HSA changes will ease Obamacare’s sticker shock
By Ryan Ellis
July 12, 2018
Congressional Democrats desperately want to blame Republicans for spiraling health insurance premium increases in the Obamacare program. Most analysts predict that the cost of Obamacare health insurance plans will increase by 10-20 percent in 2019, with the sticker shock letters dropping in mailboxes just before the election. Double digit increases are nothing new to the 12 million or so individuals and families trapped in Obamacare, but Democrats are hoping that voters can be convinced that President Trump and congressional Republicans somehow “sabotaged” the program. That would, Democrats hope, serve as the blame for this year’s annual spike in premiums, an increase which has occurred yearly since Obamacare was signed into law.
That’s why on Tuesday, the House Ways and Means Committee advanced a series of bills to expand health savings accounts and thereby give direct assistance to families suffering from Obamacare price spikes. Among these bills is H.R. 6314, the Health Savings Act of 2018, sponsored by Rep. Michael Burgess, R-Texas. Dr. Burgess’ bill would allow any person or family enrolled in a “bronze” or a catastrophic Obamacare plan to make an HSA contribution.
Why is this important?
Obamacare sets up three metal tiers in individual market health insurance—gold, silver, and bronze. There’s a tax credit available for those individuals and families making less than 400 percent of the federal poverty line, but for reasons too complicated to detail here Obamacare and the state exchanges herd most of these tax credit beneficiaries into a silver plan.
For those of us who make more than 400 percent of the federal poverty line (about $90,000 for a family of four), there is no assistance whatsoever to purchase health insurance. We bear the full brunt of the premium increases, but get no help in paying them. We find ourselves buying the least expensive plans we can get in the bronze metal tier.
“Least expensive” is a term of art. In my home state of Virginia, my family has purchased one of the cheapest plans available. A healthy family of five with two adults and three children has to pay more than $1,300 per month (that’s about $16,000 per year) just to have health insurance. The deductible on this health insurance plan is $12,800. It doesn’t cover the pediatricians my children go to, since like most substandard Obamacare plans it has skinny networks in order to cut costs. Absent a hospitalization, there is no chance my family will reach that deductible. It’s basically a very expensive hospital insurance policy. We pay for all doctor visits, lab work, and prescription medicines at full cost.
You might think such a nightmarish plan would qualify as a “high deductible health insurance” plan under tax law and be able to accept HSA contributions, but you’d be wrong. Despite the fact that the deductible is well over the minimum level set by the tax code ($2,700), it’s disqualified as an HDHP under the statute because I’m exposed to a higher out-of-pocket limit than the HSA rules permit. That’s right—my health insurance plan cost exposure is too high even for an HSA. It’s the worst of all worlds: an expensive premium, a high deductible, and no HSA eligibility despite sky-high out of pocket exposure.
This is where H.R. 6314 comes in. If Burgess’ bill becomes law, a bronze Obamacare plan like mine would let me make an HSA contribution. This in turn would allow me to pay my exorbitant out-of-pocket cost exposure with pre-tax dollars instead of after-tax dollars.
My family is not alone. According to the Center for Medicare and Medicaid Services, 11.8 million individuals and families enrolled in Obamacare plans in 2018. Of these, 29 percent—or more than 3.4 million enrollees—chose bronze plans like mine.
H.R. 6314 will not lower premiums or blunt the sticker shock of Obamacare price hikes for these 3.4 million individuals and families. But it will materially help those trapped in Obamacare to afford it. If a family pays a doctor bill of $300 and is in a combined 30 percent marginal income tax rate, running that doctor bill through the HSA will save that family $90. That’s real money to people who often have to choose between going to the emergency room and going on vacation that year.
Thankfully, the Republican Congress and the Trump administration have deployed other strategies to help these 3.4 million families. Repeal of Obamacare’s individual mandate tax penalty in tax reform, the expansion of Association Health Plans, and the imminent expansion of Short-Term Limited Duration Plans are three important “escape hatches” from Obamacare that also should not be forgotten. But H.R. 6314 is a big life preserver for those still forced to buy coverage in Obamacare, and might be the most important healthcare legislation the House passes all year long.