Consumer Driven Healthcare

4th Annual White House HSA Briefing: The Numbers

There were quite a few nuggets of data from the 4th Annual White House HSA Briefing that may provide some guideposts.

The points came in fast and furious - I remember at one point in the meeting wishing I had brought a tape recorder. 

Also, I have done my best to seperate the facts from the prognostications. 

Credits for this information go to:

• Julie Goon, Special Asst. for the President for Economic Policy
• Steve Preston, Small Business Administration
• Tom Reeder, U.S. Dept. of the Treasury
• Congressman Paul Ryan R-WI
• Congressman Chris Cannon, R-UT
• Roy Ramthun, HSA Consulting Services
• Bob Patricelli, Evolution Benefits
• JoAnn Laing, Information Strategies (including predictions for '08)

Coverage

• 4.5 million consumers with an HSA at the end of 2006 (Old news - '07 numbers available soon)
• 27% of those were previously uninsured - a key stat demonstrating that HSAs are a potential solution for the uninsured

Broker and Agent Adoption

• In 2006, <10% of brokers had HSAs in the initial proposal but 50% had them in their final proposal
• In 2007, 26% of brokers had HSAs in the initial proposal and 69% had them in their final proposal

Custodians

• In 2005 there were 48 HSA custodians
• In 2007 there were 2000+ HSA custodians

Buyer Demographics

• 79% of healthcare decisions, including the decision to open an HSA are made by females
• Of minorities, Asians are more likely to open an HSA, and African Americans are less likely

Employer Offerings and Funding

• 24% of employers offered HSAs in 2007
• 40% of employers provided funding for an employee HSA, and 21% funded 50% or more of the year 1 deductible (Treasury Dept.)
• By 2012, employees will be paying 50% of their health insurance
• Employers, including government at the national, state and local levels as well as large public companies like GM, the New York Times and others, are using HSAs as key bargaining tool
• Employers are increasingly altering their plans to attract the healthy and avoid the sick

Assets and Balances

• The average balance of HSAs that are 2 or more years old is $4,300 - the prediction last year for this statistic was $4,400
• Some legacy banks are seeing average balances of $4,900
• Some investment banks ("Savers") have average balances of $7,600
• The current estimate is that in the U.S. you will need $225,000 in retirement to pay for healthcare

Line of Credit

• There was a 4x increase in credit lines on HSAs
• A year ago this was 1 in 80 accounts, today it is 1 in 20 accounts.

Insurance / Payor Impacts

• Expect to see lower premiums on HDHPs because of lower loss claim rates
• It is also predicted that multi-year insurance products will be launched by some carriers

Contrbution Limits

• Contribution limits for 2009 are estimated to increase to $3,000 single / $5,950 family

Compliance

• There are definitely changes coming to the non-descrimination and comparability rules very soon.

4th Annual White House HSA Briefing: Lessons

I had the fortune of meeting with a number of CDH industry leaders and government officials on April 15th to discuss HSAs and the policy-making that goes along with them. 

I will leave the stastistics and detailed notes for another post but make some general and subjective observations here.

Lessons Learned

I hate to dwell too much on H.R. 5719, but there are some lessons to be learned here.

1. There will be little done to further CDH or HSAs for the next several years.  H.R. 5719 is only the start of a political wave, one that moves from right to left.  As we approach the general election in November it is clear that health care conservatives will be trying to demonstrate success with the current vehicles (i.e., CDH, HSAs) while health care liberals will be focusing on what isn't working as well as pushing new agendas.  Assuming a left-ward movement after the election, it is doubtful that CDH will get additional visibility, although there is hope that the structure may stay intact. 
2. Data = Power.  Even though the grenade went off in his hand when Evolution Benefits' CEO Bob Patracelli provided data on non-qualified merchant transactions for HSAs (~5% were clearly not a medical provider, ~12% were from big-box retailers and couldn't be verified without IIAS in place at the time) to a bunch of legislators who used it improperly, made bad and politically-motivated policy out of it, and ultimately gave EB a nice black eye, you have to acknowledge that without this information we aren't going to get anywhere.
3. It's all political.  When almost $60 Billion is claimed as itemized medical expense deductions each year you have to agree that requiring substantiations for HSAs (a tiny fraction of that amount for the foreseeable future) seems ridiculous.
4. The innovators in the industry need to lead it.  Despite everything, it is impressive to me just how much influence there really is on where CDH is headed.  The estimate was that 88% of Health Savings Accounts were represented in the small room we were in.   There were quite a few large organizations (Bank of America, Fiserv, Wells Fargo, Metavante, UHG, etc.) but a number of small ones as well (MinuteClinic, Destination Rx, Lighthouse1, etc.)  However misguided, H.R. 5719 got its energy from data provided by Evolution Benefits, a fairly small debit card company.

Update: H.R. 5719 Passes House, President will Veto

Although the White House has vowed to veto it, the House of Representatives passed H.R. 5719 on Tuesday April 15 requiring HSA custodians to substantiate HSA expenditures and provide reporting on those substantiations to accountholders.  There are a fairly long list of reasons why this proposed change can only be characterized as "political" in nature:

• While some argue that there could be lost tax revenue from unreported non-qualified HSA distributions (which are currently legal but incur a penalty), there were $57.9 Billion in self-reported healthcare expenses exceeding the 7% AGI limit deducted in Schedule A of the 1040 last year.  Any lost tax revenue related to HSA substantiation or reporting would be certainly trivial in comparison.
• Charitable contributions and IRA distributions are currently self-reported.  By this standard all charitable contributions would need to be substantiated by a third party.
• There is plenty of evidence that HSAs are succeeding, and therefore will be difficult to shut down in any change of control in the upcoming elections.

There are plenty more where that came from.  The vote was 238-179, so with or without a veto, expect to see this legislation appear again soon.

Dems Pass Bill Requiring Substantiation of HSA Distributions

This has been predicted for sometime by plenty of folks, including your friendly blogger here, and it still has a long, long journey to the capital city, but the Ways and Means Committee just passed a number of changes to the Internal Revenue Code that included this little gem:

    

SEC. 17. SUBSTANTIATION OF AMOUNTS PAID OR DISTRIBUTED OUT OF HEALTH SAVINGS ACCOUNT.

(a) IN GENERAL.—Paragraph (1) of section 223(f) (relating to amounts used for qualified medical expenses) is amended by inserting ‘‘(and substantiated in a manner similar to the substantiation required for flexible spending arrangements)’’ after ‘‘account beneficiary’’.

(b) REPORTS.—Subsection (h) of section 223 (relating to reports) is amended— (1) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), respectively, (2) by moving the text of subparagraphs (A) and (B) (as so redesignated) and the last sentence 2 ems to the right, (3) by striking ‘‘(h) REPORTS.—The Secretary may require—’’ and inserting the following: ‘‘(h) REPORTS.— ‘‘(1) IN GENERAL.—The Secretary may require—’’, and (4) by adding at the end the following new paragraph: ‘‘(2) RELATING TO SUBSTANTIATION.—Not later than January 15 of each calendar year, the trustee of a health savings account shall make a report regarding such account to the Secretary and the account beneficiary setting forth— ‘‘(A) the name, address, and identifying number of the account beneficiary, and ‘‘(B) the amount paid or distributed out of such account for the preceding calendar year not substantiated in accordance with subsection (f)(1).’’.

(c) EFFECTIVE DATE.—The amendments made by this section shall apply with respect to amounts paid or distributed out of health savings accounts UPDATED: after December 31, 2010.

Hit the jump and go to page 21 line 20 for the actual document and language [House Resolution 5719 via Ways and Means Committee].

How Do They Compare?

ReformPlans.com (The World Health Care Congress' Forum) has a nicely summarized comparison of the key differences between the candidates, interest groups, state plans, and even proposals in play in other countries.  Hit the Jump Here: [ReformPlans.com Comparison Grid]

The New Killer: Hospitals!

This will blow your mind.  All along we thought it was the lack of health insurance that was killing Americans. 

It turns out you are five times more likely to die from an infectious disease contracted in the hospital (even for a routine procedure) than you are from being uninsured.  More than AIDS, breast cancer and auto accidents combined. 

If that's not motivation to stay healthy, I don't know what is.

From [Forbes] via [National Center for Policy Analysis].