Consumer-directed health plans have become increasing popular because of their ability to save consumers money. Breaking research published by Health Affairs shows that if consumer-directed health plans increased as a share of employer-sponsored plans from 12.4 percent to 50 percent, it could save $57.1 billion annually in national health expenditures. The report states, “Savings of this magnitude would account for 7 percent of all health care spending for the population with employer-sponsored insurance and 4 percent for the nonelderly population as a whole.”
The study uses two types of consumer-directed plans to comprise the increased market share: half health reimbursement arrangements (HRAs) and half health savings accounts (HSAs). The study shows that if the ever-popular HSAs were to take up the entire 50 percent of market share, savings could reach $73.6 billion, or 9.1 percent of employee health care spending. This is because employees save more money in the high-deductible HSAs than in HRAs. HSAs are funded by both the employer and employee, while HRAs are funded solely by the employer. Thus, any money not spent in a HSA rolls over for the employee to keep, while in an HRA, it is just money the employer did not have to spend.
HSAs prove that having more control over health care decisions goes a long way toward creating savings.
Instead of building on this successful cost-saving model, Obamacare all but obliterates it. Many provisions of the law affect HSAs. For example, the medical loss ratio (MLR), which requires insurers to spend at least 80 percent (85 percent for group plans) of premiums on medical claims or quality improvement, weakens HSAs. Obamacare’s MLR does not take contributions to HSAs into account when determining if a plan meets the 80 percent threshold. One research report concluded, “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.”
Also, Obamacare’s “unreasonable rate increase” provision undercuts HSAs. As Heritage has explained before, “[H]igh-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 [high-deductible health plans] in general if the increase qualifies as an ‘unreasonable rate increase.’”
Obamacare is government-directed health policy that poses a threat to successful consumer-directed health care.