The House Ways and Means Subcommittee recently held a hearing on “Lowering Costs and Expanding Access to Health Care through Consumer-Directed Health Plans.” They examined trends in enrollment and demographics for health spending account holders and the benefits of consumer-directed health care, as well as policies designed to give more consumers access to tax-favored savings accounts, including Health Savings Accounts.
The experts invited to give testimony hailed from a wide array of the healthcare industry and included:
- Roy Ramthun, President and Founder of HSA Consulting Services, LLC.
- Matt Eyles, President & CEO of America’s Health Insurance Plans (AHIP).
- Jody Dietel, Chief Compliance Officer of WageWorks, Inc.
- Sherry Glied, Dean of New York University’s Robert F. Wagner Graduate School of Public Service.
In his opening statement, Subcommittee Chairman, Peter Roskam (R-IL) said:
“Health care reform should empower individuals and families to make decisions for themselves based on what fits their needs and budget. One of the best tools we have to accomplish this goal is consumer-directed health plans that are paired with Health Savings Accounts or ‘HSAs.’ These plans offer lower premiums and a higher deductible to encourage better use of healthcare services. Engaging consumers in their healthcare spending is critical to reining in our system’s ever-increasing costs. These plans continue to increase in popularity, now covering more than 21.8 million Americans.”
CDHPS OFTEN CONFUSES WITH HIGH-DEDUCTIBLE PLANS
There are several different types of Consumer-Directed Health Plans (CDHPs). Some can be paired with an individual plan, but others must be paired with a group plan through an employer. The one thing all CDHPs have in common, though, is that a personal health care account is used to pay for medical expenses, giving you more control over your healthcare dollars. CDHPs let you make decisions about how you’ll get the most value for your money based on what factors are most important to your circumstances. You make choices about what doctors and hospitals to use, then work with your doctor to decide what medications and courses of treatment are right for you. Finally, you pay for your health care using a combination of your medical insurance and your healthcare spending account.
CDHPs are often confused with high-deductible health plans. A high-deductible health plan (HDHP) is a specific type of CDHP, which includes a deductible of at least $1,300 for an individual or $2,600 for a family. Also, an HDHP’s total yearly out-of-pocket expenses, including deductibles and cost-sharing (co-pays, coinsurance), can’t surpass $6,550 for an individual or $13,100 for a family. Adversaries of HDHPs and CDHPs have long argued that because consumers enrolled in these plans are more worried about saving money than seeking adequate health care, the financial incentives lead beneficiaries to use fewer healthcare services even under medical necessity. This could lead to more expensive conditions down the road, including avoidable hospitalizations and long-term spending on chronic diseases.
HEALTH CARE IS MAIN BURDEN ON FAMILY BUDGETS
Founded in 1981, the Employers Council on Flexible Compensation (ECFC) is a non-profit organization that focuses on preserving, protecting, and defending the tax-advantaged programs currently available to working families through employer plan sponsors. ECFC submitted testimony to the House Ways and Means Subcommittee on Health. The statement said:
“Today, health care is the main burden on family budgets and can cripple their ability to remain independent and productive members of the workforce and their communities. ECFC membership believes that HSAs and FSAs should be expanded in the marketplace to provide families and individuals with the ability to manage their health costs and decrease the financial burden that results from an unexpected and expected healthcare crisis.
Many employers are moving toward higher deductible health plans or plans that increase the cost-sharing amounts borne by employees, and consequently, consumer-directed benefit such as FSAs, HRAs and HSAs, are of increasing importance to American workers.”
In May, Liberty Nation reported on the findings of the Centers for Disease Control and Prevention (CDC), which reinforces data contained in the ECFC statement. Both sources show HDHPs are on the rise.
MILLENNIALS HAVE DESIRE TO CONTROL MORE OF THEIR SPENDING
Studies show these types of plans may attract younger individuals with a greater desire to control more of their spending. Millennials are more likely to be engaged when picking a health plan and making cost-conscious health care decisions. They also have a higher likelihood of participating in wellness and preventive health behaviors. Younger generations are more likely than Gen-Xers and Baby Boomers to request less expensive generic prescription drugs for treatments and to use cost-tracking tools to stay on top of what they’re spending.
The subcommittee agreed that improving healthy lifestyles would be the most cost-effective way to lower the price of care in America. In the meantime, the challenge remains how to make it affordable and accessible to everyone. Republicans want more choice and custom plans and to move away from “one size fits all.” Democrats on the committee voice concern regarding the elimination of the individual mandate and expanding HSAs further; there is a potential to remove the young and healthy out of the existing markets resulting in higher premiums for those who are older and sicker. And so, the proverbial can is kicked down the road for another day.