Coronavirus Outbreak: The Case for Health Plan Flexibility

Policy

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The American people should have as much health-care freedom as possible, especially during this pandemic.

When the Health Savings Account law passed in 2003, the release of the first iPhone was still four years away. Now, imagine your iPhone, Samsung, or Android phone was prohibited by law to have any upgrades. How well do you think your phone would work? How well could it adapt if a vicious computer virus began to infect phones across the world?

Health Savings Accounts (HSAs) are facing a similar situation today. Since their inception, Congress has barely updated them to keep up with the times. As a result, Americans must still abide by an out-of-date mandate that only allows them to qualify for an HSA if it is paired with a High Deductible Health Plan (HDHP).

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We should permanently abolish this mandate.

While new health-care delivery systems have come along and new health plan designs have evolved for two decades, current law doesn’t allow HSAs to benefit from most of these new designs due to the original HDHP requirement. For example, the Internal Revenue Service (IRS) had to rush to create an emergency notice to allow COVID-19 testing and treatment to be a free benefit for the millions of Americans with an HSA-eligible HDHP. In its notice, the IRS explained that in this instance, HDHPs can pay for testing and treatment related to COVID-19 without risking their status as an HDHP. The IRS also clarified that this means “that an individual with an HDHP that covers these costs may continue to contribute to a health savings account (HSA).”

Without this emergency notice, Americans whose HDHP agreed to cover COVID-19 testing and treatment would have completely lost their ability to contribute to an HSA.

Because of the HDHP mandate, people can’t obtain medical services covered under their plan if they haven’t yet met their deductible. If they haven’t met their deductible, folks are pushed into a situation wherein they dip into their HSA or out- of-pocket savings to cover the cost. If an individual were simply able to use an HSA with any health-care plan, not just a HDHP, they could use their health savings to pay for care. Importantly, decoupling HSAs from HDHP’s would make it more likely that folks would take the opportunity to save for health-care tax-free (because they’d have greater access to HSAs), and experience some of the health-care freedom that doesn’t exist in our current system.

That is why we recently introduced the Pandemic Health Care Access Act. This legislation temporarily decouples HSAs from HDHPs, allowing more Americans to hold an HSA to save for health-care expenses during the coronavirus pandemic. Specifically, our legislation would allow any American on any health-care plan to qualify for an HSA, including seniors on Medicare who often pay thousands of dollars in out-of-pocket costs (even with Medigap plans).

Decoupling HSAs from HDHPs not only helps seniors, but also veterans on TRICARE and those who receive VA benefits, who would be allowed to have an HSA. Individuals with a wide range of plans and models, including health-care sharing ministries, direct medical-care service arrangements, and other innovative health-care options could also hold and contribute to an HSA. In short, decoupling gives more Americans health-care flexibility when they need it most.

In addition, given the beating the stock market has taken as a result of the pandemic, HSAs are a perfect way to help Americans save for health-care costs before or during retirement.

The American people should have as much health-care freedom as possible, especially during this pandemic. The rules surrounding HSAs need to be relaxed and reformed. Though this bill takes one necessary step in temporarily decoupling HSAs from HDHPs, we must also consider making the policy permanent. It’s time for Congress to modernize by making HSAs widely available for all Americans.

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