Obamacare Replacement Expands HSA Capabilities, Funding

An Obamacare alternative could bring a big boost to Health Savings Accounts (HSAs).

Introduced by Sens. Bill Cassidy, MD (R-LA) and Susan Collins (R-ME), and joined by cosponsors Lindsey Graham (R-SC), Shelley Moore Capito (R-WV) and Johnny Isakson (R-GA), the Patient Freedom Act (PFA) of 2017  would, among other things, allow HSAs to pay for health insurance premiums, for family members to pool dollars to pay for increased expenses, and to allow insurance companies to offer HSA/HDHP policies that cover all inpatient services.

The proposal includes financial assistance to legal residents of the United States not receiving income tax benefits from having employer-sponsored insurance, and who do not have Medicare, Medicaid or other government funded health care – with an aim toward providing roughly the same federal benefit that those with employer-sponsored insurance receive to those who do not have employer-sponsored insurance.

Each state will receive the funds that it would have received under Obamacare if 95% of everyone eligible for subsidies enrolled; in addition, the state will receive the money that would have paid for a Medicaid expansion. The money would be deposited directly into an individual’s Roth HSA to assist in the purchase of health care. States would have the option to either receive the total sum of money for administration by the state, or to have the federal government administer directly and give a tax credit to qualifying individuals. States will have the option to auto-enroll individuals. If auto-enrollment is selected, individuals will be allowed to opt-out of coverage. The auto-enroll feature eliminates the need for either an individual or employer mandate, according to the bill’s sponsors.

All individuals receiving the health credit would receive a Roth Health Savings Account (HSA), a high-deductible health plan (HDHP) and a basic pharmacy benefit plan. The only mandated benefits would be those required of ERISA plans. The bill provides continuous coverage protections, as well as guaranteed issue, guaranteed renewability, no annual or lifetime limits, dependent coverage through age 26, prohibiting pre-existing condition exclusions, and prohibiting discrimination based on health status. Beyond that, regulation of the insurance market reverts to the state.

In order to make HSAs more “useful,” the bill’s sponsors say that providers receiving payment for HSAs will be required to publish “cash prices” for services paid for with an HSA or with cash. In order to protect those who do need emergency services, the PFA calls for limited out-of-network surcharges for emergency medical services paid for with an HSA.

The bill’s sponsors note that the proposal repeals five federal mandates under Obamacare: the individual mandate, the employer mandate, Essential Health Benefits, actuarial value requirements, and age band requirements. After repeal, states would have one of three options.

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