HSA-Eligible Plans are Widely Available in Obamacare Exchanges

(Nota Bene! HSA plans are not necessarily consumer-driven!)

Paul Howard and Yevgeniy Feyman of the Manhattan Institute have conducted a thorough examination of plans available on Obamacare’s exchanges:

The report finds that, far from becoming obsolete under the ACA, high-deductible plans are widely available — 98 percent of uninsured Americans have access to at least one HSA-eligible plan. Moreover, these plans also make up about 25 percent of total offerings on Obamacare exchanges. We also found that they remain significantly less expensive than traditional plan designs, offering savings of about 14 percent, on average.

Nonetheless, our analysis indicates that it remains difficult for consumers to identify HSA-eligible plans and that much more could be done to simplify their administration and educate exchange consumers on their advantages and limitations.

To improve competition between HSA and non-HSA plans on the exchanges, we suggest a number of reforms for HSA-eligible plans, including:

  1. Improve transparency. HSA-eligible plans are often not labeled as such on the exchanges. Mandating identification would go a long way toward making such plans more accessible. Also, exchanges should, like Medicare’s Part D drug plan, contain a simple “cost calculator,” allowing consumers to estimate annual out-of-pocket costs while comparing the latter with the savings associated with a particular HSA-eligible plan. Over time, consumers can accumulate significant funds in such accounts.
  2. Standardize and simplify. One easy way to do this would be to allow any plan with a qualifying deductible to be automatically designated HSA-eligible, as opposed to the current thicket of regulations surrounding HSA eligibility. Alternately, policymakers could make any plan with an actuarial value of 70 percent, or less, HSA-eligible — since it is really the full out-of-pocket payment, not merely the deductible, that is relevant when considering a plan’s full expected cost in the event of serious illness.
  3. Improve affordability for low-income consumers. Catastrophic plans on public exchanges should be redesigned to be eligible for premium tax credits and cost-sharing subsidies, with savings from picking higher-deductible, lower-premium plans refundable into health savings accounts.

On the face of it, this is good news. In an article on this blog from February 2012, Roy Ramthun described the threat to HSAs from Obamacare regulations.

However, we must also recall that Obamacare exchanges encourage plans to compete by attracting the healthy and deterring the sick form applying for coverage. So, we should be careful about concluding that Obamacare’s HSA-eligible plans are really consumer-driven plans. Health insurers may be offering them as a method of selecting less expensive risks.

Comments (4)

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  1. Dr. Mike says:

    But don’t all exchange plans mandate first dollar coverage for preventive services? To me that is almost the whole point of HSAs – to save for expected health care expenditures like colonoscopies, routine labs and xrays, etc. First dollar coverage for preventive services is stupid for HSA plans as the premium increase is greater than the cost of the preventive services that you would otherwise use the HSA to pay for.

    • John R. Graham says:

      Yes: that is why I caution against conflating HSA with consumer-driven. Your colonoscopy is “free” if you are a healthy 50-year old and get it ordered during your annual physical. However, if your doctor thinks you might have cancer and orders it outside the annual physical, you pay out-of-pocket for it.

      The cost sharing is clearly in the wrong place.

  2. David N says:

    How does the intent of the insurer change anything, and how has Obamacare changed their intent?

    I think Obamacare will end up strengthening HSA plans (despite the lawmakers’ intent) because they previously were not available many people in the individual and small-group markets in several populous States.

  3. Don Levit says:

    High deductible plans are prevalent in the self funded market
    Specific stop loss attachments points for large employers usually exceed $50,000 for each employee
    National Prosperity Life and Health is taking those same dollars employers and employees contribute as premiums and reserves and providing a guaranteed return of at least 35 percent for 5 years
    Compare 35 percent return on the same dollars the employer is earning to 3 percent on reserves which have to be liquid
    Significant returns on the same dollars means many more dollars available for claims and significantly lower premiums and reserves in year one and each year thereafter
    Don Levit,CLU,ChFC