Pre-Deductible HDHP Expansion

Currently, high deductible health plans (HDHPs) are limited in the types of pre-deductible coverage they are entitled to provide without cost-sharing and without risking their status as HDHPs—or risk their participants’ ability to contribute to health savings accounts. Typically, these types of care involve preventive health services designed to catch medical conditions early or services used to prevent the exacerbation of certain chronic health conditions. Qualifying care can be provided before the participant has met their plan deductible for the year. Proposals have been floated to expand the types of pre-deductible coverage that can be provided by HDHPs in order to increase enrollment in these high-deductible plans.

We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about whether expanding pre-deductible coverage for HDHPs would increase enrollment.

Below is a summary of the debate that ensued between the two professors.

Their Votes:

Bloink

Byrnes

Their Reasons:

Bloink: The reality is that many people shy away from enrolling in HDHPs because of limitations on pre-deductible coverage. That, in turn, eliminates the HSA savings option for a large portion of the American population. Employers would offer plans with additional pre-deductible coverage if additional pre-deductible services were permitted—and increasing availability for employees would be a substantial step toward increased enrollment.

Byrnes: We have strict restrictions on pre-deductible coverage for HDHPs for a very specific reason. In exchange for higher deductible coverage, taxpayers gain the valuable right to contribute to a tax-preferred health savings account. The HSA option is what is going to encourage taxpayers to participate in HDHPs rather than expanded pre-deductible health coverage options.

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Bloink: We should be doing everything we can to expand the availability of HSA savings options so that Americans can be better prepared for health emergencies--both before retirement and during retirement. Expanding pre-deductible coverage would provide a valuable incentive to encourage HDHP/HSA participation among a larger portion of Americans.

Byrnes: Changing the rules that govern cost-sharing are not going to have a strong impact on HDHP enrollment because employee-participants are unlikely to experience the cost reductions of expanded pre-deductible, no-cost coverage themselves. It's much more likely that employers and health plans will simply change the way they implement cost sharing in general, shifting to co-deductibles and/or co-payments instead.

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Bloink: Yes, tax preferences do come with HSAs, but there are ways to ensure that lower- and middle-income Americans are attracted to the HDHP/HSA option. The typical plan participant sees the high deductible as a significant limitation to obtaining the health care they need without substantial costs. Adding more care options to the pre-deductible side of the fence would go a long way toward attracting employees to these high deductible plans—especially once the added HSA benefits are understood.

Byrnes: We already offer HDHP participants a tax incentive for participating in their own health coverage decisions. Adding care options to the pre-deductible roster could result in the provision of unnecessary care, as health providers would be able to offer these services without financial risk. Instead of increasing pre-deductible care options, we should focus on educating employees on the valuable tax benefits of the HSA option and the benefits of reducing their overall tax liability while also obtaining a tax-free option for covering unexpected health emergencies.