Momentum is building to infuse high-deductible health plans with a more flexible benefit design that would not only bolster coverage for certain costly medical services, but also make health savings accounts more palatable.
The hope is that it will garner rare bipartisan support through recently proposed legislation, as well as appeal to brokers and advisers who seek to help their employer clients ease the sting of employee cost-sharing.
The University of Michigan Center for Value-Based Insurance Design (V-BID) believes this approach will produce more effective designs “without fundamentally altering the original intent and spirit of these plans.” Based on modeling research, this new flexibility would be coupled with an actuarial restriction of no more than a 3% increase on the added spending to maintain the fundamental features of an HSA-eligible HDHP.
Preventive and counseling services, as well as immunizations, are covered at no cost to the patient under a pre-deductible safe harbor. But here’s the rub: It excludes any service to treat an existing illness, injury or condition before the annual deductible is met. The larger fear is that cash-strapped consumers will forgo important treatment for chronic conditions, which account for 75% of total U.S. health spending.
That would change under the “Access to Better Care Act of 2016” (H.R. 5652), a bipartisan bill introduced by U.S. Reps Diane Black (R-Tenn.) and Earl Blumenauer (D-Ore.). It would provide HDHPs the flexibility to provide coverage for services that manage chronic disease prior to meeting the plan deductible.
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In essence, employers would be able to implement evidence-based, clinically nuanced plan designs that the V-BID Center says “focus on necessary care, not pre-defined service categories while clearly capping both service inclusion and cost of plans. Appropriate access to necessary care without prohibitive cost-sharing will lead to better health outcomes and more efficient spending of healthcare dollars.”
Mark Fendrick, M.D., co-founder and director of the V-BID, as well as a professor at the University of Michigan, has long sought a voluntarily expansion of the IRS safe harbor beyond preventive services. He co-founded the 23-member Smarter Health Care Coalition with Michael Chernew, Ph.D., a professor of healthcare policy at Harvard Medical School. Both recently met with Reps. Black and Blumenauer to promote the role of V-BID to help lower cost, improve quality and enhance the healthcare consumer experience.
“Until the IRS condones the allowance of chronic disease services in that safe harbor, the high-value health plan (HVHP) attached to a health savings account is hypothetical and cannot be a reality,” Fendrick explains.
What’s particularly appealing about the HVHP concept is it’s one of the few healthcare reform ideas with bipartisan political support, says Fendrick, who also cites approval from key multi-stakeholders that include the U.S. Chamber of Commerce, America’s Health Insurance Plans, Pharmaceutical Research and Manufacturers of America and Families USA.
An HVHP includes a conservative mix of services already found in most fee-for-performance arrangements. Steve Parente, a finance professor at the University of Minnesota, ran the HVHP through his health plan choice model and projected that it would draw roughly 7 million enrollees a year from employer-provided health plans. There’s also tremendous interest in the HVHP as a standardized coverage template in the individual marketplace, Fendrick notes.
While some future enrollees would buy down from more expensive plans, others would buy up from less expensive plans. “Compared to PPOs, the high-value health plan is a much lower cost, and compared to existing high-deductible health plans, it’s much better quality,” he observes. This highly “intuitive” concept represents an opportunity to meet President Trump’s low-cost, high-quality litmus test, he adds.
The V-BID Center has worked with the National Association of Healthcare Underwriters and American Association of Actuaries, as well as many consulting firms, to promote the HVHP as a creative concept that meets the clinical and financial needs of public and private organizations.
Since the only way working Americans can open a health savings account is if it’s tied to an HDHP, Fendrick believes HVHPs could turbo-charge interest in HSAs, whose triple-tax advantage is palatable to all stakeholders. Contributions can be earmarked, grow and withdrawn to pay for healthcare expenditures on a tax-free basis.
By making HDHPs more attractive, it stands to reason that more consumers would be drawn to HSAs, a key component of House Speaker Paul Ryan’s (R-Wis.) recent repeal-and-replacement plan. Since HSAs were introduced in 2004, AHIP estimates that enrollment has soared to 20.2 million last year from just 3.2 million in 2006.
Fendrick says one way to make HSAs better is to soften the sting of HDHPs “because there are people with money who would love to open an HSA but not joining because they have a chronic disease.” He describes this policy tack as “underappreciated.”
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