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HSA Question About PPACA


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Last week I was asked an excellent question by a friend of mine from high school.  The question and answer, in my opinion, are perfect for our blog on insurance tips.  Below you may find both the question and my opinion.

Question

We have an HSA through Anthem here in Indiana.  Is the Obamacare going to allow that?  What should we be doing now to prepare?

 My Opinion

Technically, the HSA (Health Spending Account) is supposed to be combined with a HDHP (High Deductible Health Plan).  Right now, the HSA is regulated by the Federal Government through the IRS.  The HDHP is regulated, for now, through Indiana.  As I read the law, the HSA, as we know it, will disappear.  There is still a chance that it will morph into a different form.

Your current HSA + HDHP is “grandfathered” and will still be allowed if you had it prior to March 23.  If you got it after March 23 it is a fine plan, provided you are putting money into the HSA while you are paying premiums on the HDHP, but the rules change in the future.  It will last until 2014 when the new State Exchanges go into effect.  At that time it will disappear. 

If you already have a HSA + HDHP my advice is to continue to fund the HSA but only to the level of your health insurance’s “Maximum Out Of Pocket”.  If you don’t put money into the HSA portion of the plan, get away from it.  Unless you know exactly what you are doing, HSA + HDHP plans can be tricky and potentially expensive and problematic, especially for families with juveniles.

According to section 9004 of the Patient’s Protection and Affordable Care Act the IRS will increase the tax consequences of money used for non-approved medical expenses in 2014. The tax penalty for using money out of the account for a purpose other than one approved by HHS will increase from 10% to 20%. 

Until 2014 they are a tremendous asset, provided both parts of the plan are fully funded.  Unfortunately, the HSA can become a potential liability in the future if you have too much money in it.

With the number of angry Americans and constitutional challenges, it is highly likely that the president and congress elected in 2012 will revise the PPACA in 2013 but we cannot count on that.   I have no choice but to base my opinion on the current law of the land.

The Insurance Barn

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2 responses to “HSA Question About PPACA”

  1. The Insurance Barn Avatar
    The Insurance Barn

    Technically you got a correct understanding. There will no longer be an option to get new HDHP plans and the ones issued after March 23, 2010 will have to be exchanged for one of the new government approved plans under Section 1302 of the law. If your plan was effective prior to March 23, 2010 and you elect to keep it, it is grandfathered. You will still have the option to have a HDHP + HSA plan as long as you do not make major changes to it. The PPACA, just like Medicare Advantage, did not specifically make them illegal but changed the laws so much that they will be obsolete and unmarketable by 2014. HSAs may morph into supplements to the new government plans that do not cover 100% of medical costs for “essential benefits.” Since those plans will not be defined until 2013 there is no way to know how they will look. The odds are there will be a new Secretary of HHS at that time, if President Obama is not re-elected. If that Secretary patterns the new plans after Medicare, there is a potential problem. Yes, Medicare has no limits on what it pays but it has no out-of-pocket limits. Private insurance generally does. A person with $ 100,000 in medical bills for an accident could find themselves with $ 10,000 of personal liability even with the Platinum plan unless government puts an Out-Of-Pocket cap on the plans. We will not know for certain until 2013. If there is no cap, the HSA could play the same role as the HDHP does today except that it would be even more vital.

    Nobody knows exactly what is going to happen in the future. The U.S. Supreme Court could declare the entire PPACA null and void next summer or it could allow it to proceed. The law only gives and outline of the intent of the 111th congress. It delegates the power to make law, in the form of “rules,” to the Secretary of Health and Human Services. The current Secretary is free to make all the “rules” she wants but her successor is free to counter-mand her rules and replace them as he/she seems fit. HSA is likely to survive but in a different form. HDHP is likely to go the way of the dinosaur.

    Vince, I hope this answers your concerns.

  2. vince phillips Avatar
    vince phillips

    Please advise. Did I read your article to say that HDHPs/HSAs will be out of business after 2014? I know that life time caps are gone and annual limits will be but your article is the first I’ve seen that seems to suggest the actual demise of HDHP.

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