Don’t Be Misled: HSAs and Tax Credits Are Not the Answer for Low-Income People

Don't Be Misled: HSAs and Tax Credits Are Not the Answer for Low-Income People

In House Republican Leader Kevin McCarthy’s words, the care and coverage provided under the Affordable Care Act is akin to the federal government giving some people cars, but those cars are missing two tires, leak gas, and have a busted transmission. Other people are being forced to buy cars they don’t want.

McCarthy and the Republicans in Congress believe they can fix the proverbial “car crisis” and save our patients (I can’t in good conscious refer to our patients in automobile terms) through the judicious use of health savings accounts (HSA) and tax credits. In their view, HSAs and tax credits provide a broad-based, responsible foundation of healthcare reform.

If that was the case and these were viable solutions, I would be very supportive. But they’re not, so I’m not. HSAs and tax credits don’t work for low-income communities. Allow me to explain.

HSAs are tax-advantaged savings accounts that are normally tied to high-deductible health plans, which can be used to pay for certain medical expenses. People who use HSAs in high deductible plans can place a portion of their income, tax-free, into an HSA and then use that money, tax-free, to pay their medical bills. Because their high deductible plan would not start covering any medical expenses until they’ve spent at least a thousand or more dollars out of their own pocket (or their HSA), they would have a lot of medical bills to cover.

Current law requires an HSA-qualifying high deductible plan to have at least a $1,300 deductible for single coverage and $2,600 for families, along with a $6,550 out-of-pocket maximum for singles and $13,100 for families. This means that a family using a high deductible plan will spend $2,600 out of their HSA before their coverage kicks in and require that same family to potentially spend up to $13,100 in a single year, too.

For the low-income communities we serve, these out-of-pocket expenses are inconceivable and it is misleading to say they’re not. Our patients are struggling to provide their family with food and shelter, but now they have to come up with thousands of dollars to cover their share of medical expenses before their insurance even kicks in? That’s a plan for bankruptcy, not healthcare.

Republicans have discussed a refundable tax credit to offset these bankruptcy-inducing costs, but that is misleading as well. Under the Republican proposals that have been floated so far, flat-rate tax credits (that ignore family income) would be issued monthly to purchase healthcare coverage and anything left-over can go into an HSA.

While it sounds simple, it’s not. For low-income families, it can be disastrous. For example, if President Trump succeeds and allows people to buy insurance across state lines, out-of-state insurance plans may start manipulating the price point of insurance premiums to match or exceed the monthly tax credit amount, forcing families to spend one-hundred percent of the tax credit on premiums in a high deductible health plan, without any funding for the HSA that helps pay the plan’s high deductible.

In this situation, families will be forced to purchase bare-bones high deductible plans that don’t cover vital primary care needs and won’t have an HSA to help cover the high deductibles – they will have to pay out-of-pocket. Again, a plan for bankruptcy, not health care.

HSAs and tax credits may work for more affluent people, but they cannot be the foundation of the healthcare replacement plan for the low-income communities we serve. Quite simply, it diminishes the quality of coverage and dramatically increases financial risk for communities who are already struggling to make ends meet.

For these reasons, I cannot support them.