Republicans can prevail without McCain if they can receive commitments from Collins and Murkowski, who are studying the judge’s position on abortion before making a final decision. With those 50 votes, Kavanaugh is assured of sitting on the bench, and Schumer could then free his vulnerable incumbents to vote as they wish on the nomination without impacting the final outcome, as Heitkamp, Donnelly, and Manchin did when they approved then-Judge Neil Gorsuch for a Supreme Court opening in 2017. The stakes on HSA expansion are probably lower, though Democrats can stop passage short of the 60 votes required to advance that legislation. So the political dilemma is real.

And who are the other potential Democrat targets to reach 60 votes?

Bill Nelson of Florida, one of the more conservative Democrats (a relative term) in the Senate, faces his stiffest re-election challenge as he tries to win a fourth term against Gov. Rick Scott. Polls show a dead heat or slight Scott lead. Helping Floridians manage their medical expenses might help Nelson attract some undecided votes that Scott might otherwise capture.

Tom Carper of Delaware has supported HSAs. In fact, he and Sen. John Thune (R-SD) co-sponsored legislation in this Congress to give insurers the option to create HSA-qualified plans that allow first-dollar coverage for high-value chronic care. A watered-down version of this idea is included in one of the bills.

Chris Coons, the junior senator from Delaware, is familiar with and doesn’t always toe the party line on issues of medical coverage and finance. He’s one of four co-sponsors, along with Donnelly, independent Angus King of Maine (who caucuses with Democrats) and primary sponsor Republican Johnny Isakson of Georgia, to support S. 2302, a bill to remove broker commissions from the calculation of MLR. He’s a possible ally.

Doug Jones, who made headlines last December when he won a special election and became the first Democrat to serve in the Senate from Alabama in two decades, may be a potential target. Jones, whose general support of his party’s agenda is at odds with the politics of Alabama, won the special election because the Republicans nominated a severely flawed candidate. He will face a very difficult re-election in 2020. IF he wants to align himself with a Republican issue, this might be the time. On the other hand, his state is one of three states (along with California and New Jersey, perhaps the only issue for which these three states are included in the same sentence) that don’t allow a state income tax deduction for HSA contributions. HSA expansion may not be a cutting-edge issue to Jones.

Amy Klobuchar (pursuing a third term this year and mentioned by some Democrats as a potential presidential contender in 2020) and Tina Smith of Minnesota (who replaced former Sen. Al Franken, who resigned in January) represent a state that is home to a number of politically influential HSA trustees and medical-device manufacturers. Adding permanent repeal of the medical-device tax will increase the pressure from key Minnesota companies to support the legislation. Without a strong counterweight by Schumer, they are possible allies.

Adding a repeal of the medical-device tax likely won’t attract the two Democrat senators from state with a large medical-device company presence, Massachusetts, to the legislation. Elizabeth Warren is generally a critic of business in general and a solid opponent of any legislation that she perceives to weaken federal control over medical delivery and finance or strengthen consumer choice. Ed Markey, who as a member of the House was involved in negotiations to reduce the tax before the ACA became law, is very unlikely to join Republicans, even though he is likely more vulnerable to constituent pressure than is Warren.

So, there’s the math: At best, 51 Republicans. Six very vulnerable Democrats. Two Democrats who have been open-minded in the recent past with respect to HSA and insurance industry issues. Two Democrats who might be attracted with the inclusion of the medical-device tax. And one unlikely but possible ally serving an abbreviated term.

Whether you learned the old math or the new math, the calculation is the same. The path to passage is narrow, and the odds are long. But then, as the noted probability analyst Lloyd Christmas once said, “So you’re telling me there’s a chance?”


If one or both of the bills fail in the Senate, there is another avenue to passage. Some revenue-related provisions (like increasing HSA contributions to the statutory out-of-pocket maximum) can be attached to a bill to fund the federal government. That bill can pass with 50 votes, not the 60 required under normal Senate rules if the minority party threatens to kill the bill via filibuster.

Some provisions can be included in lame-duck legislation after the mid-term election Nov. 6. It’s common for Congress to pass some legislation between Election Day and the end of the session as retiring and defeated incumbents, freed from political constraints, cast their final votes as members of Congress. Typically only measures that have been approved by the House Ways and Means or Senate Finance Committees are candidates to attach to such legislation. These provisions already qualify.

Finally, Hatch’s retirement after 42 years in the Senate may lead to a sentimental send-off with the passage of an HSA expansion bill. Hatch has introduced HSA expansion legislation each session of Congress this decade. The Senate often bows to sentiment, Hubert Humphrey’s full-employment bill, Ted Kennedy’s fight for expanded medical coverage and passage of the ACA, Joe Biden’s son’s cancer death and the 21st Century Cures Act passed in late 2016, when sending off or remembering a long-time colleague. A bill that doesn’t pass in August or September may emerge in large part later in the year.

What We’re Reading

Medical coverage and finance are going to play an important role in the 2018 mid-term elections this November. Drew Altman of the Kaiser Family Foundation breaks down the issues.

A growing number of Americans are covered by health care sharing ministries. Do you want to learn more about this form of alternative coverage? Click here.

Can you spend HSA funds tax-free for qualified expenses once you’re no longer HSA-eligible? Get the answer by reading a recent installment from my weekly series called HSA Wednesday Wisdom, published on LinkedIn.

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