HSA Wednesday Wisdom: Talking to Lawmakers

I spent time Tuesday and will spend more today and Thursday meeting with members of Congress, their legislative aides, and key congressional committee staff members discussing issues that affect medical coverage and reimbursement accounts. In these meetings, I’m representing either the Employers Council on Flexible Compensation or the American Bankers Association Health Savings Account Council. If time permits, I’ll also represent the Massachusetts statewide chapter of the National Association of Health Underwriters (MassAHU) as I stop by offices of a handful of Massachusetts solons.

Here are the issues that I’ll be discussing:

Cadillac Tax

Like Mark Twain, the reports of the death of the Cadillac Tax have been greatly exaggerated. The levy, which assesses a 40% surtax on premiums above a certain figure, was introduced to help pay for the Affordable Care Act and to discourage rich benefits (little patient cost-sharing) that supporters of the tax believe drive up utilization. The Cadillac Tax (formally referred to as the tax on high-cost health plans) has been delayed several times and isn’t scheduled to be applied until 2022.

Earlier this year, the House voted 419-6 to repeal the tax. Think about that! In an environment of partisanship in which the two major parties rarely agree on the color of the sky, they’re nearly unanimously united in the belief that this levy should be slayed before it’s ever applied. Both parties are responding to criticism from labor unions, employers, and voters about the effect that the additional tax would have on the quality of employee benefits and additional out-of-pocket costs that employees would have to bear.

The tax is a rather blunt instrument, offering inadequate flexibility to reflect geographic regions with high medical costs or employers whose population of covered lives is older or sicker than average. Furthermore, it defines premiums not only as the cost of coverage that an insurer collects, but also employee payroll deferrals to a Health FSA and a Health Savings Account. An ECFC survey conducted two years ago, when the effective date of the tax was 2020, showed that about one in six employers had already adjusted their benefits programs – eliminating, scaling back, or not introducing these tax-saving accounts – in response to the looming tax.

These discussions will take place in Russell, Dirkson, and Hart – the three Senate office buildings located along Constitution Avenue adjacent to the Capitol. When I’ve met previously with legislative aides, they’ve been receptive to the arguments to repeal the tax. But they’ve expressed concern about the lost revenue associated with repeal. Some of you may see the irony of this argument in light of trillion-dollar annual budget deficits and an active presidential campaign in which candidates are promising new medical coverage, child-care, higher education and college-debt forgiveness programs without outlining the sources of revenue to pay for them.

The real problem, though, is that the government agency that calculates the fiscal effect of legislation distorted the revenue collected by the tax, dramatically overstating the inflow to the federal treasury. So repeal faces a higher fiscal hurdle than the actual effect of repealing the law.

Our argument will be simple:

• The tax has been delayed multiple times already. It’s never going to be implemented. Why support further delays when you can kill it once and for all?
• Employers will respond to implementation by shifting more of the cost of care to employees. Is this the time to hit hard-working Americans with what amounts to a tax increase?

Health FSA Enhancements

The House Ways and Means Committee recently marked up a bill that would make two favorable changes to Health Savings Accounts, Health FSAs and Health Reimbursement Arrangements:

• Over-the-counter drugs and medicine wouldn't require a prescription - essentially reverting to the rules prior to implementation of the Affordable Care Act.
• Menstrual products would be included in the list of qualified expenses.

In addition, a patient's participating in a direct-primary care arrangements (paying a monthly fee to a primary-care physician to cover all care rather than incurring a claim for every interaction) wouldn't disqualify a patient from making or receiving Health Savings Account contributions, and the fee itself would be a qualified expense.

Health Savings Accounts for Seniors

Both ECFC and the Health Savings Account Council have long advocated a role for Health Savings Accounts among at least working seniors, if not a broader population of Americans over age 65. This idea is important as more than 10,000 Americans – including a growing number who’ve been covered by low-premium, high-deductible medical plans and have had access to a Health FSA or Health Savings Account – are enrolling in Medicare directly from a Health Savings Account program. They want to continue to enjoy the tax benefits and opportunity to save money for qualified expenses. Some of the ideas on the agenda

• A Health Savings Account option within the Medicare Advantage program. Medicare Advantage (formally Part C of Medicare) offers private coverage approved by Medicare regulators. These plans offer richer benefits than traditional Medicare, with lower out-of-pocket ceilings and some value-added programs.
• A change in the law to allow lower-income working seniors, who receive Social Security benefits before age 65 to help them make ends meet, to remain HSA-eligible as their Social Security benefit automatically enrolls them in disqualifying Medicare Part A coverage (which covers inpatient, home health, and hospice services).
• A change in the law to define traditional Medicare coverage as HSA-qualified, so that all seniors, working or retired, regardless of income, can open and make contributions to a Health Savings Account. This bill, introduced in July 2019 as HR 3796 by Reps. Ami Bera (D-CA), a surgeon, and Justin Smith (R-MO ] would allow tens of millions of Americans to join the ranks of Health Savings Account owners and enjoy tax savings when they pay their qualified expenses through their accounts.

Medicare for All

None of the three organizations takes a position on broad legislative issues like proposals to increase federal control over the design, delivery, and financing of medical care or coverage. These initiatives typically take one of three forms:

• A government monopoly over all medical care (a solution that Sens. Elizabeth Warren and Bernie Sanders, among other, propose).
• A public option in which the federal government creates a medical plan that competes with private coverage in the under-65 market (as advocated by former Vice President Joe Biden and others).
• A “Medicare buy-in” option that would allow people over age 50 or 55 to purchase Medicare coverage for which they must wait to enroll until age 65 today (as Sen. Debbie Stabenow and others champion).

The message that we deliver rings universal, regardless of which option, if any, becomes law:

• All three programs involve patient cost-sharing, just as today’s private coverage and Medicare do. In fact, the average Medicare enrollee pays more than $5,600 annually - and that figure was calculated in 2016.
• Hard-working Americans need help paying high out-of-pocket costs. Health FSAs and Health Savings Accounts help them manage these costs so that they receive the care that they need, when they need it, to avoid more expensive care when a condition becomes acute.

Prospects

How will members and their staff members react to these proposals? I’ll keep you posted, beginning with my Health Savings GPS blog to be published Nov. 26. If you don't already subscribe, click here.

I'm director of strategy and compliance at Benefit Strategies, LLC, a provider of Health Savings Accounts and other tax-advantaged benefits. You can read my biweekly Health Savings Account GPS blog and subscribe by clicking here and my weekly HSA Mythbuster Monday column by following me on LinkedIn. My book, HSAs: The Tax-Perfect Retirement Account, is the definitive guide to navigating the intersection of Health Savings Accounts, Medicare, and retirement planning. It's available in book and e-book forms from Amazon.