New Medical Loss Ratio Rule Means No HSAs in ObamaCare Exchanges

New Medical Loss Ratio Rule Means No HSAs in ObamaCare Exchanges
December 12, 2011

The urge of government health care bureaucrats to impose their will on the market, regardless of warnings and repeated petitioning for redress for relief, overpowered public petitions in the latest medical loss ratio rule released by the Department of Health and Human Services.

The result of the new rule will mean one thing: no bronze plans, the low-cost plans that the administration promoted during the legislative battle, will be allowed in the Obamacare exchanges.

The future of the exchanges is clear—they will be populated by expensive plans for the less healthy. The healthy will simply go without insurance or find it outside the exchanges—at least until they become sick.

HSAs Cannot Qualify

The health savings account qualified health plan, and other health plans with higher deductibles, cannot meet the MLR limits set by the rule. This is not because HSA qualified plans are inherently incapable of meeting the MRL limits, but because the rules for how MLR is computed discriminate against HSAs and other health plans with higher deductibles.

How does the MLR rule discriminate against bronze plans and HSAs? Here’s how: any payment for a health care service below the deductible by an individual or family does not count in the weird and bizarre world of the government bureaucrats’ MLR. Payments for health care services by insurers do count, but not payments by individuals.

If an insurer pays for a health care service for their insured, the MLR rule counts that in their MLR rule. But if an individual pays for a health care service to meet their deductible, the MLR rule does not count that expenditure.

Only 5 percent of those with an HSA qualified health plan in any particular year have any claims paid by their insurance. Therefore, it is a mathematical impossibility for HSAs to meet the MLR limits when the new HHS rule allows only 5 percent of HSA payments for health care services to count toward their MLR limit.

But the bureaucrats at HHS simply don’t care or they think they know better—or both.

They were told in person and in writing by Congress and repeatedly by others. The result will be no bronze plans in the exchanges, should the Supreme Court not rule the law null and void.

Select Exemptions

Self-insured or ERISA plans are exempt from the MLR regulation. Thus, large employers whose employees have an HSA can keep them, at least until other large employers start dumping their employees off their health insurance and into the exchanges.

HSAs will survive in a world where large employers don’t dump their employees into the ObamaCare exchanges. In the fully insured market, since HSAs cannot make the MLR limits rigged against them by HHS, insurers will have to “borrow” MLR credits from their other plans that don’t have the rules rigged against them. This will provide HSAs some relief, but will cap the number of HSAs allowed to exist outside the exchanges.

Rumor has it HHS believes it can craft an essential benefits rule that may mitigate the rigged MLR regulation that strangles HSAs and other Bronze plans—not to help HSAs, but to allow non-HSA high deductible health plans to exist in the ObamaCare exchanges.

This is more bureaucrat hubris in action. They are wrong about manipulating the yet-to-be-published essential benefits rule to allow some Bronze plans. It’s not mathematically possible with their rigged MLR regulation. Here’s a newsflash: the bureaucrats aren’t listening.

Irrational Approach

This is what happens when bureaucrats meddle and interfere. Fairness is ignored. Common sense goes out the window. Without a low-cost option, more people will go without insurance (mandate or not) and the average cost of a health plan in the exchanges will skyrocket.

Fewer people will be able to afford coverage, and subsidies will have to grow to help finance the increased cost.

The one-size-fits-all bureaucrats will be firmly in charge of a yet another massive health care cost spike—with no HSAs or bronze plans to meet the crying need for low cost health plans in the marketplace. Welcome to the irrational world of government-run health care.

Dan Perrin (dan.perrin@hsacoalition.org) is president of the HSA Coalition.