The old saw is if you like sausage or legislation, avoid watching either being made. Here’s a case in point.
HR 2351, sponsored by Ways and Means Chairman Bill Thomas (R-California), seemed a pretty straightforward revision of MSAs, and added a $500 FSA rollover. It allowed first-dollar coverage of preventive services, lowered allowable deductibles to $1,000 and $2,000 for individuals and families, allowed 100 percent of the deductible to be contributed each year, allowed combined employer and employee contributions, and removed the limits on employer size and total enrollment. Simple, eh?
Not so fast. During mark-up in the Ways and Means Committee all kinds of strange things happened. A “substitute amendment” was offered that changed all of that. I was traveling all week, and when I got back it was (and still is) hard to sort out what happened. Although the legislative language is incomprehensible, it appears the substitute lowers the allowable deductibles to $500/$1,000 but allows individual “Health Savings Account” contributions of up to $2,000 and $4,000. That is, the contribution is no longer tied to the size of the deductible. People eligible to make these contributions would have to have a “qualifying” insurance plan or be uninsured.
What particularly alarmed people was the addition of a means-testing provision. The substitute set an income limit of $45,000 for individuals and $65,000 for families, similar to the IRA contribution limits. At first it wasn’t clear what this limit applied to. Would HSAs be available only to people at these income levels? If so, how in the world would an employer be able to offer it as a benefit plan?
Digging deeper, it appears the income limits apply only to the individual contribution to the HSAs, not to eligibility itself. Employers could go ahead and offer HSAs to the entire workforce, and contribute money to the HSA regardless of a worker’s income.
At this writing, we are told the means testing provision has been dropped. We also understand both the original MSA expansion and the HSA substitute will be in the bill when it goes to the floor. But the bill is still being worked on, so I wouldn’t place any bets.
The substitute created quite an uproar. Ways and Means was apparently deluged with complaints. The core idea isn’t bad--allow people to set up a Health Savings Account independently of their employer or of their underlying insurance coverage. In fact, I proposed precisely this in my Unified Health Account paper earlier this year. Apparently the income provisions were inserted to pacify the Joint Tax Committee’s estimate of the revenue loss. But there are ways to do that other than introducing a whole new idea for income testing. They might have reduced the allowable annual contribution to $1,000/$2,000 or $1,500/$3,000, for instance.
More importantly, the substitute was completely unexpected by the consumer health community. We were looking for a simple expansion of MSAs, and suddenly we have all these other things with next to no information about the whys and wherefores. Who was it that said, “What we have here is a failure to communicate?”
Greg Scandlen is director of The Galen Institute’s Center for Consumer-Driven Health Care and associate editor of The Heartland Institute publication, Health Care News. Email firstname.lastname@example.org. This article is reprinted from Scandlen’s Consumer Choice Matters dated 6/25/2003.