Medicare Compliance & Reimbursement

Implemented by the Medicare reform reg, the new HSAs could redefine health insurance.

Health insurers that don't want to be left behind by market shifts would be wise to start offering high deductible health plans with health savings accounts soon.
 
Two new federal guidances - the first from the Treasury Department and the second from the Department of Labor - open the door further for HSAs, which are 401(k)-like accounts into which employers and employees can save money, tax-free, for future health care expenses. The Treasury guidance, released March 30, declared that the high deductible health plans tied to HSAs may cover a wide variety of "preventive care," such as annual physicals, immunizations, tobacco cessation and weight loss programs. Prior to the guidance it was unclear whether HDHPs could provide these benefits before the deductible had been met.
 
"It's pretty good news," says Greg Scandlen, director of the Galen Institute's Center for Consumer-Driven Care in Washington. "It certainly clarifies the preventive care situation, which was a big question mark." Even better is the fact that Treasury sounds "pretty open to being flexible" when it comes to determining which health services HSAs can cover, he says.
 
Indeed, Treasury has requested comment on whether the preventive care safe harbor should also cover certain drug benefits or mental health programs. Treasury will issue its next guidance in June.
 
The March guidance makes HSAs an even more attractive option than they were when first implemented January 1 as a result of the recently passed Medicare reform legislation, experts say.
 
The guidance also clarifies that people who receive drug benefits through a plan with a low deductible cannot also be enrolled in an HSA, a decision which did not come as a surprise, according to Scott Krienke, vice president of individual medical for Assurant, formerly Fortis Health, a health benefits company that offers HSAs and HDHPs. Assurant had expected that decision, so they designed their plan so that it would already be in compliance.
 
The Department of Labor also chimed in with good news April 7, saying that HSAs are not considered "ERISA plans," meaning that they are not subject to the vagaries of the Employment Retirement and Income Security Act. This is "welcome guidance," says Jeff Munn, a health care consultant at Hewitt Associates. Employers were concerned that by putting some of their money in an HSA, they would be creating an ERISA plan, which would create a level of disclosure and documentation that employers want to avoid.

Impact on Managed Care Industry

 
The bottom line: Health plans will have to deal with the fact that banks and financial institutions will be getting into the health care game. "All of a sudden financial institutions will be holding some of the money that used to go to health plans," Scandlen says.
 
Krienke thinks that the health insurance market is shifting towards HSAs, putting more of the health care dollar into the hands of financial institutions. He points out that Assurant's sales rate for HSAs since January has been "significantly stronger" than the sales rate for medical spending accounts back in MSAs' early days.
 
Krienke also points to a recent survey by Hewitt saying that 60 percent of large employers say they will offer HSAs next year. "That's pretty significant," he says, since large employers often set the insurance trends.
 
But it's still "way too early to tell" whether HSAs will displace traditional managed care plans, Munn says. Large employers "have very complicated programs," he says, and "because of the complexity of their programs it takes a while for them to make changes." Most of the large employers with whom he's spoken are talking about adding HSAs in 2006, not 2005.
 
Still, Krienke expects MCOs will make moves to win back any market share they lose out to HSAs. "A rising tide raises all boats," he says, so increased attention on HSAs should help all health insurance products.