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How Decoupling HSAs From High-Deductible Health Plans Could Reshape Care

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Health care reform collage (Images: Shutterstock; ALM-Chris Nicholls).

The COVID-19 pandemic is reshaping our notions of work, health, education, racial disparity and personal freedoms — all issues long overdue for change.

The most lasting and important impact we might see when we’re on the other side of the pandemic could include a major reset of our employer-sponsored health insurance system.

And the tip of the spear in that transformation is something that you may not have heard before but that has gained incredible momentum in Washington, D.C. over the spring and summer: decoupling.

In simplest terms, “decoupling” means removing the requirement to have a high-deductible health plan (HDHP) as a prerequisite for having a health savings account (HSA).

A growing number of policy experts and elected officials believe that HSAs should be decoupled from HDHPs and available to any American with health insurance, regardless of what kind it is or who provides it.

The reasons for decoupling are as simple as the solution itself: Over the two decades since health savings accounts were created, the economic conditions of the U.S. health care system have dramatically worsened.

HSAs were initially meant to help individuals and employers save money on premium costs while encouraging people to adopt more consumer-like behavior in their health spending. Hence, a high deductible, not unlike your car or home insurance.

Today, virtually all health plans — whether HDHP, HMO, PPO or Obamacare — have a high deductible. At the same time, health utilization costs have skyrocketed along with premiums and deductibles. In addition, traditional employment and the notion of company benefits is being challenged by the boom in contingent or “gig” workers.

People need relief. And while decoupling won’t solve every health care problem, it could provide desperately needed options for those who are perhaps more worried about their health and finances than ever before.

The upsides of decoupling for the employer benefits world are many and varied. It simplifies both the administration and presentation of health coverage. Anyone who has health insurance qualifies for an HSA. Full stop.

For those who sell and administer health financial accounts, it means no more FSAs and, if we’re lucky, no more HRAs. One bill proposed in the House of Representatives would allow you to pay your health insurance premium with an HSA. For “Lord of the Rings” fans, think “one account to rule them all.”

And while the tax benefit to employers for providing funds into an HSA would remain, decoupling also means that the benefits of health savings accounts shift primarily to employees.

While this may seem like a direct attack on the employer-based benefit model, in fact, it’s a necessary shift that may both streamline business and allow for more focus on “benefits” (voluntary, work-life balance, personalized perks) and less on crushing health insurance costs and administration.

Health insurance offerings would become much more akin to 401(k) plan offerings, freeing up brokers to focus more on higher-commission, lower-administration products.

Plus, it would likely be years before we saw a major shift among some employers, while those who’ve lost their coverage because of COVID-19 downsizing would have HSAs available to them regardless of where or how they get their health coverage.

Like many of our work/life realities right now, decoupling is not a foregone conclusion. But it should be.

Whether we continue with a system in which tens of millions of Americans rely upon their employer for health coverage, a public option as Joe Biden has proposed, or even something more radical (and in line with the rest of the developed world) and offer some form of single-payer, there will always be a case for providing individuals with complete control of their health care spend, and preferential tax treatment to make their money go further.

HSAs for all is a necessary step, no matter where the post-COVID world leads us.


Sean Engelking is a representative of the HSA Council and founder and CEO of Starship, a venture-backed HSA startup focused on partnering with gig-economy companies.