HSA Wednesday Wisdom: Congress Is Back

Did you know that Congress is back in session after the August recess and hoping to pass a healthcare bill?

Members of Congress returned last week from their month-long escape from the heat and humidity of Washington, DC, after vacationing and spending time with their constituents. Doubtless they heard a lot of voter feedback on healthcare topics. Here are four items on which both the House of Representatives and the Senate have been working since the 116th Congress convened in January – each of which has an effect on Health Savings Account owners.

Cadillac Tax

What it is: A 40% excise tax on total premiums above a certain inflation-adjusted figure. The tax has been delayed twice and is scheduled to go into effect Jan. 1, 2022.

Why it's a problem: There are m any issues with this levy. Among them, it doesn't make reasonable adjustments for geographic costs. It's not adjusted based on the demographics of an employer population, thereby encouraging employers to discard older and sicker workers. And it uses a very broad definition of premiums to include not only payments to insurers to secure coverage, but also employer contributions to Health Savings Accounts and employee salary deferrals to Health FSAs and Health Savings Accounts.

Prospects for passage: Good. A bill passed the House of Representatives by a 419-6 vote earlier this year. The Senate version has 62 so-sponsors, a filibuster-proof majority. The question is whether it will be introduced in the Senate as a stand-alone bill (as it was in the House) or as an article in a broader tax bill focused on technical corrections to the Tax Cut and Jobs Act of 2017. Passage in either form would eliminate the tax. A stand-alone bill would not be subject to the politics of a broader tax bill, where it might again be paired with the medical-device tax and Health Insurance Tax (its partners in two previous legislative delays) and delayed rather than repealed.

How it affects Health Savings Accounts: This tax discourages employers from offering Health Savings Accounts (and Health FSAs) because it taxes employee contributions to the account. Few employers are willing to pay a 40% excise tax to help employees save a lower amount in personal income taxes. Health Savings Account owners could still make tax-deductible contributions outside a Cafeteria Plan that wouldn't be subject to the tax, but both employee and employer would pay federal payroll taxes on those funds as earned.

Surprise Medical Billing

What it is: Surprise medical bills take many forms. The most common are when a patient receives care in a network hospital and one or more providers isn’t contract with the insurer. These providers are typically the PAREs – pathology, anesthesiology, radiology, and emergency medicine practitioners. They generally don’t contract with any insurer, preferring instead to set their own rates and bill patients directly outside of insurance.

Why it’s a problem: Patients are often stuck with unexpected bills that run hundreds or thousands of dollars. They’re angry because they think they’re playing by the rules when they receive care at a network hospital, only to learn later that someone who looks just like a hospital employee is really an independent contractor.

Prospects for passage: Questionable. There are two very different approaches to addressing this issue, and most politicians strongly favor one or the other. One is to set the maximum charge linked to a reference price – Medicare’s reimbursement level, the median provider charge, the median insurer reimbursement. Providers don’t like this approach because they see it as a form of price-fixing and a threat to their income. The other is a form of arbitration – insurer and provider each submit a figure, and the arbitrator either chooses one or the other, or has the discretion to pick a figure in between the two. Providers prefer this method, but critics believe that it’ll drive up costs because providers can affect the midpoint of the range (where arbitrators usually look for a compromise) by manipulating their figure upward.

If the House and Senate can agree on a single solution, this issue will be fast-tracked through both chambers. But the president is sure to be involved in discussions around the mechanism used to determine appropriate pricing of these services.

How it affects Health Savings Accounts: These charges are the patient’s responsibility, whether because they’re not covered (HMO) or are covered subject to the out-of-network deductible (PPO, POS plan). Patients who pay their out-of-network bills deplete their Health Savings Accounts more quickly than if the cost of the services were covered by contract (lower rates) and applied to the in-network deductible.

Prescription Drug Costs

What it is: The cost of prescription drugs, particularly expensive specialty medications, is increasing far faster than general inflation or the rise in medical costs overall. And insurers are often responding by increasing patient cost-sharing by either increasing copays or applying coinsurance to the purchase of expensive drugs.

Why it’s a problem: Patients unable to afford the cost of prescriptions forego drugs altogether or reduce their doses without appropriate medical advice. In many cases, improper use of prescription drugs leads to acute episodes of chronic conditions that land patients in the hospital, thus raising overall medical costs.

Prospects for passage: Questionable. If legislation passes, it most likely won’t be a very strong tool to combat rising prices. Some politicians, including President Trump, prefer the idea of setting reimbursements as a percentage of the worldwide selling price of a drug (which is much lower than the average price in the United States). Manufacturers will actively oppose this approach. Others favor reimportation of drugs from select countries, though manufacturers can simply stop shipping to those companies, which will affect innocent patients in those nations. In short, everyone agrees that drug prices are a problem, but there’s no agreement on how to rein them in.

How it affects Health Savings Accounts: As the cost of these drugs increases and patient responsibility rises, patients deplete their Health Savings Accounts more quickly. As a result, they must increase their contributions (if they’re not depositing the maximum), reduce the balances that they build for future expenses, or retain their account balances and forego tax-advantaged reimbursement.

Price Transparency

What it is: Price transparency is simply the posting of medical prices in a place and format that consumers can find and understand easily. Today, most patients have no idea what a service costs or how the price for the same service varies from provider to provider, even within a narrow geographic area. These prices – negotiated between insurers and providers – aren’t visible until long after the patient receives the service, when she receives an Explanation of Benefits from her insurer telling her how much she owes.

Why it’s a problem: Imagine shopping in a store with no published prices. You just fill your cart with what you think you need. You purchases are scanned and bagged at the check-out counter. You’re told that you’ll receive a bill in six to eight weeks reflecting your financial responsibility.

Can you imagine buying groceries, clothing, or toiletries that way? Yet that’s how we buy most medical care – in a market with hidden prices.

Prospects for passage: Good. We’re likely to see some effort to increase price transparency. And this issue is easier than the others because they’re aren’t competing visions of how to do so. It’ll be a matter of determining how far Congress can move and still achieve passage of the measure.

The Trump Administration already issued guidance on transparency. Legislation may go further or codify the president’s regulations. But medical prices are like the price of airline seats – everyone pays a different price for the same service. It’s difficult to imagine a government-mandated solution that will provide an accurate price for every service at every location for every form of coverage. Some critics believe that disclosing this information will increase prices, since providers can see the higher reimbursement rates that some providers have negotiated and demand parity. Others believe that shedding light on prices will guide consumers – a growing number of whom are responsible for the cost of services on their medical plans with high deductibles – to shop more effectively for care.

How it affects Health Savings Accounts: You want to build Health Savings Account balances to pay for today’s and tomorrow’s medical expenses. The less you spend today without compromising care, the more you retain to reimburse future qualified expenses tax-free.

Looming Shadow

The Fifth Circuit Court of Appeals in New Orleans has heard oral arguments but hasn’t issued a ruling on a suit challenging the constitutionality of the entire Affordable Care Act. (Read more here and here. If the panel of judges agrees with the district court judge that the law can’t stand as written, the decision will likely be appealed to the Supreme Court. The Court hears only about 1% of cases submitted, but this one will be fast-tracked. And if the Court rules next June – just before the heat rises just months before a presidential election – Congress will be focused on healthcare issues far broader than price transparency or surprise billing. 

I'm director of strategy and compliance at Benefit Strategies, LLC, a third-party administrator of reimbursement accounts. I also founded HSAunited, LLC, an HSA educational company. My recently published book, HSAs: The Tax-Perfect Retirement Account, helps benefits advisors, employers, financial professionals, and HSA owners navigate the intersection of HSAs, Medicare, and retirement planning. I write a biweekly blog, Health Savings Account GPS (read and subscribe here) and publish HSA Wednesday Wisdom and other articles regularly on LinkedIn.