President's Health Care Executive Order on Price Transparency Affects HSAs and FSAs

Accessible prices can spur cost-conscious decisions; order also seeks expanded pre-deductible coverage

Stephen Miller, CEBS By Stephen Miller, CEBS June 26, 2019
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updated July 1, 2019

On June 24, President Donald Trump issued an executive order, Improving Price and Quality Transparency in American Healthcare to Put Patients First, that seeks to promote price and quality transparency among health care providers and to make health savings accounts (HSAs) and flexible spending accounts (FSAs) more attractive. The president, among other things, ordered that:

  • Within 60 days, the Secretary of Health and Human Services (HHS) issue a proposal to require hospitals to publicly post standard charge information, including charges and information based on negotiated rates and for common or shoppable items and services, in an easy-to-understand format to inform patients' decisions and allow them to compare prices across hospitals.
  • Within 90 days, the secretaries of HHS, the Treasury and Labor issue a proposal to require health care providers, health insurance issuers and self-insured group health plans to provide or facilitate access to information that will tell patients about their expected out-of-pocket costs before they receive care.
  • Within 120 days, the Secretary of the Treasury issue guidance to expand the ability of patients to select high-deductible health plans (HDHPs) that can be used alongside an (HSA), and that these plans cover low-cost preventive care, before the deductible, to help maintain the health of people with chronic conditions.
  • Within 180 days, the Secretary of the Treasury issue guidance to increase the amount of funds that can carry over without penalty at the end of the year for flexible spending accounts. Currently the rules allow individuals to carry over a maximum of $500 of the remaining account balance at the end of one plan year to the following plan year.

Promoting Consumerism

"Employers support health care price transparency being made available to consumers on the providers in their health insurance network," said Brian Marcotte, CEO of the National Business Group on Health, which represents large employers. "Hopefully, this could be coupled with quality data and also be made available to physicians to allow consumers to have informed conversations with their providers on their treatment options."

Access to price information should include total cost of care as well as patient out-of-pocket expenses, Marcotte added. "Providing this information prior to receiving care is the optimal scenario but will be a challenge for an industry that is fragmented and struggles to share and integrate data among its stakeholders," he noted.

"So that we can begin to make health care once again affordable, these rules must allow patients to compare all options, including outside their network and cash prices, for all nonemergency care," said Heather Higgins, CEO of Independent Women's Voice, an advocacy group. "This will drive prices down, as it has in every other sphere where markets exist, will make HSAs workable, and will make health care affordable for the many who are now foregoing it," she said.

PwC Health Research Institute's most recent medical cost trend report revealed that the lack of cost transparency by insurers and providers was the biggest barrier among individuals shopping for care.

Expanding Pre-Deductible Coverage

With employers increasing offering HDHPs linked to HSAs, "the rules governing health savings accounts need to be modernized to meet the needs of consumers," said Chatrane Birbal, director of policy engagement at the Society for Human Resource Management (SHRM). The recent executive order is a welcomed development because "employees with chronic conditions who enroll in HSA-qualified plans, particularly those whose employers offer only one plan, face substantial barriers to care if they want to manage their chronic conditions," she noted.

High-Deductible Plans on the Rise

High-deductible health plans are replacing many traditional health plans, SHRM's 2019 Employee Benefits survey shows. This year, 59 percent of employers offered a HDHP linked to a savings/spending account, and 56 percent offered an HSA, according to the survey, which received 2,763 responses among a random sample of SHRM members.


Employers have advocated greater flexibility for HDHPs to pay below the deductible for care that helps people with chronic conditions maintain their health, said Tracy Watts, senior partner at HR consultancy Mercer. "We were excited to see this included in the executive order," she noted.

"A new rule in line with the order could allow first-dollar coverage for conditions that commonly require maintenance drugs or therapies, such as diabetes, hypertension or arthritis, without running afoul of the HSA rules," wrote Scott Behrens, director of government relations at Lockton, a benefits brokerage and consulting firm. "In short, coverage of maintenance drugs and/or therapies for chronic conditions would not prevent individuals enrolled in an otherwise HSA-compatible HDHP from making HSA contributions."

In addition, "Treasury is also directed to propose regulations that expand what can be considered a medical expense and can therefore be paid on a tax-free basis–either by the employer on the employee’s behalf or by the employee using a tax-favored account," Behrens noted. While the order specifically mentions direct primary care arrangements such as concierge medicine, Behrens commented that "the order is vague enough we imagine regulators will consider" allowing individuals to receive reduced or no- cost medical care through a telemedicine provider or an onsite medical clinic before reaching the deductible.

FSA Carryovers

The FSA limit on carrying over unspent funds at the end of the year "creates challenges for individuals who, for one reason or another, cannot accurately forecast the coming year’s medical expenses," wrote Patricia A. Moran, a benefits attorney with law firm Mintz. In 2013, the IRS softened the “use it or lose it” rule to allow a $500 carryover per year, she noted. Directing the Secretary of the Treasury to increase the current $500 carryover allotment "is welcome news to individuals who do not always exhaust their FSA accounts as anticipated." 

Other Viewpoints

SHRM Online has selected the following articles from its archives and other sources to provide a deeper look into health care consumerism and price transparency.

Trump's Order Leaves Details to Agencies

The transparency order could upend the traditional business practices of major players in the health care industry by revealing price negotiations that have typically been kept secret. Insurers and medical providers negotiate discounted prices in private, and neither party wants competitors to know the details of the deals they've struck. The result is a market that can be opaque, with consumers frequently shocked at the prices of their care. President Trump and HHS Secretary Alex Azar said patients could avoid such unpleasant surprises if they could find out the cost of medical services in advance.

But the wording of the order, which delegates the details to regulators, also leaves ample room for modest forms of transparency that might rankle industry officials less.

(New York Times)

Opposition from the Health Care Industry

Push back from various corners of the health care industry came quickly, with hospital and health plan lobbying organizations arguing that this transparency requirement would have the unintended consequence of pushing prices up, rather than down.

"Publicly disclosing competitively negotiated, proprietary rates will reduce competition and push prices higher—not lower—for consumers, patients, and taxpayers," said Matt Eyles, CEO of America's Health Insurance Plans, a trade association. He said it will perpetuate "the old days of the American health care system paying for volume over value. We know that is a formula for higher costs and worse care for everyone."

Some health economists and industry observers without a vested interest expressed a similar view. Larry Levitt, senior vice president for health reform at the Kaiser Family Foundation, tweeted that although the idea of greater price transparency makes sense from the perspective of consumer protection, it doesn't guarantee lower prices.

(NPR)

[SHRM members-only toolkit: Managing Health Care Costs]

Employees Still Can't Find Out How Much Health Providers Charge

Employees say it's still not easy to select health care providers based on how much they charge for their services. "While price transparency alone is not enough to make health care affordable, it does have the potential to help people manage their health spending and save some money," said Will Friedman, president of Public Agenda, a nonprofit public policy organization.

While a growing number of insurers, health-information vendors and state governments have created websites that contain pricing information for doctors, hospitals and clinics, consumers often find the information not easily accessible—and not specific enough to help them select a lower-cost local provider.

(SHRM Online)

Millennials Bring Online Consumer Behaviors to Health Care

Millennial employees are more comfortable with nontraditional ways of engaging with their health care providers and are more likely to apply shopping habits associated with online retail to their health care decision-making, whether in a traditional or a high-deductible health plan, research shows.

Millennials are "more comfortable with consumerism—this is the generation that grew up being able to customize just about everything, from how their phones and laptops are configured to how their coffee is made," said Kim Buckey, vice president of client services at DirectPath, which provides personalized benefits education, enrollment and health care transparency services. Still, "the barrier for them—as for all users of health care—is lack of knowledge of price differences and that they can, indeed, shop for these services just as they shop for those laptops and lattes."

(SHRM Online)

 


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