While it’s difficult to accurately predict how, and when, the Affordable Care Act might change under President-elect Donald Trump, brokers can feel safe making a few calculated predictions.

Repeal will be easier than replacement

First, any changes will take time. House Majority Leader Kevin McCarthy recently said his caucus will begin the repeal-and-replace process at the start of the next Congressional session, according to the Los Angeles Times.

But this effort will likely take most of 2017 to unroll, and could extend into 2018.

Republicans will benefit from a procedural process known as reconciliation, which allows them to repeal with a simple Senate majority any portions of the ACA that directly affect the budget. There may be a lot of activity within the first few months of Trump’s presidency surrounding the ACA restricted Medicare payments, higher-earning taxes and the Cadillac Tax – all of which all impact the budget.

Much of the ACA, however, does not affect the budget directly. Republicans will have to address possible replacements for mandates like minimum coverage, medical loss ratio limits and assurance against pre-existing condition exclusions in any bill that repeals the ACA. That will require cooperation from Democrats, who could block any proposed laws with a Senate filibuster.

Trump, Republicans talk big game on HSAs

All of this means that it will be far more difficult to replace the ACA than repeal it.

State governors, insurance commissioners and carriers will need to offer extensive input, and each could agree and contribute to a rollback of – and introduction of new – ACA provisions. That will take time.

Whatever happens, Trump, along with Congressional Republicans, says that health savings accounts will play a vital role in the health care economy going forward.

According to the Trump transition website, the administration will advance a solution “that includes HSAs.”

And earlier this year, House Speaker Paul Ryan released a GOP policy paper that would significantly expand the tax-deferred HSA contribution limits.

Under the House Republican plan, HSA contribution limits for qualifying high-deductible plans would increase to the sum of the minimum deductible plus out-of-pocket expense limits.

That means that the existing individual HSA contribution limit of $3,400 would increase to $7,850 in 2017; contributions to family plan accounts would increase from $6,750 to $15,700.

A bipartisan force

Michael Trilli, a senior health policy analyst at the financial and insurance consultancy Aite, thinks HSAs could emerge as a bipartisan force that helps improve all coverage outcomes.

Since their introduction in 2003, HSAs have grown consistently in the group market. Today, there are about 19 million active HSA accounts.

But the ACA’s Cadillac Tax has prevented some employers from offering HSAs with qualifying high-deductible plans, Trilli says. That’s because, according to the law, employee contributions to HSAs count toward the Cadillac Tax’s $27,500 threshold for families and $10,200 for individuals.

Even though the Cadillac Tax, in its present form, won’t fully implement until 2020, the ACA “creates uncertainty on the cost of a high-deductible HSA-eligible plan” for employers, he says.

If the Cadillac Tax is repealed before its implementation date, that could encourage more employers to offer a high-deductible plan.

“Removing that barrier would bring in employers that are currently sitting on the sidelines,” says Trilli. “With the Cadillac Tax looming, a lot of employers feel they can’t make a high-deductible plan with an HSA the sole offering, because if the plan exceeds the tax threshold, they would have to go back to their employees and change course.”

Although the Cadillac Tax isn’t the centerpiece of Republicans’ repeal-and-replace plan, it may very well be a part of their first effort at reform early next year.

There is bipartisan support for repealing the Cadillac Tax, “but Democrats could dig their heels in,” adds Trilli. “I do think both sides could spin the removal of the tax to their benefit.”

Packaging Voluntary with HSAs

The most recent research from Devenir, a firm that consults with HSA providers on account investments, shows that more than 18 million HSA accounts collectively hold about $36.4 billion.

Most of the money is held in cash-equivalent investments like money market accounts; only about $5.4 billion is invested more aggressively in mutual funds.

Beyond their tax advantages, the benefit of HSAs is that unused money is rolled over to the next year. For accounts opened in 2005, the average account balance in June 2016 was $7,622; for accounts opened in 2015, the average account value was $1,531 this year.

Data from Fidelity show that more than three-quarters of its account holders withdrew less from HSAs than they contributed, and one-quarter of account holders didn’t use any of their HSA contributions in 2015.

Financial planners commonly advise investors to max out contributions if possible, invest the money in HSAs – similar to a 401(k) – and leave as much money as possible to grow in the accounts over time.

But such a nuanced strategy requires a level of education and awareness that may be lacking in many high-deductible plan participants, says Trilli.

“I would say overall awareness of the investment value of HSAs is growing. Industry has invested a lot on the educational side but, as we saw with 401(k)s, it takes time,” says Trilli.

For participants who can maximize the savings component of HSAs, voluntary benefits solutions can make the process easier.

HSA dollars can be used on qualified health services from vision and dental care to long-term care and hospital services.

When the right voluntary options are paired with HSAs, participants can actually use those benefits rather than simply keeping the money in HSAs to grow over time. Trilli thinks benefits brokers may not completely understand or leverage that strategy much.

If HSAs grow under Trump, so, too, will the role of voluntary benefits, he says.

“I would offer that voluntary benefit options will play a stronger role as HSAs grow, given the high-deductible nature of the plan design and the need to fill in gap coverage,” says Trilli.

Instant Insights /

Trump&rsquo;s plan expects to feature HSAs, expand the role of voluntary benefits

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Trump’s plan expects to feature HSAs, expand the role of voluntary benefits