Paragon published yesterday the Health Savings Account (HSA) Option, a proposal that I was pleased to coauthor with Dean Clancy, Andrew Lautz, and Roy Ramthun. The paper – The HSA Option: Allowing Low-Income Americans to Use a Portion of Their ACA Subsidy as a Health Savings Account Contribution – is available here.
The HSA Option will improve the welfare of lower-income Americans by offering them more control over their health care. An HSA can be used to help Americans pay out-of-network costs and expenses like vision, dental, and hearing care. An HSA can grow year after year to help enrollees prepare for health care expenses later in life. The HSA option will improve competition and lower costs market wide.
Currently, the Affordable Care Act (ACA) restricts exchange enrollees’ options, leaving most enrollees with a plan that limits access to the best doctors and hospitals. Exchange plans have high premiums and deductibles, but federal subsidies to health insurers are available for many enrollees to reduce their premiums. Enrollees who select silver plans and who have income under 250 percent of the federal poverty line qualify for a cost-sharing reduction (CSR) program that reduces plan deductibles and copayments.
Here are some key components of the HSA Option proposal, which provides enrollees an alternative to the CSR program:
- Enrollees eligible for the CSR program will have the option to enroll in an HSA-qualified plan that offers an HSA contribution.
- The enrollee may access the HSA only with a bank-issued debit card that ensures the funds are used only for qualified medical expenses.
- The insurer will make a monthly HSA deposit to the enrollee’s account.
- Insurers offering exchange plans will be required to offer a plan with an HSA option and an associated contribution for each of the actuarially equivalent plans required by the CSR program.
In summary, the HSA Option will allow enrollees to have another way to access their subsidy for an exchange plan. Many enrollees with incomes below 200 percent of the federal poverty level will have access to thousands of dollars in their HSAs each year if they selected the HSA option. This will allow enrollees much greater control over how to use the funds to best meet their preferences and needs.
We recommend that Congress combine an HSA Option with a CSR appropriation and a prohibition on silver loading. Based on past Congressional Budget Office estimates, this would likely expand coverage and reduce deficits – a rare feat.
All the best,
Brian Blase
President
Paragon Health Institute
