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White House Backing HSA Flexibility Bill
A bill to allow customized "flex HSA" designs will be supported by President Bush in his State-of-the-Union address, according to Consumer Directed Market Report, a major boost to the bill's visibility. Although the White House decided against actually proposing legislation, the list of supporters has grown so large in recent days that the White House opted to make sure the President is on the train.
The Cantor bill has now drawn official endorsements from America's Health Insurance Plans and several of its biggest members, the National Association of Manufacturers, a new coalition of employers and insurers, and House Speaker Dennis Hastert, who was instrumental in passage of the HSA law. The American Bankers Association and ABIA have given verbal endorsements of the bill, along with several HSA custodians. Several FSA groups and CDHC administrators plan to sign on.
The "Flex HSAs Act" would keep existing HSAs intact so they continue to grow rapidly, but add two new optional features:
HRA-FSA purchasing power for HSAs
The bill allows HRAs and FSAs to be used as a supplement to existing HSA contributions, giving consumers more purchasing power and reducing the risk of out-of-pocket costs. For example, an FSA could be used first to pay claims under the deductible, followed by an HRA before HSA funds kick in. This allows the HSA to be used as a true health savings account, fixing one of the biggest drawbacks of HSAs —the conflicting objectives of saving and spending which very often results in no savings at all. It also deals with the common problem of "HSAs" that are really just unfunded high-deductible health plans exposing consumers to market risk without the purchasing power to act like consumers.
Higher contributions to match more flexibility
The original HSA law maximum contribution amount is too low to accommodate the use of HRAs and HSA, both having a high deductible. The existing HSA contribution is limited to the dollar amount of either the deductible ($5,000) or out-of-pocket maximum, which is usually much higher (max $10,000). The new proposal would eliminate the deductible as the contribution ceiling, but keep the out-of-pocket max, in effect doubling the contribution allowed. In this way, HSA-only plans become more attractive, and the new Flex HSAs have more potential for rollover savings into the HSA.
CDMR will be doing several articles and analyses of the new approach in the next few weeks, including the next issue that will be mailed this week.
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