There is a draft executive order (EO) floating around Washington that, if signed by President Trump, would allow HSA-eligible health plans to provide first-dollar coverage for the chronically ill. Yes, that’s right – expenses for services to manage chronic illnesses would not be subject to the deductible.
Such a change would go a long way toward encouraging more employers to offer these plans and would boost enrollment. Since the EO is only a draft at this point, the timing is uncertain. Details on the drugs and services that would qualify under this safe harbor provision would come from the IRS, after the EO is signed.
This possible change combined with the expansion of HSA contributions included in both the AHCA and the BCRA would be popular with plan sponsors and employees.
- According to Mercer survey data, 53% of large employers (500+ employees) and 21% of small employers offer HSA-eligible plans today. (Offer rates are lower among small employers because they typically offer only one plan and HSA-eligible plans are generally offered as a choice.) This change might help accelerate offerings.
- Enrollment in HDHP plans, currently at 24% of all covered employees, would increase because these features make HDHP plans, which cost less than other medical plans, more attractive.
- Coverage for chronic conditions helps addresses concern that people don’t get care they need with HDHP.
- Chronic condition management is a good investment – it can prevent the need for more costly care and support productivity.
So the big question – will first-dollar coverage for chronically ill plan members drive up the cost of the plan?
Well, it depends – on the plan design, selection, and enrollment. On the one hand, it is likely some of those with chronic illnesses will hit their out of pocket maximum in any event and have 100% coverage for most of their care. So yes, HSA-eligible plan premiums could increase, but there would be the offsetting value of the tax-favored health savings account for employees and of increased enrollment in a lower-cost plan for the employer. Overall, this provision looks as if it could be a net saver.