HSA-Eligible High-Deductible Health Plans

Smarter Deductibles, Better Value: Expanding Coverage in HSA-HDHPs

High-deductible health plans paired with a tax-free health savings account (HSA-HDHP) represent a growing percentage of plans offered on the individual and group market.  HDHPs have defined minimum deductibles and maximum out-of-pocket limits.  As of 2017, 43% of Americans were enrolled in plans with high deductibles, which represents a nearly threefold increase from 2007.  Employers, in particular, are increasingly offering Health Savings Account-eligible HDHPs (HSA-HDHP), which provide tax-free accounts for employers in conjunction with an HDHP, to expand coverage options, lower their health care spending, and promote proactive consumer engagement.  However, in these plans, enrollees with existing conditions are required to pay out-of-pocket for necessary services prior to meeting the plan deductible, resulting in lower utilization of care, and potentially poorer health outcomes and higher costs.

In July 2019, the U.S. Department of Treasury issued Notice 2019-45 in response to Executive Order 13877.  IRS Notice 2019-45 allows HSA-HDHP plans the flexibility to cover specified medications and services used to treat chronic diseases prior to meeting the plan deductible.  A previous guidance from the IRS allowed HSA-eligible HDHPs the ability to provide select preventive care benefits prior to satisfaction of the plan deductible, but services and medications used to treat chronic conditions were excluded.   Primary prevention, while important, is a small component of overall health spending.  By contrast, spending on chronic disease encompasses 78% of total U.S. health care expenditures. 

With these policies in place, all high-deductible plans are now able to adopt a more flexible benefit design offering more protection for certain medical services through a value-based insurance design plan structure.  As the market for HSA-eligible HDHPs grows, it is important that these plans use this flexibility to allow for effective health management for all beneficiaries.  A targeted strategy exploring coverage for certain high-value, clinically-indicated health services prior to meeting the deductible will produce more effective clinically-nuanced designs, without fundamentally altering the original intent and spirit of these plans.  Adoption of voluntary, clinically-nuanced expanded HDHP benefit designs has the potential to mitigate cost-related non-adherence, enhance patient-centered outcomes, allow for lower premiums than most PPOs and HMOs, and substantially reduce aggregate health care expenditures.