Wednesday, February 20, 2013

Dangerous Musings [Updated & Bumped]

[Originally posted February 19, 2013 - scroll down for update]

The National Association of Alternative Benefit Consultants is the organization which sponsors my CBC designation. It's made up of, and run by, good folks, and does a good job of hunting up interesting ways for agents to expand their business. Sometimes, though, I just shake my head in bemusement at what they send out.

Case in point, a recent email with the provocative title "HSAs, HRAs - Alive & Well Under PPACA‏"

I'm going to elide over the HRA (Health Reimbursement Arrangement) for now - although that model has some interesting challenges under The ObamaTax, as well - and focus on Health Savings Accounts.

As we've written, HSA's are essentially outlawed under the 'Tax, because despite their built-in cost efficiency (or perhaps because of it), they fail to meet the minimum essential coverage requirements under the train wreck law. NAABC's email avers that "many employers will switch to CDHPs, either in the Exchanges or through ERISA plans to escape the regulations of the PPACA.  Even a one-deductible, 100% coinsurance plan will qualify under the "Bronze" level in the exchanges."

Their position relies on this statement from the IRS:

"Section ... directs that the limit on deductibles described ... for a health plan offered in the small group market be applied so as to not affect the actuarial value of any health plan. We interpret and implement this provision through our proposal ... by authorizing a health insurance issuer to make adjustments to its deductible to maintain the specified actuarial value for the applicable level of coverage required ... we propose that a plan may exceed the annual deductible limit if it cannot reasonably reach a given level of coverage (metal tier) without doing so.”

Which should clear up any confusion on that issue.

But of course it doesn't, any more than relying on the IRS hotlines during tax season. The agency goes on to "clarify" its position:

"We propose to use a ‘‘reasonableness’’ standard and request comment on what evidence or factors should be required from an issuer and considered in determining whether this standard is met with respect to health insurance coverage ... While it may be possible to develop plan designs to meet all of these constraints, we believe it could be difficult to develop plans with reasonable coinsurance or equivalent cost sharing rate" [emphasis added]

Talk about weasel words. Does any sane person really think it's a good idea to rely on the generosity and open-mindedness of the IRS? The NAABC seems to think so, because they end their email with this citation from the IRS regs themselves:

"A health plan’s annual deductible may exceed the annual deductible limit if that plan may not reasonably reach the actuarial value of a given level of coverage a ... without exceeding the annual deductible limit"


So it seems that the IRS has left us a loophole through which we can drive our HSAs.

Or does it?

I would characterize this as (at best) sketchy: for one thing, those final regs have yet to be written. For another, this whole argument seems to center on the group market, but we already know that many (most?) folks will be in the market for individual plans (whether by choice or not). Given the MLR requirements for these plans (not to mention all the "freebies" they're required to include), does it really seem reasonable that carriers will be able to design cost-effective HSA plans that will be Exchange-compliant?

As a major and long-time proponent of consumer-driven health care plans (aka HSAs), I really wish that the NAABC was right. But I see no evidence to support that position. And given the actual implementation of The ObamaTax thus far, I'm not hopeful that this will turn out the way they expect.

UPDATE: Bob has a contrarian view, based on his own conversations with the author of the information on which NAABC relied:

"... cost-effective HSA plans that will be Exchange-compliant?"
As we move forward in this train wreck, I am becoming more convinced there is a viable market for major med (and ancillary lines) outside the exchange. Yes, the products will still need to provide EHB's and adhere to MLR, blah, blah, blah but they will also have more flexibility.

This seems to be especially true in the renegade states where the federales are running the show. It is possible non-HIX plans will have a lower premium (ex-subsidies of course), broader networks, broader Rx formularies and even higher deductibles.

Feedback I am getting from carriers (which are not always the sharpest knives in the drawer) indicates they really don't care if they write HIX business or not and will focus on non-HIX product lines.

I am also under the impression that major med quote engines (Norvax, Quotit) will not offer any HIX products and have heard that eHealthinsurance will also focus on non-HIX sales.
I certainly hope that Bob's correct, and that we'll continue to see consumer-centric health plans flourish under The ObamaTax. One indication that seems to validate this belief comes from Cigna, which emailed this:

"In the face of another year of economic volatility and legislative and regulatory change, Cigna's consumer-driven health plan (CDHP) participation grew by 26 percent during 2012, resulting in one-in-five Cigna customers now participating in a Health Savings Account (HSA) or Health Reimbursement Account (HRA)."

Now, HRA's aren't HSA's, but the basic idea that high deductible plans that encourage consumer participation are still valued is a hopeful sign.
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