Since they were introduced in 2003, the use of high deductible health insurance plans with health savings accounts have grown steadily more popular among employers who believe that making employees responsible for upfront costs will make them thriftier health care consumers.
Proponents of these plans had worried that Democrats would effectively outlaw them in their health reform bill by setting the minimum value above the threshold of most of these plans. Earlier proposals would have required employers to contribute 70 percent of the cost of an employee's health plan. The eventual legislation put that threshold at 60 percent-a level in line with most high deductible plans, which require employees to contribute more to its overall cost.
Not only did Democrats set the threshold at 60 percent, they took an additional step that may actually encourage more use of such plans.
The move involved the Cadillac tax on health plans that starts in 2018. The 40 percent excise tax applies to individual plans valued at more than $10,200 and family plans valued $27,500 for family coverage.
It's hard to imagine today that in less than eight years many people will have health plans that cost that much-essentially double today's averages. But a Towers Watson study published last month estimates that the tax will ensnare 60 percent of large employers in 2018. Experts speculate that more and more employers will move to higher deductible plans, which have lower premiums because of the high cost sharing, to avoid the tax.
One drawback to the growth of these plans in the legislation are new limits on how people can spend money in their health savings accounts. Another open question is whether employer contributions to the accounts count toward their contribution to the plan. Also, out of pocket maximums will limit how high employers set the deductible.
Congress could of course easily lift the limit at which plans are taxed but barring any major change to the law as it stands now employers may begin to shift in droves to higher deductible plans to prepare for the day when the Cadillac tax kicks in.
But unless Congress also eases up on HSA limits, the benefits employers will realize from doing so may also be limited.