Bipartisan legislation aims to get more Americans into high-deductible insurance, but perils would remain.
WASHINGTON, DC : Rep. Brad Wenstrup (R-OH), chairman of the health subcommittee, chairs a during a House Veterans’ Affairs Committee hearing, September 26, 2017 in Washington, DC. The hearing concerned a variety of legislation facing the committee, including increased access to medical care for women veterans and the Puppies Assisting Wounded Servicemembers (PAWS) Act of 2017.
By BEN LEONARD
Lawmakers on both sides of the aisle want Americans to embrace more risk when it comes to their health care.
They’re proposing to do it by making high-deductible health insurance plans a little less risky. The plans, which already enroll more than 60 million people, offer low premiums and tax breaks but require patients to pay more toward their care before benefits kick in.
A push led by House Republicans to allow insurers offering the plans to cover more expenses than they do now is gaining momentum in Congress and dividing Democrats.
“The government should be focusing on enhancing care, rather than burdensome requirements for the providers who care for patients,” said Rep. Brad Wenstrup (R-Ohio), who’s teamed with progressive Oregon Democrat Earl Blumenauer on a bill to expand benefits.
The proposed changes reflect the new state of play on health care for Republicans, who have turned away from efforts to repeal Obamacare but see high-deductible plans as a way to boost market forces in the system. They also appeal to Democrats such as Blumenauer as a way to make access to care more affordable.
But other Democrats, including Ways and Means Health Subcommittee ranking member Lloyd Doggett (D-Texas), worry the plans would still pose financial and medical risks for low-income employees who can’t afford to pay their deductibles and would skip care as a result.
Doggett believes the legislation would mainly benefit the wealthy — the plans come with health savings accounts with major tax advantages — and undermine the Affordable Care Act by offering inadequate coverage.
“The idea is to provide larger and larger tax shelters,” Doggett told POLITICO.
The proposed changes moving through the House would retain another benefit Republicans favor: High-deductible plans aim to discourage people from seeking unneeded care, reducing health care costs, which lowers inflation.
To increase the number of people using the plans, the Ways and Means Committee approved Wenstrup and Blumenauer’s bill on a strong bipartisan vote in June to permit the plans to cover chronic care services before patients hit their deductibles.
The committee also approved legislation led by two Republicans, Michelle Steel of California and Adrian Smith of Nebraska, and two Democrats, Susie Lee of Nevada and Brad Schneider of Illinois, that would allow plans to cover telehealth costs predeductible.
The full House is expected to vote on the bills after Congress returns from its August recess.
The pros and the cons
Despite the lopsided votes, tensions boiled over at Ways and Means, with Wenstrup calling assertions from Democratic opponents that the wealthy are using health savings accounts as second retirement funds “absurd.”
Blumenauer, acknowledging the plans’ established place in the insurance market, argued that the legislation would help increase preventive care.
“More and more employers are electing to offer this type of coverage,” he said. “We ought not to turn our back on expanding opportunities for prevention.”
For thrifty consumers, there’s a lot to like in high-deductible health insurance. The plans offer low monthly premiums, and those fees fully cover preventive care, including annual physicals, vaccinations, mammograms and colonoscopies, with no co-payments.
The downside is that plan participants must pay the insurers’ negotiated rate for sick visits, medicines, surgeries, and other treatments up to a minimum deductible of $1,500 for individuals and $3,000 for families. Sometimes deductibles are much higher.
To cover those costs, plan subscribers can fund health savings accounts with income that’s tax-exempt if used to cover health care expenses. They can invest an annual maximum of $3,850 for individuals or $7,750 for families. Many employers also allow enrollees to shelter another $3,050 from taxes in limited-purpose flexible spending accounts each year to cover dental and vision expenses. All those numbers adjust annually for inflation.
People in the plans cannot invest in broader health care flexible spending accounts that cover medical expenses, but subscribers can use health saving account funds for that. Most FSA funds expire if unused at the end of the year. HSA funds never expire, and their owners can invest them in stock and bond funds.
When employees turn 65, an HSA becomes a sort of supercharged 401(k) because funds can be withdrawn for any reason and income tax is levied on the withdrawal, just like a 401(k), while owners can still cover their health care expenses tax-free.
People who fully fund the tax-advantaged accounts year after year, and at the same time remain healthy enough to keep the money invested, can grow substantial nest eggs.
Supporters argue the proposed changes would expand access to care and create potential cost savings by encouraging preventive care. Skeptics say they put lower-income patients at risk by not offering sufficient coverage, leaving them more vulnerable to costly bills.
The American Hospital Association has raised concerns about the plans, arguing that they shift cost burdens to patients and, when patients can’t afford to pay, onto hospitals. David Allen, a spokesperson for insurer lobby AHIP, countered that insurers negotiate less expensive rates from providers like hospitals to shield consumers from high costs.
The cost of a sick visit also is a disincentive to visit the doctor, potentially putting patients’ health at risk, said Cheryl Fish-Parcham, director of private coverage at Families USA, a left-leaning consumer health care advocacy group: “We always see people avoid care when they don’t think that they can pay for the costs.”
But employers say that’s all the more reason to back the bills the House is considering because they would expand the services fully covered before patients hit their deductibles.
“For low-cost, high-quality services, meaning high-value services, we want to maximize utilization,” said James Gelfand, president of the ERISA Industry Committee, which represents large employers’ benefit interests.
Tax breaks and health outcomes
A quarter of employers offer high-deductible plans with HSAs, up from 10 percent in 2009, and the percentage of workers using the plans has doubled in the past decade, according to the health care research group KFF, which includes a broad swath of large and medium-size employers in its survey.
An estimate focusing on large employers from consulting firm WTW found that 86 percent offer high-deductible plans, and 80 percent of those plans have HSAs.
“We knew that the market could be electric. We just didn’t know how much current would be flowing through those wires,” said Joel White, a health care lobbyist and president of the Council for Affordable Health Coverage who helped draft the language creating high-deductible health plans in the 2003 Medicare Modernization Act when he was a Republican Ways and Means Committee aide.
He pointed to Indiana as an example of what states should be doing — rewarding people with cash for getting preventive care, like joining smoking cessation programs or getting an annual checkup.
The increased popularity of high-deductible plans comes as many insurers are raising premiums. People priced out of more expensive plans can trade down to high-deductible coverage — and hope they don’t get sick.
“Employers continue to offer them because they do want those lower premiums as an option,” said Adam Beck, senior vice president for commercial employer and product policy at AHIP, the insurers’ lobby.
Studies have shown that few participants can take full advantage of the tax benefits. More than half of those enrolled hadn’t contributed to their health savings account in more than a year, according to one analysis. The Employee Benefit Research Institute found that the average HSA account balance was about $4,000, though more than a third of enrollees ended the year with less than $500.
There’s evidence of major disparities.
Research from 2015 found that higher-income enrollees established and fully funded their HSAs “at least’” four times more often than lower-income enrollees. And 2020 research found that Black, Hispanic and lower-income beneficiaries were substantially less likely than white and higher-income people to use HSAs.
White argues that there’s little evidence of disparities in health outcomes as a result, though, and says that lower-income people aren’t using HSAs as often because many don’t have private health insurance. Medicaid plans don’t offer HSAs.
But he called for more research into outcomes and suggested that other types of plans be allowed to have associated health savings accounts. That would require Congress to act.
On the other hand, Frank Wharam of the Duke Margolis Center for Health Policy points to his research showing worse diabetes outcomes for lower-income people on high-deductible plans, including those both with and without a health savings account. His study on high-deductible plans with HSAs for diabetes patients found an increase in disease complications.
“I see high-deductible health plans as potentially harmful to important populations, especially low-income, high morbidity people … and not generally being harmful to health outcomes for those with high incomes,” Wharam said.
White countered that Wharam’s study period didn’t allow participants to fully fund their HSAs.
Rep. Brad Wenstrup is leading a House Republican push to allow insurers offering high-deductible health insurance plans to cover more expenses than they do now. Critics say the plans would still pose financial and medical risks for low-income employees who can’t afford to pay their deductibles and would skip care as a result.