Senator Rand Paul (R) Kentucky was re-elected on November 8, 2016. In his interview on Fox News Channel Wednesday November 9, 2016 he re-iterated his statement that one of the first tasks for a Trump – led Republican Administration is to make it legal again to purchase low cost insurance.
What Does “Legalized Low Cost Insurance” Mean?
But let’s break his down a bit. In our opinion, Mr. Paul refers to the ACA’s elimination of high deductible health plans (HDHP). Under the Affordable Care Act, the maximum out of pocket for any health plan is was $13,700 in 2016 for a family. Generally speaking, any HDHP that exceeded that amount is eliminated. However HDHPs are allowed under the ACA in effect by Health Savings Accounts (HSAs). HSAs have limits on out-of-pocket costs, similar to the ACA .
The ACA eliminated plans with high deductibles and out-of-pocket exposure. At the same time, the new guidelines are compatible with HSAs and HDHPs. Specifically:
The Affordable Care Act changed two rules regarding HSAs, effective in 2011:
- Prior to 2011, the penalty for HSA withdrawals for non-medical purposes was 10 percent. But it doubled to 20 percent on January 1, 2011. Account holders can avoid this fee as long as they either use their HSA funds for medical expenses, OR wait to withdraw funds until they’re at least 65. After that, withdrawals for non-medical purposes are simply taxed, but there’s no penalty.
- Prior to 2011, HSA funds could be used for over-the-counter medicines. Since 2011, OTC medicines can only be purchased with HSA funds if a doctor prescribes them.
Under ACA regulations, HSA-qualified plans (like all plans) must cover preventive care with no cost-sharing and without requiring the insured to meet the deductible first. Under HSA regulations, no other claims can be covered before the deductible is met. These two regulations have co-existed well in 2014, 2015, and 2016, when all new HSA-qualified plans have also been ACA-compliant.
Stop loss insurance, providing catastrophic financial support only as a hedge against high medical bills has been essentially unavailable. For some who wish to avoid high insurance premiums and pay cash for routine medical bills, the Trump Administration may propose a solution for those who only want to guard against major medical bills.