BestWire
BOSTON, MA — Although backed by the U.S. health insurance industry, consumer-driven health plans don’t have the seal of approval under Massachusetts’ health-reform law mandating that all residents buy health insurance.
High-deductible health insurance plans linked to a health savings account or health reimbursement arrangement are not being sold in the Commonwealth Health Insurance Connector, said spokesman Dick Powers, referring to consumer-driven plans. The connector is a quasi-governmental entity overseeing the law’s implementation. It’s also the entity through which individuals and businesses with 50 or fewer employees can buy health insurance on a pretax basis.
High-deductible plans would conflict with the connector’s image of trusted adviser, Powers said. All private, unsubsidized plans offered through the connector have earned the connector’s seal of approval and comply with the health reform law, the connector said.
Consumer-driven plans are being offered outside the connector, Powers said. Health savings accounts are considered “creditable” insurance policies in Massachusetts, he added.
Chris Murphy, a spokesman for Blue Cross Blue Shield of Massachusetts, the state’s largest health insurer, said they are selling high-deductible plans linked to an HSA or HRA outside the connector to the individual and small-group market. Beth Helenius, a spokeswoman for Fallon Community Health Plan, said they’re also selling these plans outside the connector.
Wendy Morphew, a spokeswoman for the Hartford, Conn.-based Aetna Inc. (NYSE: AET), said Aetna currently doesnt offer consumer-directed health plans in Massachusetts. The company sells traditional preferred provider organization plans to large, national customers and to small- and midsize employers. “We continue to support an individual coverage requirement but for now, we are continuing to focus on our consumer-directed products,” she said.
Traditionally, Massachusetts has offered health plans with rich benefits, noted Debra Draper, associate director for the Center for Studying Health System Change, a nonpartisan health policy research group.
In April 2006, then-Gov. Mitt Romney enacted the law. All residents 18 or older must buy coverage by July 1 or face tax penalties.
HSAs, created as part of the 2003 Medicare overhaul, are tax-advantaged savings accounts that may be used to pay for qualified medical expenses, such as for deductibles for high-deductible plans. Contributions to HSAs are made by an employer and/or employee and funds may be rolled over from year to year. Unlike HRAs, which offer similar tax-advantages, HSA funds belong to an individual and are portable.
The consumer-driven concept is that people who have a financial stake in their medical-care decisions will lower their own and their employer’s health-care costs. Critics of this concept, including some Democrats, contend the plans, particularly HSAs, are for the healthy and wealthy, and force people with lower incomes or chronic medical conditions to forgo needed medical care.
The Massachusetts health insurers offering unsubsidized plans, known as Commonwealth Choice plans, through the connector are selling three levels of coverage, along with “young adult” plans for those ages 19-26.
“Some people may be able to afford these plans, but many will be left out in the cold,” said Carmen Balber, a consumer advocate with the California-based Foundation for Taxpayer and Consumer Rights. With one of the cheapest plans, a 56-year-old would pay $5,600 a year, she said. That person would have to pay 35% coinsurance, she said, noting many of the plans rely heavily on coinsurance.
As people are mandated to buy coverage, the only “affordable” option will be the high-deductible plans, which carry high out-of-pocket costs, said Balber. The connector issued regulations regarding minimum creditable coverage that allow people to buy HSA-linked high-deductible plans that dont have to comply with the other state mandates issued for plans within the connecter, she said.
Many aspects of California Gov. Schwarzeneggers plan to cover the uninsured mirror Massachusetts law, Balber said. The foundation is lobbying to require health insurers justify what they charge before any mandate is enacted that people buy insurance, she said.
Attempts to reach America’s Health Insurance Plans were unsuccessful. A recent study by AHIP showed the number of Americans enrolled in high-deductible plans linked to HSAs was 4.5 million, up 43% from a year earlier. Of those buying in the individual market, more than a quarter of HSA buyers were previously uninsured, the study noted.
One of the ways the Massachusetts law is trying to ensure coverage is affordable is through Section 125 “cafeteria” plans, said Brian J. Malynn, senior health compliance specialist in the Boston office of the Segal Co., an employee-benefits consulting firm. The law requires employers with 11 or more employees to offer them.
A cafeteria plan must be, at a minimum, a premium-only plan that allows employees to pay for the cost of coverage on a pretax basis, according to the connector. A high-deductible health plan can be paired with this type of cafeteria plan to enable plan participants to pay their high-deductible plan premiums pre-tax, thus lowering their taxable income and saving federal, state, and FICA, or Federal Insurance Contribution Act taxes, said Malynn.
Eli Stoltzfus, an economist with the Division of National Compensation Survey for the U.S. Bureau of Labor Statistics, said a health reimbursement arrangement is a cafeteria benefit. Health savings accounts aren’t considered such a benefit, but are similar because they allow employees to set aside money on a pretax basis.
The law also requires that employers with 11 or more employees who don’t offer coverage to full-time workers be charged a $295 per-employee fee. It may be better for an employer to take the surcharge; but, they may have a hard time attracting and retaining employees if they’re not offering coverage and other employers are, said Joe Marlowe, national health and productivity leader for Aon Consulting.
Ultimately, both employers and individuals need to make a “rational, economic choice,” said J.D. Piro, head of the health-care legal consulting practice at Hewitt Associates. That choice is whether it’s easier to pay the penalty or buy the insurance, he said. “We’ll just have to see how it plays out.”
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Contact the author Fran Matso Lysiak, Senior Associate Editor, BestWeek, at: [email protected]
