Draft executive order would enhance high-deductible coverage for chronic disease care
While all eyes were on Senate Republicans last week as they rushed to assemble their bill to repeal the Affordable Care Act, a draft version of a White House executive order surfaced that would allow patients enrolled in high-deductible health plans to access care for chronic conditions before they meet their deductible.
Patients enrolled in high-deductible plans linked to tax-exempt health savings accounts must spend hundreds or often thousands of dollars to meet their annual deductible before benefits kick in. Under Internal Revenue Service rules, only preventive services, like mammograms and blood pressure screenings, are covered pre-deductible. Federal rules bar health plans from covering clinically recommended services for people already diagnosed with a chronic illness until the deductible is met.
But the draft executive order would change IRS rules so that healthcare services and drugs used to manage chronic diseases would also be covered pre-deductible. Supporters say expanding the IRS' "safe harbor" would remove a barrier that leads chronically ill patients to put off necessary care for fear of racking up high out-of-pocket costs. It's also likely the change will boost enrollment in high-deductible plans, which studies show can save costs for employers and health plans.
"A lot of times, patients delay care because the deductible is so high. This is a common-sense policy to ensure that individuals in these arrangements get the care they need," said Andrew MacPherson, a principal at lobbying firm Healthsperien and co-director of the Smarter Health Care Coalition, a group of health plans, pharmaceutical companies and employer groups that have been pushing for the change.
In recent years, the number companies offering high-deductible health plans linked to an HSA has ballooned as employers and insurers looked for ways to rein in rising healthcare costs. The plans usually have lower premiums, which experts say makes them attractive to younger, healthier enrollees, but they often come with higher out-of-pocket expenses.
About 29% of workers enrolled in employer-sponsored health coverage were enrolled in high-deductible plan in 2016, up from 25% in 2015, according to employee benefits consultancy Mercer. And 61% of employers offer such plans, while 9% offer it as the only choice.
Health policy experts have touted high-deductible health plans with HSAs as a way to cut down on healthcare spending. These plans, defined as having a deductible of at least $1,300 for single coverage and $2,600 for family coverage, put more of the burden of paying for healthcare on the consumer, who generally must pay for most services at full cost until the deductible is reached.
The idea is that by giving consumers more "skin in the game," they will make smarter decisions when shopping for healthcare and avoid seeking unnecessary care, which will save money for employers, insurers and the healthcare system as a whole. The plans do save costs: a 2016 Mercer survey found that the plans coupled with HSAs cost 22% less on average than coverage in a traditional PPO plan.
But a chief criticism is that people often delay or skimp on necessary care to avoid spending lots of money out of pocket. Experts warn that skipping needed care can lead to worsening health conditions and higher costs down the road. A 2011 RAND Corp. study, for example, found that while healthcare spending did decrease among individuals enrolled in high-deductible plans, those enrollees also skimped on both unnecessary and necessary care.
While high-deductible plans may attract young, healthy enrollees who don't need much care beyond preventive services, the plans don't do much for the chronically ill. The inflexible, one-size-fits-all nature of high-deductible plans is one reason consumers are slow to enroll in them, said Dr. Mark Fendrick, director and co-founder of the University of Michigan Center for Value-Based Insurance Design, who has long advocated for value-based insurance design, or VBID. VBID plans waive or reduce out-of-pocket costs for services and drugs that are considered effective treatments for patients with chronic health conditions such as diabetes.
Fendrick said the change to the IRS rules included in the draft order would make the plans more attractive to a broader range of consumers and boost enrollment in plans that ultimately "lower deductibles, enhance coverage and lower healthcare costs in the aggregate."
The change is also a welcome one for employers, who have been pushing for prescription drugs for chronic conditions to be covered pre-deductible, said Tracy Watts, a senior partner and U.S. health reform leader at Mercer.
"Employers don't want cost to be a barrier for members with chronic conditions, such as diabetes and high blood pressure, to be compliant with their condition management plans," she said.
This isn't the first time supporters of HSA reform have made some headway. Last year, U.S. Reps. Diane Black (R-Tenn.) and Earl Blumenauer (D-Ore.) introduced a bipartisan bill that would allow first-dollar coverage of exams, prescription drugs and other services for people who have chronic conditions and are enrolled in a high-deductible health plan. That bill is set to be reintroduced in the next several weeks, MacPherson said.
As written, the draft executive order contains no details about which drugs and services to manage chronic diseases would be included in the IRS' safe harbor provision. That would be left up to the IRS, MacPherson said.
The Trump administration and congressional Republican leaders, including House Speaker Paul Ryan, have championed HSAs as a way to expand consumer choice in healthcare. A draft of the Senate healthcare bill, the Better Care Reconciliation Act of 2017, released last week would nearly double the amount of money consumers can put into their HSAs tax-free to $6,650 for individuals and $13,300 for families. Currently individuals can contribute up to $3,400 to an HSA, while families can contribute $6,750.
But the bill does nothing to make high-deductible plans work better for those who enroll in them, Fendrick said. "As long as you need a high-deductible health plan to open an HSA, we need to make high-deductible health plans more attractive to a broader population."
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