They say that if a couple waits until everything's perfect to have a baby, they never will. At some point, we just have to take a leap of faith.
Health savings accounts, the latest generation of health insurance products, just turned four years old. They were conceived as part of the Medicare Modernization Act of 2003 and born Jan. 1, 2004. HSAs arrived with much fanfare. This initial excitement quickly waned, though, when everyone realized carriers weren't going to price these products to sell. While carriers bragged about the plans' ability to reduce utilization by giving consumers skin in the game, they didn't factor this behavior change into the plan premium. They based their pricing solely on the actuarial value of the benefits being provided.
As HSAs were going through their terrible twos, evidence finally emerged that they do, in fact, reduce utilization. Carriers adjusted their rates accordingly, which helped increase sales. Many, however, believe high-deductible plans remain overpriced. With a significant percentage of their patients on consumer-directed plans, providers would be forced to compete on cost and quality. But to reach that level of enrollment, we need a further price reduction on HSA-compatible plans. Insurance companies need to take a leap of faith.
A somewhat surprising ally in the effort to expand HSAs has been the federal government, which passed legislation that makes HSAs more consumer-friendly. In December 2006 the rules were changed to allow for a one-time rollover from an HRA or FSA into an HSA and to allow people with HDHPs to contribute the full federal limit to their accounts regardless of their deductible.
I recently spoke with Craig Keohan, president of First Horizon Msaver, a Kansas City HSA administrator. Keohan also serves as chairman emeritus of the American Bankers Association Health Savings Account Council. In this role, he has attended roundtable discussions with President Bush and meets with members of Congress to discuss legislation impacting the industry, specifically future HSA development. Keohan was instrumental in the positive changes we saw in 2006 and helped draft a bill sponsored by U.S. Sen. Orrin Hatch, R-Utah, that would make HSA plans even more user friendly.
The first change would allow people to use HSA funds to pay for any type of health insurance premium regardless of circumstances. Current law only allows HSA funds to pay for COBRA or for insurance premiums when a person is receiving state unemployment benefits.
The bill also would give insureds more time to get their account started. When people enroll in a high-deductible health plan, they sometimes wait a month or two before setting up their HSA. Medical expenses incurred during this gap cannot be reimbursed with HSA funds, but this bill would allow all expenses incurred after HSA-qualified coverage begins to be reimbursed from the HSA as long as the account is set up by April 15 of the following year.
We also would see expanded eligibility for veterans who have used VA medical services in the past three months and for people on Medicare Part A.
Another bonus is that it would allow those 55 or older to make catch-up contributions to the same HSA.
And a huge change proposed by the bill is to expand the definition of preventive drugs to include prescriptions and over-the-counter medications that prevent the worsening of or complications from chronic conditions. This will provide additional flexibility to health plans that want to cover these medications prior to the deductible and will remove a barrier for people with chronic conditions.
Last but not least, the bill makes several changes to the definition of "qualified medical expenses" in Section 213(d) of the Internal Revenue Code. The modification would allow Americans to deduct the cost of fees for direct practice physicians that bill their patients on a flat-fee basis; exercise and physical fitness programs; and nutritional and dietary supplements.
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From the March 2008 issue of Benefits Selling Magazine • Subscribe!
