Health Savings Accounts
It's all over the news: high-deductible health plans paired with health savings accounts, or "HSAs," are being promoted by President George W. Bush's administration as a solution to America's healthcare dilemma. HSAs, which first became effective January 1, 2005, are accounts to which individuals and employees can contribute pre-tax funds up to the amount of the lesser of their high deductible or an annual maximum specified by law (generally $2,700 for individuals and $5,450 for families for 2006) to fund future medical expenses. HSAs must be paired with high-deductible health plans. HSAs are part of a larger trend toward consumer-driver health plans (CDHPs). These types of plans, still in their infancy in the insurance market, give patients greater autonomy in choosing the providers from whom they seek treatments, and the health care costs that are incurred, than traditional insurance plans, where such choices have been driven by third party payers.
HSAs and Health Care Providers
HSAs present a new paradigm not only for patients, but for providers as well. For example, a patient enrolled in an HMO or PPO program may pay only a $20 copay for an office visit with a contracted provider, and the provider can collect that amount at the time of the visit. A patient with an HSA might also choose that same contracted provider, but the amount the provider can or should collect from that patient for the office visit likely will be greater than a simple copay, depending on the patient's coverage plan and HSA. To address these situations, the provider may well wish to negotiate (with payers) when and how the provider may collect payment from the patient. Additionally, an HSA patient with coverage that does not include a preferred provider network may choose to see any provider, but will have cost-sharing obligations that are greater than would a patient accessing the provider through a preferred network. The HSA-covered patient in this situation typically will not pay his or her portion of professional fees until the cost-sharing amount is determined, usually after the claim is processed by the health plan. Providers treating either of the HSA-covered patients described above could see an increase in accounts receivable (A/R) days for portions of payment due from the patient, and/or may have difficulty collecting fees from patients.
Pharmacies are also likely to experience similar payment issues, which are new to them. Traditionally, insurance plans have had separate riders with lower deductibles for prescription drug coverage. Under the HSA rules, a high-deductible health plan, to be paired with an HSA, cannot have a separate deductible – prescription drug costs must be applied to the health plan deductible in the same way that other health plan expenses apply.
Prompt payment laws (enacted in almost every state) will be of little use in these situations, because those laws apply only to third-party payers, and not to patients. That said, how can providers maximize timely collection of patient responsibilities in a CDHP world that involves HSAs?
Payment Structure Options
To avoid increasing A/R amounts (and time in A/R), some providers have begun to consider methods of securing payments from patients with HSAs at or before the time of service. Such methods may include securing a discounted prepayment for the patient's portion of services that a patient knows will be incurred (e.g., childbirth expenses), or securing a contractual commitment from the patient to pay certain discounted amounts at the time services are rendered, rather than waiting for the claim to make its way through a health plan's system. In either of these scenarios, the provider receives payment in advance (or at the time services are rendered), rather than waiting to bill and collect patient amounts after health plan claims processing is complete.
Regulatory and Practical Concerns
Although the payment options outlined above can be structured to comply with current health care and employee benefits laws, the following regulatory issues should be considered before implementing such a payment program:
The payment program should not be offered to federal health program beneficiaries (Medicare and Medicaid patients). (Note that individuals enrolled in Medicare or Tricare Coverage are not eligible for HSAs anyway.)
In many states, a provider must inform the patient's health plan/insurer of any discount that has been offered to the patient, to ensure that claims to the payer do not overstate total amounts billed and/or collected for services.
Global prepayment (at a discount) for all services a patient may need during a year can – in some states – constitute the practice of insurance, and in these states payment at point of service may be a better option.
HSA funds can be withdrawn from the accounts tax free only to pay "qualified medical expenses," which typically includes only those costs that a patient actually incurs – care must be taken to ensure that a patient does not pay for services that are not rendered.
Contracts with payers may (or may not) require that a provider collect "all" coinsurance amounts; this language may prevent the discounting of HSA allowable expenses. This issue should not arise for noncontracted providers.
Many employers who fund HSAs fund the accounts on a monthly or quarterly basis. For that reason, providers may need to structure payments over time in order to allow patients to adequately fund their HSA prior to the need for payment for services.
Payment plans must be flexible enough to work within HSA account rules, which will vary among HSA providers. HSA trustees/custodians can put reasonable limits on the frequency and/or size of distributions available from the accounts.
It is clear that any contemplated HSA payment option program must be carefully structured to maximize compliance, and will be driven by facts that may trigger regulatory issues. Faegre & Benson's employee benefits and health care attorneys are well-versed in the legal issues surrounding these programs (as well as their practical implementation) and can assist in the development of HSA opportunities for your organization.