New research from the Employment Benefits Research Institute shows health savings accounts, a key part of consumer driven health plans, continue to grow in popularity despite President Obama’s efforts to discourage their use via his health care law.
According to the EBRI report, in 2012 more than 18 million adults ages 21–64 with private insurance, representing more than 15 percent of that population, were either in a consumer driven health plan (CDHP) or one eligible for a health savings account (HSA). EBRI also calculates nearly 70 percent of workers with such accounts reported employers contributed to the account in 2012. Both represent continued increases.
Obama’s law prevents health savings accounts from being used to pay for over-the-counter purchases, and difficult if not impossible for such plans to be sold through the insurance exchanges because of the medical loss ratio requirements for plans. According to Roy Ramthun, president of HSA Consulting Services, this growth will continue despite those obstacles, as long as CDHPs can be priced competitively.
“Assuming carriers continue to offer the types of CDHPs we’re used to, the answer all depends on how these plans are priced. If they are too expensive, I think more people will pay the tax penalty and go without coverage,” Ramthun said.
CDHPs and the Exchanges
Ramthun says the Obama administration has made it difficult for CDHPs to meet the requirements for inclusion among the plans offered by the health insurance exchanges.
“The only way to offer minimal coverage that satisfies the mandate requirement is to choose a CDHP Bronze plan with the highest possible deductibles and out-of-pocket limits allowed,” Ramthun said.
“These plans will have to cover the essential benefits, meeting all the new insurance rules, etc., too, so they could still be much more expensive than comparable plans on the market today,” Ramthun continued. “If people still want to buy ‘minimal coverage’ outside the exchanges and don’t care whether they pay the penalty, there should be more flexibility there, depending on how all the final rules come out.”
Few Changes for Self-Insured Employers
Ramthun expects self-insured employers to be able to continue to offer CDHPs regardless of HHS’s continued rulemaking.
“For self-insured employer-based CDHPs, I expect very few changes, although it is possible employers may raise deductibles to lower their premium costs further,” Ramthun said. “In the fully insured market where carriers are selling CDHPs inside and outside the exchanges, we now know that CDHPs will qualify as Gold, Silver, and Bronze plans, depending on their deductibles and out-of-pocket limits.”
Expectations for Metal Plans
Under Obama’s law, plans with lower deductibles and lower out-of-pocket limits will be designated as Gold plans, and those with higher deductibles and higher out-of-pocket limits will be Bronze plans. Silver plans will be in the middle. Ramthun expects plans with family coverage are generally going to have deductibles and out-of-pocket limits twice as large as for singles. He projects this amount at roughly $6,350 for individuals and double that for family coverage.
“For example, a plan with a deductible of $2,000 that covers 100% after the deductible (i.e., out-of-pocket limit = $2,000) is met qualifies as a Gold plan,” Ramthun said. “A plan with a $2,000 deductible with 80/20 coinsurance after the deductible up to an out-of-pocket limit of $5,000 qualifies as a Silver plan. A plan with a $6,000 deductible that covers 100% after the deductible qualifies as a Bronze plan.”
“But just because these plans can qualify as metal-tier plans does not mean carriers will sell them and will price them attractively,” Ramthun said.
He says the rules may require premiums within the exchanges which lead to CDHPs being crowded out.
“Carriers are only required to sell one Silver and one Gold plan in the exchanges, if they want to participate at all. Bronze plans are not required,” Ramthun noted. “We won’t know whether carriers will offer Bronze plans at all. If they do offer Bronze plans, will they be CDHP-type plans or not? CDHP plan designs are not required, so carriers could offer Silver and Bronze plans that are not CDHPs, such as plans with lower deductibles but lots of copays or heavy coinsurance.”
In this case, the exchanges may not allow CDHPs that provide significant benefits in terms of lower premium costs, making them far less attractive than they have been thus far.
“If carriers offer CDHP Silver and Bronze plans, will there be a large difference in premium between the different metal tiers or not?” said Ramthun. “If there isn’t much difference in premium, what plans will consumers choose?”
Further Restrictions Likely
Michael Cannon, director of health policy studies at the Cato Institute, said some members of Congress are likely to introduce legislation to continue to restrain CDHPs and other similar plans in future years, because they view them as not providing sufficient insurance coverage.
“For healthy people who still [choose] to buy health insurance rather than pay the much-lower mandate penalty, high-deductible health insurance plans (HDHPs) will be even more attractive than they are today,” Cannon said. “But it is precisely because healthy people will use HDHPs to minimize the hit they take from ObamaCare’s hidden taxes that many in Congress will try to take HDHPs away.”
EBRI: “Employer and Worker Contributions to Health Reimbursement Arrangements and Health Savings Accounts, 2006–2012”