John Garven

The 2012 Census of the HSA Market was released earlier today by AHIP.  According to the Census 13.5 million individuals are covered by HSA compatible high deductible health plans (HDHPs).  The Census, which includes participation from almost all of the health insurers nationally that provide products in the HSA/HDHP market, is used by policymakers, the news media, and researchers.

Key findings from the 2012 Census include the following:

• Total enrollment has grown over 2 million covered lives from the 2011 Census.  Enrollment rose to 2.5 million in the individual market, 3 million in the small group market, and 7.9 million in the large group market.
• The states with the highest numbers of HSA enrollees are California, Texas, Illinois, Ohio, and Florida.  States with the highest percentage of HSA enrollees are Vermont, Minnesota, Montana, Utah, Connecticut, and Indiana.
• Almost all individuals covered by HSAs / HDHPs are in PPO-style plans, giving those consumers access to provider network discounts.
• The average monthly premiums for all markets range from a high of $470 for single coverage in Tennessee and $1,201 for family coverage in New Hampshire, to lows of $206 for single coverage in South Dakota and $423 for family coverage in Iowa.

There is a study published in the May 2012 issue of Health Affairs around the potential impact of consumer driven health plans (CDHPS) on the American health care system entitled “Growth Of Consumer-Directed Health Plans To One-Half Of All Employer-Sponsored Insurance Could Save $57 Billion Annually”.

As my good friend and colleague Greg Scandlen pointed out in a post earlier today, “Most of the media reports have been reasonably accurate, see The Hill and The Washington Post, but have missed the real potential in the study.  The media reports have focused on the study’s conclusion that if half the people with employer-based plans were in a consumer driven plan, the system-wide savings would be $57.1 billion. But this is a mid-range estimate that assumes an equal mix of HRA and HSA approaches. The study acknowledges that HSAs are far more cost-effective, and estimates that, if all of these people were in HSA plans the annual savings would be $73.6 billion.”

Last Friday, the House Ways and Means’ Committee’s Oversight Subcommittee examined the limitations imposed by PPACA on the purchase of over-the-counter medications with Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), and Health Reimbursement Accounts (HRAs). Later that day, their Subcommittee on Health held a hearing to review the bipartisan support for implementing a Medicare premium support system to modernize and improve the financial solvency of this federal program.

Finally, the House Ways and Means Committee issued a report last week on the impact the health reform law is likely to have on employer-provided healthcare coverage. The analysis, based on information provided by members of President Obama’s Council on Jobs and Competitiveness, shows that the healthcare law is raising costs, fostering uncertainty that impedes growth and planning, and putting pressure on employers to consider dropping employee health coverage altogether.

The IRS has just issued Revenue Procedure 2012-26, which provides the 2013 cost-of-living contribution and coverage adjustments for HSAs, as required under Code Section 223(g). Most contribution limits and the out-of-pocket amounts have been increased for 2013.

• HSA contribution limits are being increased from $3,100 to $3,250 for self-only coverage, and from $6,250 to $6,450 for family coverage.  The Age 55 catch-up contribution limit remains at $1,000.
• The maximum out-of-pocket amounts for a qualifying high deductible health plan (HDHP) are being increased from $6,050 to $6,250 for self-only coverage, and from $12,100 to $12,500 for family coverage.
• The minimum deductible amounts for a qualifying high deductible health plan (HDHP) are being increased from $1,200 to $1,250 for self-only coverage, and from $2,400 to $2,500 for family coverage.

For a copy of Revenue Procedure 2012-26, visit http://www.irs.gov/pub/irs-drop/rp-12-26.pdf.

The following is posted at http://bit.ly/vZcz14:

Roy Ramthun, also known as “Mr. HSA,” is now projecting the 2013 amounts for HSAs. “With last Friday’s release of the January inflation figures by the Bureau of Labor Statistics (BLS), the inflation-adjusted amounts for health savings accounts (HSAs) for 2013 are coming into view,” says Ramthun. “With only two months of data remaining to be collected, we can now project the 2013 numbers for HSAs with virtual certainty.”

Because of the enactment of the Tax Relief and Health Care Act of 2006 (P.L. 109-432), the data period for calculating the inflation adjustments runs through March (reported by the BLS in April). The U.S. Treasury Department is required to publish the inflation-adjusted amounts for the upcoming year for HSAs by June 1 each year.

Ramthun predicts that the maximum HSA contribution (not including catch-up contributions) will increase to $3,200 for individuals with self-only coverage and $6,450 for those with family coverage in 2013. The annual catch-up contribution for individuals age 55 or older is set by statute and will remain $1000 per person for 2013.

Ramthun also predicts that changes will be forthcoming for the HSA-qualified insurance plans as well. “For the first time in three years, the minimum deductible for HSA-qualified plans will increase. Health plans that have been using the minimum deductible will need to update their plans for next year” The minimum deductible is projected to rise to $1,250 for individuals with self-only coverage and $2,500 for individuals with family coverage.

“The limits on out-of-pocket expenses will also rise for 2013,” says Ramthun. The new limits are expected to increase to $6,250 for individuals with self-only coverage and $12,500 for individuals with family coverage. “Existing plans with lower limits will not have to change this feature of their plan designs but can if they want to,” says Ramthun.

About Roy Ramthun:

Roy Ramthun led the U.S. Treasury Department’s implementation of the HSA program after they were enacted in 2003. Now a private consultant, Ramthun is a nationally-recognized expert on HSAs and consumer-driven health plans. He is a frequent speaker at conferences and seminars around the country. More information is available at http://www.hsaconsultingservices.com.

Here is a hat tip to my friend Greg Scandlen for summarizing information found in Paul Fronstin’s EBRI Issue Brief entitled “Health Savings Accounts and Health Reimbursement Arrangements: Assets, Account Balances, and Rollovers, 2006–2011“.

Be sure to read Greg Scandlen’s summary.

Here is a hat tip to my friend Greg Scandlen for summarizing information found in Paul Fronstin’s EBRI Issue Brief entitled “Health Savings Accounts and Health Reimbursement Arrangements: Assets, Account Balances, and Rollovers, 2006–2011“.

Be sure to read Greg Scandlen’s summary.

A number of new interesting reports and studies were issued last week.

• According to a new analysis by the Robert Wood Johnson Foundation, health insurance premiums would rise by as much as 25 percent if the healthcare law is implemented without an individual mandate. Furthermore, the study found that removing the mandate from PPACA while still expanding Medicaid eligibility would decrease the number of people with private coverage by 3.6 million. Uncompensated care would increase by $20 billion.
• The Agency for Healthcare Research and Quality issued a report that shows that only one percent of the population accounted for a whopping 22 percent of healthcare costs in 2009. Furthermore, only 5 percent of the population accounted for 50 percent of healthcare costs. The high cost patients “tended to be white, non-Hispanic women in poor health; the elderly; and users of publicly funded healthcare.”
• Also out last week were the results from Aetna’s ”HealthFund” study on consumer-directed products, including health savings accounts and health reimbursement arrangements. Compared against standard plans, Aetna found that employers who offered consumer-directed plans saved $21.8 million over a five-year period for every 10,000 members. The study also surveyed 2.3 million Aetna clients and found that those with consumer-directed plans  “received screenings for cervical cancer, colorectal cancer and prostate cancer, as well as mammograms and immunizations, at a higher rate compared to members in PPO plans.”
• Finally CMS’ Office of the Actuary released its annual report on health spending in the United States. Spending is growing at a historically low rate, which is attributed to the country’s general economic decline. Total health spending grew just 3.9 percent in 2010—only slightly faster than the 3.8 rate of growth in 2009—reaching a total of $2.6 trillion. This represents the slowest rates of growth in the 51 years that CMS has collected the data.

Concerning the last bullet point, the decline in healthcare spending is not attributable to PPACA, since the data collected is for 2010, and few of the laws provisions were in effect then, and none were in effect for the entire year. Also, it is important to note that in 2010, the federal government’s share of national health spending increased to 29 percent. As PPACA’s subsidy provisions take effect in 2014, the amount of national health spending incurred by the federal government is only expected to grow further.

The US News & World Report article found at http://bit.ly/z1bikd, entitled “What to Do About Retiree Healthcare Costs”, points out issues that are best addressed by purchasing private long term care insurance and setting up an HSA (health savings account) as part of one’s pre-retirement planning. (Note: With an HSA one is able to withdraw money tax-free to pay long term care insurance premiums and / or actual LTC services.).  There really is no “mystery” here.  Simply put, there are plenty of opportunities to address healthcare costs in retirement if one takes the adequate steps BEFORE retirement to plan for them.

The release of President a Obama’s deficit reduction plan comes just a week after the President submitted to Congress the actual text of his proposed jobs legislation.

My greatest concern with S. 1549 , which seems quite unlikely to move forward in its current form, is that, as a pay for, the bill would change the tax treatment of employer-sponsored health insurance. Section 401 of the bill limits the value of all itemized deductions for married couples filing jointly with adjusted gross income of at least $250,000 and single taxpayers with adjusted gross income of at least $200,000 to 28 percent. This would include the cost of employer-sponsored health coverage and deductions for health-spending accounts (HSAs and HRAs). The amount that is reported by the employer for the employee is not excludable by the taxpayer. Republicans have expressed openness to some elements of the jobs proposal but have generally opposed the proposed tax changes and other revenue raisers that President Obama outlined. A number of Democrats also have spoken out against elements of the President’s proposal.

Here is a “hat tip” to Dan Perrin, the Executive Director of the HSA Coalition, about the new tax being proposed on Health Savings Accounts (HSAs) by the Obama Administration in “The American Jobs Act” bill it’s championing – http://bit.ly/oIEedP.

Here is a Section by Section Analysis of the bill.  As Dan points out, one will find the tax in Title IV, Section 4:

Subtitle A – 28 Percent Limitation on Certain Deductions and Exclusions

Section 401 – 28 Percent Limitation on Certain Deductions And Exclusions. This section would limit the value of all itemized deductions and certain other tax expenditures for high-income taxpayers by limiting the tax value of otherwise allowable deductions and exclusions to 28 percent. No taxpayer with adjusted gross income under $250,000 for married couples filing jointly (or $200,000 for single taxpayers) would be subject to this limitation. The limitation would affect itemized deductions and certain other tax expenditures that would otherwise reduce taxable income in the 36 or 39.6 percent tax brackets. A similar limitation also would apply under the alternative minimum tax. This section would be effective for taxable years beginning on or after January 1, 2013

For those who have an HSA or work in the healthcare field and don’t want your HSAs taxed, call or write your Senator and your Congressman and let them know that this provision is unacceptable!

On May 26th I blogged about Sen. Hatch’s introduction of the Family and Retirement Health Investment Act of 2011, a bill that’s intended to strengthen and expand HSAs and FSAs – http://bit.ly/j33F0G.

My friend / colleague Roy Ramthun has just penned the following which he entitled “Taking HSAs to the next level”, and I am sharing the same with my blog readers:

The number of Americans covered by Health Savings Accounts (HSAs) continues to grow (see latest survey from America’s Health Insurance Plans at http://www.ahipresearch.org/pdfs/HSA2011.pdf), as businesses look for ways to control employee benefit costs. HSAs could grow even faster if Congress passes legislation recently introduced by Sen. Orrin Hatch (R-Utah) and Rep. Eric Paulsen (R-Minnesota). Senator Hatch is the ranking Republican on the Senate Finance Committee, and Rep. Paulsen is a member of the House Ways & Means Committee. Both committees have jurisdiction over tax matters, including HSAs.

The bill (S. 1098 / H.R. 2010, introduced May 25, 2011) would repeal the two most egregious provisions relating to consumer-driven health care plans in the new health reform law. First, the bill would eliminate the need to have a prescription for over-the-counter medicines when seeking reimbursement from health care accounts like HSAs and FSAs. Second, the bill would strike the maximum deductibles of $2,000 for single coverage and $4,000 for family coverage for plans offered by employers and insurance carriers. This will help keep premiums affordable for employers and employees.

Changes to HSA Eligibility – The bill makes several improvements to the eligibility requirements for HSAs. For seniors enrolled only in Part A of Medicare, they could remain eligible to contribute to their HSA if they are otherwise eligible to do so and do not enroll in any other part of Medicare. For veterans with a service-connected disability and Native Americans, they could remain eligible to contribute to an HSA even though they have access to medical services provided through the VA or Indian Health Service, respectively. Lastly, for retired military persons that are still covered by free TRICARE benefits but may now be working in the private sector, they could be eligible to contribute to HSAs for the first time.

Great Flexibility in Using HSA Funds - Unlike Americans who have employer-sponsored health coverage, individuals purchasing their own health insurance get little tax relief for their premiums. The bill would provide relief to these persons by allowing them to use their HSA funds tax-free to pay these premiums. The bill would also eliminate a technical issue so that all qualified medical expenses incurred after HSA-qualified coverage begins may be reimbursed tax-free with HSA funds as long as the account is established by April 15 of the following year. Currently, expenses incurred before someone opens their HSA account cannot be reimbursed tax-free. The bill also fixes another technical problem that prevents account holders from using their funds tax-free to pay Medicare premiums unless they are age 65 or older (i.e., can’t pay for an older spouse’s Medicare premiums if not 65+ yourself).

To help people stay healthy and preserve their HSA funds, the legislation would allow HSA funds to be used for new types of expenses not currently permitted by the IRS, including:

• Exercise and physical fitness programs (up to $1,000 per year)
• Nutritional and dietary supplements, including meal replacement products (up to $1,000 per year)

Another type of expense that would be allowed for tax-free reimbursement is an “all-inclusive” flat fee charged by doctors instead of the fees charged every time you visit. Currently, the IRS does not permit HSA funds to be used to pay these fees because there is no direct billing for individual services provided by the physician.

Rollovers and Catch-Up Contributions – The changes made by Congress in 2006, though well-intended, make it very difficult for employees to roll over unused funds in an FSA or an HRA to help fund their HSAs. The new legislation simplifies the process for rollovers in order to ease the transition to HSAs.

HSA-eligible individuals age 55 or older may make additional catch-up contributions of $1,000 each year. However, the contributions must be deposited into separate HSA accounts even if both spouses are eligible to make catch-up contributions. The bill would allow married couples to put their catch-up contributions into one account.

Expanded Definition of “Preventive” Drugs – HSA-qualified plans (along with all other plans) are now required to cover preventive care services without applying the policy deductible or charging out-of-pocket expenses like copays. Although the IRS allows certain types of prescription drugs to be considered “preventive care,” they generally do not permit plans to include most drugs taken to prevent the worsening of chronic conditions. The legislation would provide additional flexibility to health plans that want to provide coverage for these medications and remove a perceived barrier to HSAs for people with chronic conditions.

What’s Next?

Like all other legislation, it will have to be approved by Congress and signed by the President. The sponsors of the legislation will be looking for opportunities to move the bill forward through the process towards enactment. Please let your elected representatives know about this legislation and ask them to sign on as a co-sponsor today.

About the Author: Roy Ramthun is President of HSA Consulting Services, a health care consulting practice specializing in Health Savings Accounts and consumer-driven health care issues. Mr. Ramthun led the U.S. Treasury Department’s implementation of the HSA program after its creation in 2003 before becoming the senior health policy advisor to President George W. Bush. Mr. Ramthun is a frequent speaker at conferences and seminars around the country. He and his family have had an HSA since 2005.

America’s Health Insurance Plans (AHIP) has released the latest update of its annual census of the market for health savings accounts (HSAs).  As of January 2011, more than 11.4 million Americans were covered by HSA-eligible high deductible health plans (HDHPs), an increase of more than 14 percent from the prior year.

Other key findings of the census include the following:

• Between January 2010 and January 2011, the fastest growing market for HSA plans was for large-group coverage, which rose by 26 percent, followed by individual market coverage, which grew by 15 percent.
• In the individual market, 2.4 million covered lives are enrolled in HSA plans, while approximately 2.8 million lives were enrolled in HSA/HDHP coverage in the small-group market and over 6.3 million lives were covered in the large-group market.
• Forty-nine (49) percent of all HSA/HDHP enrollees in the individual market (including dependents) were age 40 or over; 51 percent were under age 40.
• States with the highest levels of HSA/HDHP enrollment were California (1,073,319 enrollees), Texas (844,832 enrollees), Ohio (728,868 enrollees), Illinois (690,509 enrollees), Florida (656,243 enrollees) and Minnesota (507,307 enrollees).

My friend and colleague Roy Ramthun made me aware of Sen. Hatch’s introduction of the Family and Retirement Health Investment Act of 2011, a bill that is intended to strengthen and expand HSAs and FSAs.  The press release from the Senator’s office may be viewed at http://1.usa.gov/kcSMvO.