It would have low premiums. It would cover expensive medical care after payment of a high deductible. And it would include an account funded by tax deductible contributions that could be used to pay for care not covered by insurance and to build retirement savings.
For many, it would be the ideal health insurance plan.
I refer, of course, to a catastrophic health insurance plan, paired with a Health Savings Account.
This kind of plan could and should be available to all. Insurers have long offered catastrophic plans. Tax-deferred HSAs have been authorized since 2003. Unfortunately, the Affordable Care Act, more commonly known as Obamacare, tightly restricts enrollment in catastrophic plans to those under 30 or who qualify under one of the “hardship exemptions” listed on HealthCare.gov. To make matters worse, the ACA prohibits those few who are allowed to enroll in a catastrophic plan from contributing to an HSA.
This only highlights the dysfunctional nature of the ACA.
The Internal Revenue Code allows only those covered by a “high deductible health plan” to contribute to an HSA. Catastrophic plans, given their high deductibles (at least ,7,350 as of 2018), should qualify as high deductible health plans. But the ACA ensures that they do not. To qualify as “high deductible,” regular plans must not cover any care, except preventative care, before payment of the deductible. But the ACA requires also requires catastrophic health plans to cover at least three primary care visits before reaching the deductible. This requirement prevents any catastrophic plan from qualifying as a high deductible health plan, and prevents those in catastrophic plans from contributing to a health savings account.
This prohibition has significant negative consequences. It requires many who would prefer to enroll in catastrophic plans to pay thousands more in much higher premiums for traditional insurance plans that provide many benefits that many will rarely, if ever, need and don’t want. This is a drag on the economy because it means money that could be invested and spent on other goods and services is instead diverted to enrich the health insurance industry.
What’s more, those covered by catastrophic plans cannot receive a tax deduction for contributing to an HSA or use the account, as many do, to build savings for medical care in retirement that isn’t covered by insurance.
The ACA has made a mess of the health insurance market. It has increased prices, reduced competition, limited choices, and prevented too many from having the insurance they want and need.
Cleaning up this mess will not be easy. But a good start would be to abolish the narrow limits on enrollment in catastrophic plans, allowing those covered by these plans to contribute to health savings accounts.
David M. Simon is a lawyer in Chicago. The views expressed in this article are not necessarily those of the law firm with which he is affiliated.
