Might We See Some HSA Opportunity in an Upcoming Lame-Duck Session?

I’ve spent a lot of time this week talking to Capitol Hill staffers about potential items to add to lame-duck legislation after the election.

One of the benefits emerging from the pandemic is near universal comfort with the technology to stage virtual meetings. It's an effective way for groups to conduct short meetings with elected officials, their legislative aides, and committee staff members to discuss public policy. I'm participating in about a dozen such meetings this week and next to discuss some small changes in the rules around Health Savings Account eligibility. These small changes could have an enormous impact on hard-working American families who find it increasingly difficult to make ends meet in the current economic climate.

Members of Congress and their aides are introducing and debating legislation for the next several weeks, after which both chambers will adjourn for the summer recess so that members can escape another oppressive DC August and return home to campaign. They'll return in September but will accomplish little prior to the mid-term elections. Then, the last opportunity to pass legislation will be during the lame-duck session at the end of 2022.

Lame Duck

The period on Capitol Hill between biennial elections in early November and the convening of a new Congress two months later is called the lame-duck session. If one party retains control of both chambers of Congress and the presidency, as is the case currently, this is typically a quiet period. And for generations, wholesale change in control was rare.

In recent decades, the increasing tendency has been for a shift of control of at least one of those three centers of power. When one party gains one or two – but not all three – of those institutions, the prospects of a productive lame-duck session increase.

Why? Simple. The party losing control of a chamber or the presidency wants one last bite of the apple, knowing that the next two years will be a difficult time to advance its agenda. The incoming party of control is motivated because it has additional leverage, though without the ability to push through partisan legislation on its own.

In 2016, for example, Donald Trump, a Republican, was elected president. Republicans retained control of both the House and Senate, but by narrower margins than they held prior to the election. As a going-away present to Vice President Joe Biden, who’d been a member of the Senate for 36 years before what seemed like the end of his public career, Congress passed the 21st Century Cures Act. This legislation appropriated additional government spending on finding cures for cancer, the disease that had taken the vice president’s son’s life. The legislation included provisions that had been pushed by one party or the other, including reforms at the Federal Drug Administration, changes to Medicare, and the introduction of Qualified Small-Employer Health Reimbursement Arrangements, or QSEHRAs.

The Current Environment

In this year’s mid-term election, Republicans are widely expected to regain control of the House of Representatives. All 435 voting members are on the ballot, and Democrats hold a narrow 220-211 advantage (with four vacancies). Polls show strong Republican support. Democrats control a 50-50 split Senate, as the president of the Senate, Vice President Kamala Harris, breaks ties with her 101st vote. Because Republicans must defend more seats and have more retiring members in vulnerable states, the projected Red Wave of the House may not extend to the Senate.

In the likely event that Republicans recapture the House, we’ll have a period of split government. Neither party will be able to pass partisan tax and spending legislation, as Democrats did in this Congress and Republicans did during the first two years of the Trump Administration. Retiring or defeated members who want to leave a legacy will be keen to deal during the lame-duck session.

Health Savings Account Priorities

I work with several national industry trade organizations asking members of Congress and their staffs to add some important corrections to the current Health Savings Account rules. In roughly descending order of impact, these “asks” are:

Social Security recipients and Health Savings Accounts. A growing number of seniors (age 65+) remain actively employed because they love their work, they don’t have adequate retirement savings, or they have been coaxed out of retirement to assume the many unfilled positions in the economy. Working seniors who collect Social Security benefits – mostly lower income workers who need that payment to make ends meet – are automatically enrolled in Medicare Part A at age 65. Part A (which covers inpatient care) enrollment is disqualifying, even though the deductible of $1,556 per hospitalization is higher than the statutory minimum annual deductible of $1,400 for self-only coverage on an HSA-qualified plan. These working seniors can't receive an employer Health Savings Account contribution or make pre-tax payroll deductions to reduce their taxable income, pay current bills with tax-free dollars, or save for retirement medical expenses. In contrast, their fellow working seniors with higher incomes have deferred Social Security (thereby building a higher future monthly benefit) and can make and receive contributions to a Health Savings Account. This process looks like discrimination based on age and low income.

The Ask: Disregard Part A coverage when determining whether working seniors are eligible to make or receive contributions to a Health Savings Account. If they meet other eligibility requirements, allow them to fund an account.

Small-Company Employees and Health Savings Accounts. Many insurers require working seniors at companies with fewer than 20 employees to enroll in Medicare Part A and Part B as a condition of remaining covered on the group health plan. That’s because providers send claims to Medicare first, then to the private insurer to pay the balance of the richer benefit of the two plans. This requirement disqualifies these seniors from making or receiving contribution to their Health Savings Account.

The Ask: Allow working seniors at small companies who are otherwise HSA-eligible and forced by their insurer to enroll in Medicare to remain eligible to fund their Health Savings Accounts and accept employer contributions, as their younger workers (and contemporaries working at larger companies) can.

Veterans and Health Savings Accounts. Retired military personnel who are eligible often retain the TRICARE plan that covered them during active service. It's an inexpensive back-up insurance. But TRICARE doesn't offer an HSA-qualified option, so these veterans can't make or receive Health Savings Account contributions.

Many veterans use the Veterans Health Administration (VA) system for care. But unless the care is preventive or service-related, they're disqualified from making or receiving Health Savings Account contributions for three months.

The Ask: Give those who served our country the opportunity to receive the coverage that they've earned and also open and fund a Health Savings Account of they meet all other eligibility requirements.

Direct-Primary Care. A growing number of doctors are turning their backs on the current model and instead refusing to deal with insurance, charging patients a monthly all-inclusive fee for primary care, and providing care via in-person and virtual visits, texts, e-mails, and holistic care. Because patients pay a monthly membership fee rather than for each service rendered, this arrangement is defined as coverage (with the fee considered a premium and all services received viewed as care below the deductible).

The Ask: Allow patients to maintain their health and receive care for simple ailments and chronic conditions via this arrangement without disqualifying them from opening and funding a Health Savings Account.

Indian Health Services. Native Americans who are otherwise HSA-eligible and receive any non-preventive care through Indian Health Services (the only care available on a reservation) lose their eligibility to fund a Health Savings Account for three months.

The Ask: Don't punish Native Americans who receive care at the only easily accessible clinic by disqualifying them from funding a Health Savings Account for three months.

The Result

Each of these measures would expand the pool of Americans who can open and fund a Health Savings Account via their own pre-tax or tax-deductible contributions and employer tax-free deposits as well. More Americans would be better able to manage the rising cost of care, particularly during a time of high inflation when family budgets are being squeezed by higher prices for food, petroleum products, utilities, home repairs and everything else.

The Bottom Line

These asks aren't new. But the landscape is different this time. Families are more squeezed financially than usual. Patients' out-of-pocket responsibility is climbing. Politicians should be looking for ways to help hard-working families cope with rising costs at little cost to the Treasury (the loss of revenue from forgone tax revenue is far lower than direct subsidies). Many Americans - poor and wealthy, old and young, ill and healthy - will benefit from these simple changes in the law.

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