Members of Congress are signaling rare bipartisanship in their support for crucial updates to health savings accounts (HSAs) — a key casualty of last year’s ill-fated Affordable Care Act (ACA) “repeal and replace” efforts. This is would be a small, albeit important, victory for collaboration across the aisle. More crucially, it would be a major victory for the American people who are struggling with ever-increasing health-care costs and complexity.
Yet Congress shouldn’t stop with easy updates. Rather, transparency should become the greater bipartisan cause.
HSAs are tax-advantaged financial accounts paired with High-Deductible Health Plans (HDHPs) in what are called Consumer-Directed Health Plans (CDHPs). Currently held by more than 21 million Americans, HSAs were created as part of the Medicare Modernization Act of 2003 to combat rising costs with “consumerism.” As the thinking went, a high deductible would force people to pay “first dollar” for many medical expenses instead of the low or no copays of traditional medical plans. The new plan design and tax-advantaged account would give consumers “skin in the game,” which in turn would make them be more conscious of costs in their behavior.
While there has been some progress on consumerism, important updates are needed. In separate hearings on back-to-back days for the House Ways and Means Committee and the Joint Economic Committee, numerous business and professional groups, industry insiders, and think tanks spoke in support of the Bipartisan HSA Improvement Act, H.R. 5138.
Key among the issues discussed, and proposed in H.R. 5138, were raising annual contribution limits to align with out-of-pocket maximums on health insurance plans imposed by the ACA. This would allow for expanded approved coverage options like telemedicine and onsite clinics, and make HSAs more widely available by tying them to actuarial value, not just deductibles.
There was also widespread agreement on the need for increased transparency tied to decision-making in health care. These efforts are critical, as health insurance deductibles continue to rise along with health-care costs, leaving many Americans saddled with major expenses and few tools to navigate the health-care marketplace on their own.
The current outdated state of HSAs is a function of both what has changed since they were enacted in 2003 and what has remained the same.
The most consequential change, of course, is the ACA. The most expansive social legislation in two generations changed health insurance in ways both large and small — changes we’re still experiencing eight years after its implementation. Some costs have risen due to ACA plan requirements. Simple, policy-oriented inconsistencies have also cropped up, such as a mismatch of what a consumer can contribute annually to an HSA versus their maximum out-of-pocket costs per the ACA — i.e. you can’t put away as much as you can spend.
However, necessity has proven to be the mother of invention. Key innovations in utilization and provider models, such as telemedicine on the provider side and value-based insurance design (V-BID) on the utilization side, could be greatly advanced in their ability to drive cost savings. As such, fixing both the mechanics and flexibility of HSAs are deserving of the bipartisan efforts they have received, and hopefully will result in legislative progress this year.
The change that could have a greater, more lasting impact is transparency. It will also be harder to achieve. One of the most revealing statements during the hearings came from Tracy Watts of Mercer. She noted before the Joint Economic Committee a finding in the 2017 Mercer National Survey of Employer-Sponsored Health Plans that only 30 percent of all consumer health-care products and services in the United States are “shoppable.” In other words, for all of the good intentions of CDHPs creating better consumers, we can only even attempt consumerism with 30 percent of what we may need.
Such opaqueness is a prime example of how we have disadvantaged consumers by trying to help them.
Today, HDHPs account for nearly 44 percent of all private health coverage for those under age 65, according to the Centers for Disease Control and Prevention’s National Health Interview Survey. And they account for a whopping 54 percent of individual, non-employer-sponsored plans. Yet fewer than half of those with HDHPs also have an HSA. In essence, we’ve greatly increased the part of CDHPs that limits consumer options without equally promoting the part that increases them.
Furthermore, in the 15 years since HSAs were created, the employee or individual’s share of premium costs has increased at the same time that their deductible amounts have gone up. That means they’re paying more upfront and out-of-pocket. And with only 30 percent “shoppable” among their health costs, they’re left paying more and understanding less.
A particularly devastating example was detailed in a recent New York Times article, which reported that high deductibles have caused some women with breast cancer to put off treatment.
How do we fix this? By prioritizing transparency. We should no longer accept provider and payer assertions that revealing costs would leave them at a competitive disadvantage — unless they think that individual consumers are their competitors. There is growing bipartisan support for transparency, as with the issue of pre-existing conditions, where support has crossed party lines because their detrimental effects don’t recognize political parties. Indeed, both CMS Executive Director Seema Verma HHS Secretary Alex Azar have signaled their support for transparency by comparing health care to consumer experiences in other industries.
But transparency alone is not enough.
Explicit attention must be paid to the individual market. Cost-sharing reduction payments may be a political hot potato, but with high-deductible, narrow-network plans accounting for a large share of individual coverage, these lower-income consumers must at least be able to have funds to put into an HSA after given access to one. By providing them with “first-dollar” coverage —and pairing it with greater access to both low-cost alternatives (telemedicine) and consumer transparency tools — CDHPs can achieve their true aim: smarter and healthier, consumers.
Fixing HSAs and driving consumerism will not solve all of our health-care problems. But it will be mark significant progress. After years of political stances stubbornly informing health policy debates, maybe one bipartisan step forward can actually lead to another. And once we’re marching forward, we’ll start to see real benefits in terms of controlling health-care costs, increasing access, and maximizing quality.
George Kalogeropoulos is the CEO and co-founder of private health insurance marketplace HealthSherpa. Shandon Fowler is the owner and principal of Four8 Insights, which is a benefits and health-care consulting company. Fowler is a paid consultant to HealthSherpa.