• Quote: “Obamacare a Trojan horse for conservative health-care reform”

    Shortly after the law passed, it looked like the administration would use regulatory rule-making to kill health savings accounts. But subsequent rules clarified that HSA-qualified plans were actually the default structure for bronze plans on the exchanges. (Some silver plans qualify, too.)

    Far from being driven to extinction, high-deductible, HSA-eligible plans have an opportunity to capture significant new market share on the exchanges.

    Paul Howard and Yevgeniy Feyman, Bloomberg. See also Reihan Salam.


    • This actually occurred to me as well. In fact, it’s one of the central premises of my upcoming book The Self-Pay Patient – that the default option for nearly everybody obtaining coverage through the exchanges will be in high-deductible plans. My understanding is they had to rejigger some of the regs to address the first-dollar coverage of ‘preventive’ care (most of which isn’t, but that’s another matter), but it will indeed be ironic if one of the main outcomes of Obamacare is the dramatic expansion of high-deductible plans.

      Note, however, that not all high-deductible plans are HSA eligible, in fact my recollection of looking at insurer rate filings in half a dozen states is that a much smaller number of plans were identified as HSA eligible (you can usually tell by looking at the name of the plan, btw).

      • All HDHPs are by definition HSA eligible. Many plans that are HSA-eligible don’t come with an HSA right away, though (so not having HSA in the name doesn’t mean that the plan isn’t HSA-eligible). HSA-eligibility is essentially defined by the deductible level (there are some other minor reqs, but deductible is the main part).

        • All HDHP’s are not HSA eligible. I know of many HDHPs that
          have deductibles > $1,250 / $2,500 that are not HSA-eligible

    • Yes this is one of the good things about the PPACA. The deductible cap is a little low to do much but that could change.

      • Imagine an insurance product with no deductible, in which premiums are priced as if the deductible was raised.
        People have the ability to make claims from dollar one, but consciously decide not to do so.
        These smaller claims are paid by the employer and/or employee.
        Doing so allows paid-up benefiuts to continue building, way past the maximum deductibles allowed under the ACA.
        How is this kosher?
        By qualifying the paten tedpaid-up benefits rider as an excepted benenfit, that porton of the plan need not be ACA compliant. It has no 60 % minmum actuarial value, for example.
        This plan will be available for selected self insured large employers in 2014, and available for the fully insured market in Texas in 2015.
        Don Levit

    • Gosh, you policy wonks have no conception, no idea of what the health coverage experience has been for working Americans in private, for profit and not-for-profit concerns with employer-sponsored coverage.

      What a sheltered life you lead, and no wonder you believe PPACA’s new, higher standard for coverage, with no annual or lifetime maximum benefit limits is not only essential, but somehow will continue to be affordable to employers and employees alike.

      “High” deductible is a misnomer. For comparison, back in the day, we used to call 401(k) plans “salary reduction savings plans” – based on the language in IRC 401(k). Then, of course, the marketing people got their hands on that one. Today, some still call them “HDHP’s” because that is the description in IRC 223. But, most of us who actually design health plans and are accountable to maintain budgets, etc. call them “Consumer Driven Health Plans” or CDHP’s – where you are counting on basic economic principles to moderate utilization (no thanks to PPACA’s “free” contraceptives and other supposedly essential preventive services – all designed, of course, to buy votes).

      Anyway, back in the day, 30 years ago, in 1984, my indemnity, major medical, insured health plan had a deductible of $200/$400 – and workers thought that was really high!!!!!

      Today, the HSA-qualifying CDHP that I participate in as a retiree (the successor of the coverage in effect in 1984), has a deductible of $1,500/$3,000.

      However, the fact is that, had my employer just kept pace with the increased cost of health coverage, that $200/$400 1984 deductible would be $2,056 / $4,651 2014 deductible – if the point of purchase cost sharing had kept pace with the actual average per capita cost incurred (claims, admin, changes in utilization, etc.) – based on my estimates. Sure, there were changes in the population – we got a little older, on average. However, those year over year increases are despite very effective (some would say aggressive) cost management provisions which kept the average annual increase to just over 8%/9% per year during that 30 year period.

      Today, an HSA-qualifying “High Deductible Health Plan” only requires a deductible of $1,250/$2,500 in 2014 to ensure the participant is an “eligible individual” with respect to Health Savings Account participation.

      I would note that the percentage of employer-sponsored plans with a general deductible has increased from about 55% in 2006 to 78% in 2013 – and definitely headed higher. Employers are even adding deductibles to HMOs!!!!! (KFF employer survey, September 2013). Even the Kaiser closed network HMOs now have a plan design that would enable an individual to contribute to a Health Savings Account.

      But, that trend started well before PPACA. In fact, a number of studies show that less than 50% of employer sponsored plans had annual deductibles at the turn of the century, and at least one study claimed that the average annual FAMILY deductible in the late 1990’s was $250 (you have to wonder whether they averaged in the $0’s).

      Anyway, PPACA ensures employer plans, to the extent they are maintained, will continue to increase the annual deductibles. PPACA only applies the $2,000/$4,000 maximum deductible to exchange plans – individuals and small employers. Larger employers (that are no longer grandfathered) can introduce deductibles up to the 2014 cost sharing limits, that would be $6,350 / $12,700 – and using the government’s own calculator, assuming the plan covers all EHBs, such a deductible would still be in excess of “minimum value” – or 60% actuarial value.

      That’s kind of funny, in a sick sense of the word, because even a deductible of that size may not be sustainable in 10 – 15 years. Note how the “High Cost Health Plan” (“Cadillac Tax”) is determined and indexed, to match the CPI +1 for 2019 and 2020, then CPI in subsequent years. Assuming employer-sponsored plan costs continue even at an 8% per year increase (not at all likely due to cost shifting resulting from reductions in Medicare reimbursement, as well as increased enrollment in Medicare and Medicaid, where reimbursement rates for many services are pegged at “below cost” levels, coupled with the increasing age of the working population), the bet in the employer-sponsored, employee benefits community is that even a “High Deductible Health Plan” set at the maximum point of purchase cost sharing may not be enough to avoid the Cadillac tax, say 10 – 15 years into the future, for perhaps as many as half of employer sponsored plans (when you add in employee FSA contributions, employer contributions to HSAs, and perhaps employee contributions to HSAs). Take the Milliman annual cost survey for a family of four, “all in” including the out of pocket that would be funded through a Health FSA. They estimate just over $22,000 in 2014. The average increase per year over the last five years was just 7%. Take that 7% rate, index the $22,000, and if you can believe Milliman, and if you can ignore the fact that averages can be very deceiving, it suggests that the average plan, for a family of four, in 2018, will trigger the $27,500 cadillac tax.

      When that happens, well, let’s see, ya think employers will sustain the coverage at that level of cost AND pay a 40% excise tax on the excess over the dollar thresholds. Keep in mind, there is no “Cadillac Tax” on exchange coverage. Only ignorant policy wonks believe there are employers who will sustain coverage where it triggers the Cadillac Tax.

      Obviously, progressive policy wonks haven’t changed much. A decade ago, along with the AARP, you used to criticize employers who prospectively amended their final average pay formula defined benefit pension plans to cash balance formulas. Then, you enlisted the plaintiff’s bar and pursued litigation claiming that such prospective changes discriminated on the basis of age. Took many years in the courts, but, finally, it was clear that such a benefit formula was not discriminatory. What the AARP and others didn’t realize of course, was that the choice for employers was not between a final average pay formula and cash balance formula, but between a cash balance formula defined benefit pension plan and NO defined benefit pension plan (frozen plans).

      The same groups, including the AARP, made the same mistake when it came to employer-sponsored retiree medical coverage. They thought, well, we can curtail the tax preferences for funding retiree medical (IRC 419, added in 1984). Then, they pursued litigation that claimed it was age discrimination where a retiree medical plan integrated with Medicare (medicare primary). Nope, took a few years, but the courts decided integrating coverage with Medicare was not age discrimination. Again, they totally missed the boat. The choice was not between a health plan that integrated with Medicare or a plan primary to Medicare. No, the employer’s choice was between a plan that integrated with Medicare or NO retiree medical plan. Today, in terms of new hires and active employees, only public employees and represented employees (and not many of them, either) will receive employer-sponsored retiree medical benefits. Most private employers have terminated coverage, or scaled back/froze eligibility. PPACA will only worsen the trend to eliminate or curtail reiree medical – pushing many of the remaining employers who offer such coverage to a defined contribution scheme, or no scheme at all! .

      DB plans and retiree medical are the “canary in the coal mine” for PPACA – in terms of the impact on employer-sponsored coverage.

      Most of you must be tenured professors, or in similar situations. Apparently, you don’t keep up with the news about what is happening to the rest of us. For example, Investors.com published a list, updated on 11/5/2013, that shows 363 employers who have announced reductions in hours to < 30 (including 100 school districts). Because of ERISA Section 510 interference rules, most of the employers who are in fact reducing hours make no announcement – to minimize their litigation exposure. Yes, that is true, it is PUBLIC employers, those not subject to ERISA, who are almost all of the employers on the Investor.com list.

      The CBO projections, obviously reflective of the assumptions Congress and progressive policy wonks have about how employers will respond, assume more people will be covered under employer-sponsored plans in 2019 than in 2009. They assume employers are static. They ignore the trend to part time employment – now higher (according to BLS) than at any time since they started measuring part time employment. They ignore the fact that the world's second largest private employer is Kelly Services (after Wal Mart), and that satellite radio is running ads touting the profit potential of opening up a temp agency franchise. And, of course, they ignore the sluggish employment situation of 7+% unemployment and the lowest labor force participation rate in four decades, coupled with the highest level ever of social security disability claiming. .

      Sure, employers will continue to offer plans and more will be covered in employer-sponsored plans in 2019 than in 2009.

      Sure. Right.