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  • Side Effects: If You Like Your HSA, Get Ready to Lose It

    Everyone remembers President Obama’s repeated promise, “If you like your health care plan, you’ll be able to keep your health care plan, period.” Unfortunately, Obamacare breaks this promise many times over. One way is through its medical loss ratio (MLR) requirement and the impact it will have on consumer-driven, high-deductible health plans (HDHP) that include health savings accounts (HSA) in individual and small group markets, a new report from Milliman shows.

    The MLR requires that insurance companies spend 80 percent of revenue from premiums on medical claims or anything that improves the quality of health care. The additional 20 percent is for administrative and other non-medically related expenses. If the minimum of 80 percent is not met, the insurer must issue a rebate to the consumer.

    Obamacare will damage these health plans, even though they’re becoming increasingly popular. According to America’s Health Insurance Plans, “The number of people with HSA/HDHP coverage rose to 11.4 million in January 2011.”

    High-deductible plans are typically combined with HSAs, which are used to cover costs before a plan’s deductible is reached. These plans are increasingly popular with consumers, but their structure makes them incompatible with the new MLR rules, since the formula does not take into account contributions to HSAs. The Milliman report explains, “For high-deductible and HSA plans to be viable, both from a consumer and carrier perspective under [Obamacare], an adjustment to the MLR formula for the impact of HSAs may be necessary.” Without recognizing the HSA contribution, HDHPs won’t meet the MLR rules.

    Another reason it’s hard for HDHPs with HSAs to meet the MLR requirement is their lower premiums. A reduced revenue from premiums means plans have less to pay for what are generally fixed expenses, making it difficult to keep its non-claim expenses below 20 percent. The HSA Council explains, “For example, $400 of fixed expenses represents 40 percent of a $1,000 premium, but only 20 percent of a $2,000 premium and just 8 percent of a $5,000 premium.”

    Another problem is that HDHPs result in fewer claims per year, but those claims tend to be higher-cost. According to the Milliman study, “This lower-frequency/higher-average-cost scenario creates more variability in experience. The variability could result in high claims in one year and low claims in another. This increases the likelihood in any given year that high-deductible plans will fall below the 80% MLR threshold and be required to pay rebates.”

    Finally, high-deductible plans require larger annual rate increases, because medical inflation has a greater impact on claim levels with higher-deductible plans. The larger rate increase might disqualify HDHPs in general if the increase qualifies as an “unreasonable rate increase,” which is subject to the discretion of the Secretary of Health and Human Services under Obamacare.

    The obstacles Obamacare creates for consumer-driven health plans could lead to their extinction, even though they are an affordable form of coverage that is gaining in popularity.

    Posted in Featured, Obamacare [slideshow_deploy]

    5 Responses to Side Effects: If You Like Your HSA, Get Ready to Lose It

    1. Lloyd Scallan says:

      When are we going to understand Obama will not speak the truth. He lies, distorts, bribes, intimidates, threatens and uses the media to hide the facts that allows him to get his ideology passed the American people.

    2. Steve Adams says:

      All congressman and senators should be asked to repel Obama Care

    3. Jillian Davis says:

      Since when did we oppose getting rid of HDHP's? They're not affordable nor sustainable for families. I need a fixed premium that I can afford with a reasonable copay. I also cant afford to spend $207.00 per month for 1 childs medication, that's just 1 out of 4 meds between each family member. This is because I have a $5000 deductible and a self funded HRA AND I pay a premium. I cannot understand how anyone who read the above article and perceived it as a bad thing. Its a great thing for everyday people. Finally a law in favor of the People and not corporations. 1.4 billion dollars is how much United has in net worth. Its doubled between 2009-2011. This is due to NOT having to pay claims because everyone has sucvh an enormous deductible that they take in revenue but very rarely does any go towards paying claims. We (my husband and I are UHC employees, we know what is going on and our employer is not shy about discussing their revenue income. By the way, this network has been engineered by Americas wealthiest people disguised as a grassroots org. The only thing wrong with Obamacare is it doesnt offer a public option. Id rather pay an additional 2.5& of income taxes than what I pay toward private healthcare costs which is a lot more than 2.5% of income tax. Please go back and re-read the article, this is actually a good thing? What? You want a plan with a deductible so high your ins. co. never pays out a dime on your behalf. You like spending $116.00 at the drs. office despite having an "insurance plan"?

      • Russell says:

        If you have high healthcare costs, then I can see why you don't want a HDHP. For those with low costs, a HDHP plan makes a lot of sense. Over 11million people want their HDHP and the number is growing. Just because you don't want it doesn't mean that it should be yanked away from everyone else.

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