As originally posted on Armada Global’s website:


It’s been a busy year for health care in Washington. While the conversation has largely focused on reform of the Affordable Care Act’s (ACA’s) individual marketplaces and Medicaid financing structure, there are a number of other substantial health care policy debates underway. Notably, this year has seen momentum on issues of importance to employers: (1) amendments to Health Savings Account rules; (2) repeal or a further delay of the ACA’s so-called Cadillac tax; and (3) an expansion in access to Association Health Plans. All of these issues will continue to gain steam in the coming months and are worth watching. In this blog post, we’ll focus on the first two issues and cover expansion in access to Association Health Plans next week in Part II.

Health Savings Accounts

More than 20 million Americans currently have an HSA, a figure that grew by 20 percent in 2016 and by 13 percent in 2015. Employer demand for, and consumer uptake of HSA offerings are likely to continue to increase, and many in Congress are strongly supportive of expanding access to HSAs as a tool to give consumers more control over their healthcare choices and spending. A number of bills have been proposed this year that seek to tweak the rules surround HSAs.

Each of the ACA repeal and replacement bills included HSA provisions. These provisions largely sought to undo some of the changes that the ACA made to HSA policy, like increasing the allowable contribution threshold, allowing HSA savings to be used for OTC purchases, and enabling catch-up payments.

Beyond those policies, many in Congress seek to go further to make HSAs easier to use and to ensure that HSA policies accommodate medical advances and benefit trends. A new bipartisan and bicameral bill, to be released next month, is expected to include several reforms, including:

  • Greater flexibility to offer first-dollar coverage of health services at an onsite employee clinic and retail health clinic;
  • Permitting employers to offer direct primary care alongside an HSA;
  • Clarification that “excepted benefits,” which are non-major medical benefits like telehealth and second opinion services, do not jeopardize a beneficiary’s eligibility to contribute to an HSA;
  • Correcting the definition of “dependents” to include adult children, domestic partners, and non-traditional dependents;
  • Greater flexibility to offer first-dollar coverage of services and medications for chronic disease prevention;
  • Permitting the use of HSA dollars toward wellness benefits, including exercise and other expenses associated with the sole purpose of participating in physical activity;

These reforms will better align HSAs with current employee benefit policies, while giving consumers the chance to drive their own health care. It remains to be seen if these changes can be attached to a moving legislative vehicle that will be introduced and voted on before the end of the year. There is almost universal support for the bill among employer groups in Washington and they will be pushing strongly for it.

Cadillac Tax

In order to pay for tax credits and Medicaid expansion, the ACA applied a 40 percent excise tax on high-cost employer-sponsored health plans whose value exceeds $10,200 for individuals or $27,500 for families. The tax, infamously known as the Cadillac tax for its impact on high-cost coverage, has been delayed until 2020.

Earlier this year, Senators Heller (R-NV), Heinrich (D-NM) and 17 bipartisan cosponsors introduced the Middle Class Health Benefits Tax Repeal Act of 2017 (S. 58), which would repeal the tax. Additionally, Representatives Kelly (R-PA), Courtney (D-CT) and 170 bipartisan cosponsors introduced companion legislation the House. While these bills enjoy strong bipartisan and bicameral support, neither of the bills have moved forward.

Despite strong condemnation of the tax across the political spectrum, legislative attempts to eliminate or delay the tax have been affected by the high cost associated with ending the tax. A 2015 report from the Congressional Budget Office (CBO) estimated that repealing the tax would cost the federal government $87 billion over a ten-year period.

A broad-based coalition comprised of dozens of public and private sector employer organizations, unions, healthcare companies and others have continued to advocate for repealing in one of the big end-of-year legislative packages Congress will develop. At this point, at a minimum, another delay is a likely scenario.

Stay tuned for Part 2 of this series. Be sure not to miss it by subscribing at the top right of the post!