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Additional HSA Regulatory Updates

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Medical Loss Ratio | Actuarial Value | Guidelines | Affordable Care Act Mandate |
Essential Health Benefits Mandate | Interchange Regulation | Prior Events | Current Regulatory Issues

Medical Loss Ratio (MLR)

HHS Dir. Cohen's Testimony at Energy & Commerce Hearing: Watch a webcast of the hearing. On December 13, 2012, HHS Director Gary Cohen testified at a House Energy & Commerce Subcommittee hearing. During the hearing, Dir. Cohen stated that HSA contributions will be considered first dollar coverage for MLR as long as it is spent in response to a question from Rep. Cassidy (R-LA). This change in MLR calculation will enable HSA-qualified plans to meet the MLR numbers. Read the full exchange between Cassidy and Cohen.

On December 7, 2011, HHS published the final regulation on how it will implement the minimum medical loss ratio (MLR) requirements for insurance plans in the private market.  MLR requirements apply only to "fully insured" insurance policies. The MLR on policies for individuals and small businesses is 80% and for large companies it is 85%.

HSA Council Supported Letter to the President on MLR and AV Regulation's Affect on HSA-Qualified Plans sent by Rep. Lynn Jenkins, October 5, 2012. It urges the President to instruct HHS to change the MLR and AV rules so they do not discriminate against HSA-qualified plans. Read the Thank You Letter from the HSA Council to Rep. Jenkins.

In response to concerns that the HHS MLR regulations would disadvantage HSA-qualified health plans, the HSA Council commissioned a report by leading actuarial firm Milliman. Read the press release: Milliman Study Confirms MLR Threat to HSAs

From Milliman's study, the primary issues of concern for HDHPs are:
-The MLR formula doesn't take into account contributions to HSAs
-HDHPs may not be able to raise rates fast enough to keep up with rising costs.
-HDHPs have less premium dollars to cover their fixed expenses.
-HDHPs have less predictable claims experience that could increase the risk of paying rebates.

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Actuarial Value (AV)

HHS Final Rule on AV, released February 20, 2013.
See page 12847 for language regarding the Snow 2k/4k small group deductible cap. The ACA stated that the small group deductibles would be capped at 2k/4k for individuals and families. When HHS interpreted this part of the ACA, they were concerned that the cap would lead to market disruption and plan cancellations. Therefore, HHS issued this final rule that allows small group deductibles to exceed the statutory cap if the plan would not otherwise be able to qualify as a minimum metal tier on the Exchanges.

ABA's HSA Council Comment Letter to HHS on the Proposed Rule on Essential Benefits and Actuarial Value (AV) Calculator.
Submitted December 26, 2012.

HHS Releases Proposed Rule on Essential Benefits and Actuarial Value (AV) Calculator.
Read the Proposed Rule, released on November 26, 2012. Download the AV Calculator (click on the Actuarial Value Calculator with Continuance Tables). Read the AV Calculator Methodology.

HSA Council Supported Letter to the President on MLR and AV Regulation's Affect on HSA-Qualified Plans sent by Rep. Lynn Jenkins, October 5, 2012. It urges the President to instruct HHS to change the MLR and AV rules so they do not discriminate against HSA-qualified plans. Read the Thank You Letter from the HSA Council to Rep. Jenkins.

IRS Notice 2012-31 on Actuarial Value
Released April 2012. Similar to proposals by HHS, the HSA contribution will be adjusted for purposes of calculating the AV. HSA Council's Comment Letter to IRS on AV. Sent June 2012.

HSA Council's Comment Letter on AV sent to Health and Human Services (HHS).
Submitted April 2, 2012.

HHS Guidance Bulletin on Actuarial Value - Released February 2012. See page 9 for information on HSAs. Guidance states that employer contributions to an HSA may be counted when calculating the Actuarial Value.  HHS also states that they do not intend to include individual HSA contributions in the actuarial value of HSA-qualified health plans purchased in the individual market.  This bulletin is open for public input and the HSA Council will submit a comment.

ConsumersUnion Health Policy Meeting Synopsis - Release January 2012. This brief identifies the key challenges and issues that regulators must address if AV is to be used effectively under PPACA.

American Academy of Actuaries (AAA) - Statement on Actuarial Equivalence, May 2009
See page 4 for information on HSAs. States that "whether to incorporate HSA or other account-based contributions depends on whether contributions are voluntary and/or forfeitable." If the contributions are automatic, AAA recommends they be added to the AV of the health plan. If the contributions are voluntary, AAA recommends discounting the value of the potential contributions.

Congressional Research Service Report - Released April 6, 2009, on "setting and valuing health insurance benefits," provides background information on AV.

Congressional Budget Office (CBO) - Report on Health Insurance Proposals, December 2008
See page 65 for information on HSAs. CBO recommends that the AV "of consumer-directed plans would include the expected value of any contributions that an insurer or employer sponsoring the plan would make to an enrollee's account."

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  • IRS Preventive Care Notice: Impact on HSA-qualified Plans
    The IRS has released Notice 2013-57, which clarifies what can be offered under the ACA as preventative care.
  • HSA Funds Not Excluded from Bankruptcy
    The US Bankruptcy Court for the district of Minnesota-Minneapolis ruled that HSA funds are not excluded from an estate in regards to bankruptcy. This ruling was largely based on the Courts finding that HSAs are trust accounts, not insurance.
  • Guidance on the 1-year Delay in Employer Mandate
    Due to complex reporting requirements, the Obama administration has postponed the requirement that businesses cover their workers under the ACA for one year. The Administration hopes to streamline the requirements during the next year. Therefore there will be no penalties the first year on businesses that don't cover workers.

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U.S. Supreme Court Rules the Affordable Care Act (ACA), including the individual mandate, is constitutional

Link to the Ruling. Five Justices, including Chief Justice Roberts, agreed that the penalty someone must pay if they don't purchase health insurance is a kind of tax that Congress has the authority to impose under its taxing power. Because the individual mandate survives, the Court didn't need to decide what other parts of the statute were constitutional, except for a provision that required states to comply with new eligibility requirements for Medicaid or risk losing their funding. On that question, the Court held that the provision is constitutional as long as states would only lose new funds if they didn't comply with the new requirements, rather than all of their funding.

The real-world effect of this ruling on Health Savings Accounts is certain. Individuals and small businesses will discover that obtaining HSA-qualified health plans - the one thing you must have to open a health savings account - will become increasingly more difficult to do, a negative result for these consumers. Individuals and small businesses have the most difficult time of any market segment finding affordable coverage. The Affordable Care Act's many regulations make obtaining coverage harder for these consumers, not easier. The HSA Council will continue to pursue legislative and regulatory relief, specifically relating to the Actuarial Value and Minimum Loss Ratio regulations, the two features of the law that so negatively affect fully insured HSA-qualified plans.

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Essential Health Benefits Mandate

HSA Council Letter to CMS on Federally-Facilitated Marketplace
In response to a draft letter from CMS to issuers in the Federally-Facilited Marketplace (FFM) that suggests insurers would have to cover 3 primary care office visits under the deductible, the HSA Council explained that this would limit consumer choice and increase costs by eliminating HSA-qualified plans from the FFM.

Read the Report, released October 2011. The Institute of Medicine's (IOM) report about the essential health benefits package mandated under PPACA. IOM recommends that HHS develop a list of essential benefits in line with the costs of a typical small-employer plan, and that called for keeping a balance between coverage and affordability. The IOM report is silent on whether or not HSAs should automatically qualify as minimum coverage.

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HSAs are Exempt from Interchange Regulation

The Federal Reserve Board issued its Final Rule – Regulation II – establishing standards for debit card interchange fees and prohibiting network exclusivity arrangements and routing restrictions. After review, the HSA Council has concluded that HSAs are exempt from the entire scope of Regulation II.

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Prior Events:

  • Why Not HSAs? Senators Barbara Boxer (D-CA) and Richard Burr (R-NC) introduced legislation that would make FSAs available to members of the military.
    Draft: American Health Benefit Exchange Model Act by NAIC, released November 15, 2010.
  • Senator Harry Reid (D-NV) released the Patient Protection and Affordable Care Act, which is the healthcare reform bill that the Senate floor will debate beginning November 30, 2009.
  • As of October 29, 2009, the House released information on their health care reform bill: H.R. 3962, America's Affordable Health Choices Act. It was prepared by the Committees on Ways & Means, Energy & Commerce, and Education & Labor. The following links provide detailed information on and summary of this Bill. Detailed Summary of the Act, Section-by-Section Analysis, Implementation Timeline, ;List of the Major Changes Between this Act and the Original H.R. 3200, List of Provisions that can go into Immediate Effect.
  • Spreadsheet of amendments offered through September 25, 2009 in the Senate Finance Committee.
  • Senate Finance Committee's America's Healthy Future Act of 2009. This was released on September 16, 2009. It has several provisions that affect HSAs. Please see pages 18, 204 and 205.
  • The House Energy and Commerce Committee passed their version of H.R. 3200, without the amendment that would protect HSAs. Please follow this link for additional information and instructions on how to contact your Senators and Representative.
  • Sample letter to send to HSA owners in order to encourage them to take action in order to protect HSAs.
  • Read a July 16, 2009 Letter from the HSA Council and sent to members of the Energy and Commerce Committee in support of an amendment to H.R. 3200 that would protect the interest of the millions of account holders.
  • A Chart by the Heritage Foundation that provides a breakdown of income tax rates by state if Obama's proposed 5.4% surtax is passed and compares those rates to the rates in other developed countries.
  • Read a July 9, 2009 Letter from the fiscally conservative Democratic Blue Dog Coalition to House leadership that outlines the Blue Dogs' concerns regarding health care reform.
  • A Chart released by the US Chamber of Commerce that demonstrates the complex nature of the regulations associated with the Senate HELP Committee's Affordable Health Choices Act.
  • Two legislative proposals, backed by the HSA Council, that would establish a Medicare HSA and a Medicaid/SCHIP HSA.
  • Sample Letter that account administrators can encourage their small business clients to send to members of Congress in response to the proposals from the Senate Finance Committee and House Ways and Means Committee.
  • HSA Council's Response to the Senate Finance Committee's "Proposed Health System Savings and Revenue Options."
  • S. 3626, originally introduced by Senator Orrin Hatch (R-UT) in the 110 Congress. It would improve access to HSAs by expanding their availability and improving upon existing provisions.
  • S. 173 originally introduced by Senators Inhofe (R-OK) and DeMint (R-SC) in the 110 Congress. It would establish Medicare HSAs.

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The HSA Council is dedicated to advancing policies that preserve and expand banks’ ability to offer Health Savings Accounts. Its members include financial institutions, insurers and their technology partners.

Questions? Please contact Renee Galbraith for additional information.