The state House Finance Committee has approved a bill to exempt high-deductible health plans eligible for health savings accounts from a mandate for early intervention services, bringing the tax-advantaged accounts closer to Rhode Islanders’ reach.
Rhode Island is the only state where HSAs aren’t available now, because the early intervention mandate, passed last summer, went into effect too late to be covered by a U.S. Treasury grandfather provision that exempted existing state mandates from HSA rules.
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State officials only became aware of the problem when UnitedHealthcare of New England filed an application with the Department of Business Regulation to offer an HSA-eligible product, and the DBR replied that it would violate the new early intervention law.
Gov. Donald L. Carcieri and legislators on both sides of the aisle vowed to correct the problem quickly, and filed bills to that effect.
Carcieri proposed to exempt high-deductible insurance plans from state coverage mandates, current and future, as long as the plans are designed to qualify for a state or federal “tax preference.”
State Rep. Eileen S. Naughton (D-Warwick) and Sen. Marc Cote (D-Woonsocket) took a more narrow approach, seeking to exempt HSA-eligible health plans from the early intervention mandate in particular – the most immediate obstacle to HSA implementation.
At first, legislative leaders and United officials alike described the Democrats’ bills as short-term, stopgap measures, enough to make HSAs available this year but not enough to ensure their availability after Dec. 31, when the Treasury’s grandfather provision expires.
At that point, several state health plan mandates across the United States are expected to clash with the Treasury’s definition of what an HSA-eligible plan may cover. With more than three dozen mandates on its own books, Rhode Island was presumed to face the same issue if a longer-term solution such as Carcieri’s proposal wasn’t approved.
Now it turns out that’s not the case. What makes the early intervention mandate conflict with Treasury rules is that it requires “first dollar” coverage – meaning without a deductible – for a service that doesn’t qualify as “preventive care” under HSA standards. But no other Rhode Island coverage mandate seems to have that problem, United lobbyist R. Kelly Sheridan said.
United spokeswoman Debora M. Spano said her company, which is prepared to launch an HSA-eligible product as soon as it’s allowed, still supports Carcieri’s bill as a long-term solution. “It has language in it to basically affect the future, so we won’t have something come down the line in, say, 2010 that would affect this,” Spano said.
Absent any new first-dollar coverage mandates, however, passage of the Naughton/Cote measure would be enough to allow HSAs to be offered in Rhode Island indefinitely, all now seem to agree.
For state Rep. Steven M. Costantino (D-Providence), the House Finance chairman and a co-sponsor of Naughton’s bill, that raised a new set of concerns.
Employers and benefits experts like HSAs and the high-deductible plans that go with them because they’re less expensive than traditional coverage, so they make it possible to keep coverage where it might otherwise be dropped, or offer it where it’s now unaffordable.
HSAs are also a key part of the “consumer-driven health care” movement, which argues that if workers are smarter, more responsible health care consumers – do their homework and spend their dollars wisely – employers and workers alike will benefit.
HSAs were too new last year for most companies to offer them, but a survey by Mercer Human Resource Consulting found that as a class, so-called “consumer-driven health plans” cost an average of about 7 percent less in 2004 than HMO plans, and almost 10 percent less than PPO plans – the most popular kind of coverage in Rhode Island now.
But critics of consumer-driven plans say the high deductibles just shift costs to workers, exposing them to huge medical bills they can’t pay. Hospitals and other health care providers are also leery because, as deductibles have risen, their uncollectible debts have spiked.
At a House Finance hearing and in an interview, Costantino also raised another concern frequently voiced by HSA critics: that if such inexpensive plans are available, employers will stop offering more comprehensive health coverage.
“I think we’re all in favor of more people having insurance, and people who are now insured who are working in small businesses should have the opportunity to have insurance,” Costantino said. “But what I’d also be concerned about is people becoming less insured.”
Thus Costantino made two amendments to Naughton’s bill before the committee could vote on it: one to “sunset” the early intervention exemption after five years – so legislators are forced to revisit the matter – and another to require a report by the health insurance commissioner, within three years of passage, about the law’s impact on the state’s health insurance market.
Commissioner Christopher F. Koller did not testify on the original or amended bill, but he spoke informally with Costantino, and told the PBN the “general trajectory” of the measure is one the Carcieri administration approves of.
Blue Cross & Blue Shield of Rhode Island, which plans to launch an HSA-eligible product Oct. 1 if the law passes, has also backed the amended bill.
