Three bills in the U.S. Senate would give Americans more control over their health care spending by removing rules that limit the use of health savings accounts (HSAs).
HSAs allow consumers to put pre-tax money into a tax-free account to spend on qualified health care expenses. Participants must be enrolled in a high-deductible health plan and are limited to how much they can put into an HSA each year, but the accounts can grow over time, and interest and earnings are tax-free. Consumers can use an HSA to pay for co-insurance, co-pays, deductibles, and out-of-network expenses, but are prohibited from using the accounts to pay for insurance premiums or a monthly flat fee to a physician offering direct primary care (DPC).
Eligibility, Contributions, Expenses
The bills address eligibility, contribution, and expense limitations.
The Enhanced Primary Care Act, S. 2990, sponsored by Sen. Bill Cassidy (R-Louisiana), would allow HSAs to be used for DPC if the consumer is enrolled in a high-deductible insurance plan. The bill would also allow Medicare to offer a DPC option and includes physicians who do not participate in Medicare.
The Pandemic Health Care Access Act, S. 3546, sponsored by Sen. Ted Cruz (R-Texas), would decouple HSAs from high-deductible plans for the duration of the pandemic emergency. It would expand HSAs to enrollees in Medicare, other government plans, or employer plans, and would allow HSAs to pay for DPC and telemedicine visits in those circumstances.
The Health Savings Act of 2019, S. 12, sponsored by Sen. Marco Rubio (R-Florida), would allow spouses older than age 55 to make catch-up contributions on the same HSA account, expand eligibility to those in Medicare Part A as well as other government health programs and health share ministries, and allow HSAs to pay for over-the-counter drugs, DPC, and health insurance premiums.
DPC is a health care arrangement that is growing in popularity, but Congress and the Internal Revenue Service have struggled to define it. At issue is whether DPC is a type of health insurance or health service (similar to a physician visit).
DPC members pay a flat fee, usually under $100 a month, for what is often 24/7 access to a physician, by phone or email, and on the weekends for example, and to receive discounts on prescription drugs, imaging, and lab services. Many practices do not accept insurance, which allows them to eliminate claim costs.
HSAs’ Current Limitations
The HSA bills are a step in the right direction, but some don’t go far enough, says John Goodman, president of The Goodman Institute and co-publisher of Health Care News.
“We need to divorce HSAs from high-deductible insurance plans, permanently and completely,” Goodman said.
Goodman gives the example of a consumer with a chronic condition such as diabetes.
“If a patient is diabetic, then the employer wants the patient to comply with drug treatment,” Goodman said. “The employer may even lower the costs of the drugs to zero. But under current law, that cannot be done, because of an across-the-board deductible requirement that compels the employee to bear all costs up to the deductible. These accounts are not designed for people with chronic illness.”
Only Congress can make HSAs more flexible, Goodman says.
“President Trump has made major headway with a rule that allows employers and insurers to pay for prescription drugs for 13 chronic conditions without jeopardizing the employee’s right to have an HSA, but we need to go further by removing the deductible requirement altogether,” Goodman said.
HSA Power Proven in Medicaid
Something like a flexible HSA has already been tested in the marketplace, says Goodman, with the Medicaid Cash and Counseling Program (MCCP). MCCP provides disabled people with a cash account they use to manage their own expenses. The program has been in existence for decades and is available in every state.
“They can hire and fire people and if they save on expenses, they can use the funds to meet other needs,” Goodman said. “It is a model for people managing their own health care dollars. The program’s satisfaction rates are in the high 90 percentiles and you don’t see numbers like that in any other program, anywhere in the world.”
The HSA concept scores highly in many polls, Goodman says.
“People like the idea of managing their own health care spending dollars,” Goodman said.
Unleashing HSA Potential
HSAs have been available for nearly two decades, but are not as widely used as they should be because of unnecessary legal restrictions, says Devon Herrick, PhD., a health care economist and policy advisor to The Heartland Institute, which co-publishes Health Care News.
“Since becoming available in 2004, it is estimated that HSAs have grown to more than 25 million accounts covering individuals and families,” Herrick said. “Some of these are underfunded but have the potential to accumulate balances. Enrollment in health plans that are HSA eligible far exceeds the number of HSA accounts.”
The bills could make HSAs more popular by expanding eligibility and the list of qualified expenses. Of the three proposals, Herrick says he believes Rubio’s bill is the most comprehensive.
“Sen. Rubio wants to expand HSA eligibility to many other types of [health care] arrangements, including sharing ministries and Medicare,” Herrick said. “[The bill] also expands the types of expenses that are HSA eligible to include OTC drugs and certain exercise equipment and DPC. [The bill] also treats HSAs like retirement accounts, sheltering them from bankruptcy. This is an especially great idea.”
As insurance premiums grow, high deductible plans are becoming more popular along with alternative health care payment arrangements, Herrick says.
“Many on the left clamor for a ‘Medicare for All’ program,” Herrick said. “Perhaps the better plan is the one used in Singapore, where individuals are required to fund an HSA-like arrangement, called a ‘Medisave’ account. Every American should have an HSA and everyone should set aside some funds for their day-to-day medical needs.”
Kenneth Artz (email@example.com) writes from Dallas, Texas.
The Enhanced Primary Care Act: https://www.congress.gov/bill/116th-congress/senate-bill/2999/all-info
The Pandemic Health Care Access Act: https://www.congress.gov/bill/116th-congress/senate-bill/3546/text
The Health Savings Act of 2019: https://www.congress.gov/bill/116th-congress/senate-bill/12