Before the President’s Day recess, Congressional leaders provided a framework regarding their health plan tenets that would  repeal and replace the Affordable Care Act. The plan consisted of many fundamental principles previously espoused in plan proposals, A Better Way and Empowering Patients First. It is expected that next week, more details will emerge regarding the blueprint (like how is it going to be paid for?), and potentially a proposed plan by the White House is expected soon.

At the heart of the plan is age-based monthly tax credits to assist people buying health insurance on the individual market; individuals who don’t receive health care through their employers would receive refundable credits to buy benefit plans that could be less comprehensive than currently permitted under the Affordable Care Act.

There are many items that stakeholders will have various perspectives on, everything from proposed Medicaid block grants to high-risk pools, to the potential for capping the tax exclusion on the value of employer-sponsored health plans, to the repeal of the individual and employer mandates.

Since I don’t have the time to address all of the items, I thought I would focus on the promotion of Health Savings Accounts (HSAs) in the GOP plan. The House GOP proposal would greatly expand the availability and use of HSAs by increasing the maximum contribution limits to equal the maximum out-of-pocket amounts allowed by law; permit individuals and families to spend HSA money on "over-the-counter" health care items; allow both spouses to make additional "catch-up" contributions to the same account; and expand the duration of time an individual or family can use an HSA on certain expenses.

Increasing the amount of money that people could put into health savings accounts? Certainly, nothing wrong with that, but it reminds me of when defined contribution limits were increased as part of the Economic Growth Tax Relief and Reconciliation Act (EGTRRA), whose many provisions were made permanent under the Pension Protection Act. The thought was that by increasing contribution limits that would increase retirement savings. But the reality is that the average person does not have 18K or 20K to put away annually. I don’t believe increasing the amount accomplished the goal of increased retirement savings.

Although I believe health savings accounts are a great triple-tax advantaged savings vehicle for individuals, the same thing applies here. Most individuals do not have the funds to take full advantage of the maximum dollars allowed under these plans. When they were first introduced, the premise was, if consumers of health-care have more “skin in the game,” they will use their health-care dollars more judiciously, paying attention to costs when choosing services, and not overusing health-care services. Proponents of higher employee cost-sharing say that asking people to pay more of their medical bills causes them to be more discriminating about the health services they select and use.

It was, also, believed that with the demise of employment-based retiree medical plans, these vehicles could be used to save for medical expenses in retirement, especially when many are saying that an average couple will need $260K to cover their medical expenses. A build-up of savings in health savings accounts can certainly help to offset these expenses, but, often, medical emergencies can neither be avoided nor budgeted for, nor is the savings enough. Even with the best efforts, most individuals may not be able to save and meet their current health-care expenses, let alone build up enough for their out-of-pocket costs during their retirement years.

High-Deductible Health Plans (HDHPs) and Health Savings Accounts (HSAs) continue to grow in popularity due to their lower monthly premiums, as compared to traditional plan offerings, and tax-preferential treatment.  At the same time, as these plans have increased in prevalence, health-care deductibles and out-of-pocket spending has increased for most individuals. According to the Kaiser Family Foundation and the Health Research and Educational Trust’s 2016 annual survey of employer health benefits, deductibles rose 12% in the employer group market and four times faster than premiums increased.

While wage growth has been sluggish, and premiums have stabilized for many individuals in employer-sponsored health plans, the downside is the fact that plan deductibles are rising almost six times faster than wages, taking a big bite out of many individuals’ wallets. Research from Employee Benefit Research Institute (EBRI) indicates that both employee and employer contributions to health savings accounts have been on the decline, so people are saving less to meet their out-of-pocket expenses.

Less than 50% of all households above the poverty level have enough assets to cover an out-of-pocket maximum of $3,000 to $6,000, With larger up-front deductibles, many fear that despite being insured, high-deductible health plans can drive people into medical debt or cause them to skip needed care for fear of unaffordable medical bills. Drew Altman, President and CEO of the Kaiser Family Foundation, explored the trend of higher deductibles in health plans showing an analysis that many people with insurance coverage do not have sufficient financial resources to pay a mid- or high-range deductible.

I guess we’ll have to see how the tax credits pan out, but whether individuals are eligible for assistance or not, increasing the ability to save more money for health-care expenses through one’s health savings account, I don’t believe, offers a great solution to addressing the situation…………..other than continued cost-shifting to individual consumers.  Across the spectrum of low-wage and moderate-income wage workers especially, there aren’t enough available funds to meet the current and future higher out-of-pocket costs.

Lenny Sanicola, Senior Practice Leader, WorldatWork