Tuesday, October 24, 2017

We already have the high deductibles...so would adding HSAs hurt?

In my last post I suggested that among the destructive White House demands to alter the Alexander-Murray ACA stabilization bill, one concept -- encouraging takeup of High Deductible Health Plans linked to HSAs -- might be a reasonable concession for Democrats to consider.

My reasoning boiled down to this: Once you have a deductible higher than the HDHP threshold of $1350 individual/$2700 family  -- as well over half of individual market enrollees do -- it doesn't hurt to add the tax-free HSA to help people cope with the expense.

Today I asked Yevgeniy Feyman, a Manhattan Institute adjunct fellow and senior research assistant at the Harvard School of Public Health, for ways to encourage HDHP/HSA takeup in the ACA marketplace. His suggestions:
  • Create a seamless process for establishing an HSA -- so that once you sign up for an HSA eligible HDHP, you would be redirected into a pipeline for creating an HSA.

  • Simplify the rules by which a high deductible plan can be eligible for linkage to an HSA. At present, no services except the ACA-mandated free preventive services can be covered until the medical deductible is reached. In a family plan, the full family deductible has to be reached before coverage kicks in. These rules could be loosened. At the far end of easing, "you might end up permitting anyone to have an HSA, and just cap contributions at their deductible or max OOP."

  • Allow enrollees eligible for Cost Sharing Reduction (CSR) subsidies to take some share of the CSR benefit as an HSA contribution instead. That would be administratively tricky, in that insurers have been reimbursed for CSR (until the recent cutoff) on an estimated basis, later reconciled on the basis of the individual enrollee's actual claims. (A change like this would be premised on a deal in which Congress appropriates funding for federal CSR reimbursement.) Feyman suggests that it might be feasible to "reduce CSRs slightly for conversion into HSA contributions to make them budget neutral" -- adding "the devil is obviously in the details." This one would be controversial for sure -- and possibly attractive to healthy CSR-eligible enrollees, 
Larry Levitt of the Kaiser Family Foundation adds, as Feyman acknowledges above, that calculating a workable HSA credit carved out of the CSR benefit would be difficult. Of those who would opt for the benefit, Levitt says, " "You couldn’t give them the average amount, since healthy people would disproportionately take it and not leave enough to give cost-sharing reductions to the remaining sicker people. It would be pretty tough to estimate a fair amount to offer, given the adverse selection effects."

I would add that, kludgy as an HSA conversion of CSR might prove, enabling it would constitute a sort of light version of the Cassidy-Collins bill introduced last January, which invited states to choose between the current ACA marketplace structure and an HSA-centric alternative. Given the broad Republican attraction to HSAs -- e.g., for incorporating them into the ACA Medicaid expansion benefit via waiver, as Mike Pence did in Indiana -- it might prove a fairly powerful lure to some Republicans.

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