Bill Offers Alternative to Obamacare

A health plan introduced by two Republicans promises to make good on what it calls ObamaCare’s three broken promises: universal coverage, cost control, and protection for the chronically ill. Yet the proposal spends no more money than the current system and it repeals almost all of ObamaCare’s regulations. Pete Sessions (R-TX), Chairman of the House Rules Committee and one of the sponsors of the legislation said, “ObamaCare tries to tell everyone what to do – every doctor, every patient, every employer and every employee. Our goal is to liberate people by empowering them to make their own choices and by freeing the marketplace to meet their needs.” The Senate version of the bill has been introduced by Sen. Bill Cassidy (R-LA).

The centerpiece of the proposal is a health insurance tax credit that applies dollar-to-dollar to insurance premiums and deposits to Health Savings Accounts. The credit will be the same for everyone, regardless of income. The tax credit sets a floor under the insurance people will have. Everyone will have access to insurance that looks a lot like well-managed, privately administered Medicaid, said John Goodman, a health economist who helped prepare the plan. People will have more options if they and their employers spend additional money – but those dollars will be unsubsidized.

The sponsors say the plan gives employers and employees new tools to control costs and that they will be able to convert waste, fraud and abuse into higher take-home pay by being smarter buyers of health care. Also, because of free market risk adjustment, health plans will specialize in the treatment of chronic conditions and will compete to solve those problems. The Sessions/Cassidy proposal is the freest enterprise reform ever introduced in the U.S. Congress, said Goodman. It minimizes and streamlines the role of the federal government and eliminates perverse incentives caused by federal tax and spending policies and unwise regulations. Even though introduced by Republicans, Goodman says there is much in the bill that Democrats will like. It has a much better chance of actually becoming law than any Republican proposal that I have seen so far. Goodman is the author of A Better Choice: Healthcare Solutions for America, the source of many of the provisions in the plan.

Health Insurance and Workplace Wellness

  • There has been a steady increase of high-deductible health plans (HDHPs) and consumer-directed health plans (CDHPs) over the past two years – nearly two in three employers offer one of these types of plans along with a health savings account (HSA).
  • 57% of employed adults say their employers should play an active role in their employees’ health. Sixty-eight percent say that they should pay lower health insurance premiums for participating in wellness programs.
  • About two in five of employers that increased health insurance options also added other benefits or a workplace wellness program. About two in five said the change was due to pressure from employees.
  • When it comes to wellness, employees are most likely to take advantage of preventative screenings and vaccinations (46%), health risk appraisals (38%), health goals/biometrics monitoring (36%), healthy food options (30%), and ergonomic workstations (30%).
  • Employers that report a positive effect on healthcare costs are more likely to offer screenings (69% vs. 57%), website links to employee services (53% vs. 39%), and wellness initiatives (48% vs. 37%).
  • 65% of the employers that offer wellness programs say they have complete leadership commitment and support, but only 45% say they have integrated health promotion into their organization’s culture.

HSA Rollovers Are Increasing

While there have been some ups and downs, rollovers in health savings accounts (HSAs) are generally increasing, according to data from EBRI/Greenwald & Associates. When an employer offers an HSA health plan, any money left in an account at the end of the year rolls over automatically, and is available in the following year since there is no use-it-or-lose-it rule. However, employers can restrict the amount carried over. The survey also finds the following:

  • The number of accounts with a rollover increased annually until 2013. The total level of assets being rolled over has increased in all years except for 2010, 2013, and 2014. In 2008, 2.5 million accounts rolled over $2.5 billion.
  • Conversely, the share of accounts without a rollover has been going down. In 2008, 16% of people with an HSA or health reimbursement account did not roll over any money. By 2014, that had decreased to 11%.
  • By 2014, 7.1 million accounts rolled over $8.9 billion. The average rollover increased from $1,000 in 2008 to $1,244 in 2014.
  • Accounts with an employer contribution had a higher amount rolled over than did those without an employer contribution in 2014.

A Look at HSA Investment Options

Investment options in health savings accounts (HSAs) are a fairly new and not widely used, but they tend to draw larger contributions, and have higher balances, according to an analysis by the Employee Benefits Research Institute (EBRI). In many cases, HSAs offer an investment-account option that allows account owners to invest in mutual funds and other options, much like a 401(k) plan. So how are they working? Data from the EBRI HSA Database reveals the following:

  • In 2014, 6.4% of HSA owners used the investment option portion of the account.
  • Individuals contributed $2,636 annually on average when they had investments and $1,224 when they did not have investments.
  • Annual distributions for health care claims averaged $1,777 from HSAs with investments and $1,293 from HSAs without investments.
  • End-of-year account balances averaged $10,261 among HSAs with investments and $1,709 in HSAs without them.

Consumers Overlook HSA Investment Options

Investment options in health savings accounts (HSAs) are fairly new and not widely used, but they tend to draw larger contributions and have higher balances. In many cases, HSAs allow account owners to invest in mutual funds and other options, much like a 401(k) plan. So how are they working? A report by the Employee Benefits Research Institute finds the following:

  • In 2014, 6.4% of HSA owners used the investment option portion of the account.
  • People contributed $2,636 annually on average when they had investments and $1,224 when they did not have investments.
  • Annual distributions for health care claims averaged $1,777 from HSAs with investments, and $1,293 from HSAs without investments.
  • End-of-year account balances averaged $10,261 among HSAs with investments, and $1,709 in HSAs without them.

The HSA Market at a Glance

Starting from nothing about a decade ago, enrollment in HSA-eligible health plans is estimated to be about 17 million policyholders and their dependents in 2014, according to a study by the Employee Benefits Research Institute (EBRI). More employers are expected to offer an HSA-eligible health plan as an option or as the only health plan. As a result, HSA-eligible health plans and HSAs are expected to grow as a vital component of employment-based health coverage.  The following are highlights of the study:

  • 78% of HSAs were opened since the beginning of 2011.
  • Average balances increased from $1,408 to $1,933 during calendar year 2014.
  • 70% of the accounts in the EBRI HSA database had an individual or employer contribution in 2014.  Average balances in these accounts increased from $1,562 to $2,384. About 4% of them ended 2014 with a zero balance.
  • Just over one-half of accounts had individual contributions, with deposits averaging $2,096.
  • Among the 52% of accounts receiving employer contributions, the accounts received an average of $1,021.
  • Distributions for health care claims averaged nearly $2,000 among the 61% of accounts with a distribution.

The Cadillac Tax Is Causing Employers to Eliminate HSA Contributions

Many employers with plan costs close to the Cadillac Tax threshold are eliminating payroll contributions to HSAs to avoid incurring excise tax liability, even though many HSA-qualified plans are likely to avoid the tax for years, according to a study by The American Bankers Assn through its Health Savings Accounts Council and HSA Consulting Services.

In a recent letter to the IRS, the HSA Council said that employee contributions should be excluded from the excise tax calculation. HSA plans have proven effective in increasing health and wellness behaviors while decreasing healthcare costs and enabling Americans to save for healthcare and retirement expenses, according to the Council.

Kevin McKechnie, executive director of ABA’s HSA Council said that many HSA-qualified plans are expected to remain under the initial Cadillac Tax threshold, but employers in expensive states or with expensive plans may incur tax liability in 2018. The tax is calculated monthly. Employers who contribute large amounts in one month to help employees seed accounts may need to spread contributions over a plan year in order to avoid the tax.

There is a very large premium variance among states. HSA plans in Connecticut are likely to be affected right away while Iowa plans appear to be safe for years to come.

Todd Berkley, president of HSA Consulting Services, the author of the study said, “We initially set out to prove that HSA plans would steer clear of the tax, but are dismayed to find some plans will be hit right away if payroll contributions are counted. While many HSA plans will likely be a safe haven for now, like the AMT, this tax will eventually affect every plan in America, including HSA plans.”

Employers Are Missing the Boat on Alternative Provider Models

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Many employers don’t understand alternative provider delivery models and payment reform. As a result, they may miss a significant opportunity to improve health and financial results for their workforce and business, according to a study by Aon and Catalyst for Payment Reform. Despite their lack of understanding of the models, 60% are providing or are considering providing a financial incentive for employees and dependents to use these new models through plan design changes, narrow network options, HRA/HSA contributions, or cash.

The study reveals the following:

  • 75% don’t understand payment transformation models.
  • 51% don’t understand the cost and quality data provided by their carriers related to new models like Accountable Care Organizations (ACOs).
  • 71% are unaware or need to learn more about the attribution process and how they are directly contributing to the payment of these new provider delivery models.

“Employers have the potential to be one of the strongest voices in driving systematic change, but if they don’t understand it, they won’t make it a priority or demand validation for the improvement that is needed,” said Mike Taylor, senior vice president of Delivery System Transformation at Aon Hewitt. According to a separate Aon Hewitt 2014 Health Care survey of more than 1,200 employers, 65% of said that provider payment models that promote cost-effective, high quality health care outcomes will be a part of their strategy. Of those, 12% say it will be one of their three highest priorities. Taylor said, “Employers are increasingly making innovative provider network structures an important part of their strategy, which will help to improve health care purchasing and shift the payment focus towards value based reimbursement and support providers who produce higher quality outcomes.”

While few employers have adopted provider network structures, that number is expected to increase in three-to-five years:

  • 24% of plan sponsors steer participants to high quality hospitals or physicians for specific procedures or conditions through plan design or lower cost. Another 56% are considering doing so in the next three-to-five years.
  • 18% use integrated delivery models, such as patient-centered medical homes, to improve primary care effectiveness, and another 56% plan to do so in the next three to five years.
  • 11% contract with hospitals or other health providers directly in specific locations, and another 28% plan to so.
  • 10% have adopted reference-based pricing, and another 58% plan to do so.

HSA Accounts Provide Financial Flexibility

An HSA plan is a valuable financial tool for consumers, providing flexibility to cover immediate medical expenses and save for health care costs, according to a study by the American Bankers Association (ABA) and America’s Health Insurance Plans (AHIP.) Fifty-five percent of HSAs received personal contributions during 2012. Roughly 80% of accounts had a positive balance that could be carried over to the next year. “This study confirms that HSAs are being used as they were designed: to pay for routine health care needs and to save towards future medical expenses. HSAs have the advantage of offering consumers greater choice and control over their health care,” said Kevin McKechnie of the ABA. The study also reveals the following: • 44% of the accounts received employer contributions. Of those accounts, the average personal contribution was $2,337, and the average contribution from employers was $1,142. • 58% of accounts had withdrawals during the year. Of those accounts, the average withdrawal during 2012 was $2,081. • 19% of accounts had $0 available at the end of the year; 31% had $1 to $499; 11% had $500 to $999; 12% had $1,000 to $1,999; 14% had $2,000 to $4,999; and 12% had at least $5,000. For more information, visithttp://www.hsaalliance.org.

How HSAs Beat HRAs

BusinessBoxingPeople with HSAs are more likely to engage in cost-conscious behavior compared to those in HRAs, according to a report by the Employee Benefit Research Institute (EBRI). HSA participants are more likely to ask for a generic drug instead of a brand name, check the price of a service before getting care, ask a doctor to recommend less costly precriptions, develop a budget to manage health care expenses, and use an online cost-tracking tool provided by the health plan. Paul Fronstin of EBRI said, “HRAs and HSAs may be similar, but there are some key differences that may produce different incentives …Those with an HSA are more likely to respond to health pricing.” An employee owns the HSA, which is completely portable. With HRAs, an employer is not required to provide the unused balance to a worker when they leave the company. For more information, visit www.ebri.org.

Last Updated 10/14/2020

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