Midweek update

David Ermer–Uncategorized–

The Washington Post reports that effective next year the State of California plans to bar hospitals with low scores on certain quality metrics from holding in-network status in health plans participating in the State’s Obamacare and Medicaid exchanges. Times up according to the article. It struck a chord with the FEHBlog because OPM under its “plan performance system” bases 65% of each nationwide FEHB plans already miserly gross profit on similar quality metric scores. Now OPM hopes that Congress will base the FEHBA government contribution in part on these quality scores. Financially punitive, metric driven approaches like California’s, OPM’s, the ACA’s questionable readmissions penalty on hospitalsare prime examples of the “tyranny of metrics.” In the FEHBlog’s view, the approaches are not good for healthcare because they drive up administrative expenses in efforts to boost quality metric scores, among other concerns.

The Health Care Cost Institute blog reports that Emergency room “spending among the commercially insured continued to rise in 2016, driven by the price and use of high severity cases (2009-2016).” So while health plans have been seeking to divert members to lower cost facilities like urgent care centers, etc., the hospitals have been jacking up their prices for the people who need to visit the emergency room.  The Affordable Care Act has done little, if anything, to control health care spending, again in the FEHBlog’s view.

The FEHBlog, who likes his own high deductible plan with health savings account, noted this Employee Benefit News article suggesting that people of all ages make voluntary contributions to their health savings account before their retirement plans.

While a 401(k) plan will beat an HSA if left to retirement, reality hits when withdrawals are made from the 401(k) to pay for things like medical expenses — not to mention a 401(k), and other traditional retirement plans, are burdened with taxes and penalties. With healthcare being one of the biggest expenses most individuals will face during retirement, an “HSA first” approach makes the most sense, as it offers a unique triple-tax advantage [tax free deposits, tax free growth, tax free healthcare spending]. 

For those who are uncomfortable with this strategy, there are several additional benefits to an HSA, such as: 

  • 100% of unused funds roll over year-after-year
  • Funds go with you even if you switch employers
  • Can pay for the eligible expenses of your legal spouse and tax dependents regardless of their insurance
  • Can be used for Medicare premiums as well as qualified long-term care premiums 

An individual can also reimburse for out-of-pocket health expenses at any time — even 30 or 40 years in the future. During that time, money grows in the HSA tax free. Some refer to the HSA as a “stealth IRA” when it’s used this way.

Pretty, pretty good.