With healthcare costs continuing to increase, individuals have used Health Savings Accounts (HSA) to help manage their health care costs by paying for deductibles and other medical expenses with tax-free money set aside in an HSA, and preserving the use of health insurance for more catastrophic events. This has been an effective strategy because insurance companies offer High Deductible Health Plans (HDHPs) with low premiums for those willing to pay for routine health expenses on their own. Obamacare threatens this approach by implementing minimum coverage thresholds that insurance plans must satisfy in order to operate.
Currently, using HDHPs in conjunction with HSAs, individuals can contribute money to their HSAs to help protect themselves in the event they have to pay the high deductible. Money is contributed to an HSA and withdrawn tax-free when used to pay for qualified medical expenses. Unlike other health savings vehicles, such as an FSA, the funds in an HSA never expire year to year, so consumers can accumulate substantial funds for future medical expenses.
Under the PPACA, the “actuarial value” threshold will divide health plans into tiers to determine the coverage threshold for that plan. For example, a health insurance plan at the “gold” tier, must have an actuarial value of 80%, meaning the plan must pay for 80% of each insured’s medical expenses. The lowest tier, bronze, must have an actuarial value of 60%, or cover 60% of medical expenses. HDHPs currently cover a lower a percentage of an insured’s medical expenses and will be required to provide higher reimbursement rates with lower deductibles, which will in turn cause higher premiums. This not only jeopardizes the future of the HDHPs, but HSAs as well, because, currently, HSAs can only be used with HDHPs.
This is important to note. For many healthy Americans, using HDHPs, which allow coverage at a low premium, together with HSAs, has been a way to manage their health care costs. While the sole intention of the PPACA is to not eliminate HSAs, in theory, it does make them less valuable in the future.
Source: Advisor One