BEYOND THE NUMBERS
With the Supreme Court decision in King v. Burwell looming, another Republican legislative proposal seeks to use that decision to undo most of health reform, likely leaving millions of low- and moderate-income enrollees in federal marketplaces uninsured or substantially underinsured.
The Patient Freedom Act, which Senate Health, Education, Labor and Pensions Committee member Bill Cassidy proposed this week, wouldn’t extend subsidies for residents of states with federal marketplaces (as opposed to state-based marketplaces) — in case the Court eliminates those subsidies. Instead, the bill creates a way for federal marketplace states to continue receiving subsidy funding. But here’s the catch: states could only use that funding to contribute to residents’ Health Savings Accounts (HSAs), not to continue subsidies for marketplace coverage.
The bill doesn’t clearly delineate how the funding to states and individuals would work. But it would likely greatly diminish assistance for low-income people who need subsidies to afford coverage and medical care. That’s because it would spread fewer federal subsidy dollars among a much larger group of people, apparently including individuals with incomes up to $190,000 per year and people already enrolled in affordable employer-sponsored health insurance — leaving fewer funds for lower-income people and the uninsured and, thus, likely leaving them unable to afford their premiums. (A state apparently could — but wouldn’t have to — set HSA deposit amounts at current subsidy levels for existing subsidy-eligible marketplace enrollees.) An individual’s HSA deposit amount would have to go for buying coverage and paying any out-of-pocket medical costs.
Those out-of-pocket costs could be quite high. Health insurance plans would no longer have to cover a comprehensive array of health services or limit total out-of-pocket costs for in-network covered services, as they do under health reform. Moreover, in a state taking the HSA option, the bill would eliminate health reform’s market reforms and consumer protections, such as that plans must cover preventive care at no cost to enrollees and that insurers cannot consider individuals’ health status, gender, and other characteristics when setting premiums. States would have to ensure that a basic health plan is available for the new HSAs, but such plans would need to cover only generic prescription drugs for a limited number of conditions, provide access to an “adequate” provider network, and cover federally recommended childhood vaccines without cost-sharing.
Moreover, in states taking the HSA option, the bill would scrap health reform’s requirements that most individuals must have coverage or pay a penalty and that large employers offer affordable, adequate coverage to their workers or pay a penalty.
Finally, the Cassidy bill would dramatically expand tax-sheltering opportunities for high-income taxpayers with HSAs. HSAs are currently available only to people enrolled in high-deductible plans. Under the bill, anyone who has health coverage and isn’t eligible for Medicare could have an HSA. We’ll have more to say about this substantial, and potentially costly, tax break soon.