Aug 12, 2019 2:31 PM
EDT
Medicare medical savings
accounts (MSAs) are unique Medicare Advantage plans that
nearly no one has, yet are poised to become more popular, thanks primarily to
the rise of high-deductible employer insurance plans.
According to the
Centers for Medicare & Medicaid Services (CMS), a grand total of 6,707
people were enrolled in an MSA as of May of this year, out of the nearly 61
million people now enrolled in Medicare (about 0.01 percent).
While Medicare
enrollments are headed higher and higher as society gets older, MSA sales are
only about half what they were in 2016 (although they are up sharply from only
3,040 three years ago). Only four insurers even sell MSAs and they are
available in fewer than 20 states.
“It is portable and goes with you,” just like an employer-plan
HSA.
One of those four
insurers is tiny Lasso Healthcare in
Harrisburg, Pennsylvania. It is, to say the least, an outlier when it comes to
MSAs and is literally betting the company that these plans will become much
more popular.
The reason, company
leaders Jim Handlan and Craig Ritter said in a phone interview, stems from the
soaring use of high deductibles in employer health insurance plans. In a report late
last year, the Employee Benefit Research Institute said that the percentage of
under-65 employees with such plans had risen to 46 percent in 2018 from only 17
percent.
These high-deductible
plans are usually linked to a health savings account (HSA), which is funded
with pre-tax funds from employees and employers. More than 20 million people
now have HSAs. These funds can be spent during a plan year or rolled over to
the next year. If the funds are spent on qualifying medical expenses, they
incur no taxes when spent, making HSAs unique among financial products in that
both their funding and expenses escape federal taxation. Further, proceeds can
be placed in investment accounts and held there indefinitely, making them
attractive retirement investment tools.
Medicare plans are not
considered high-deductible plans, but MSAs are. MSAs also permit people to
receive fee-for-care health services anywhere in the U.S. That’s the same as
original Medicare, but different from other Medicare Advantage plans, which are
based on care that is managed by private MA insurers, usually using networks
that restrict coverage to participating doctors and hospitals in the plan’s
local area. Despite that difference, MSAs are technically MA plans.
“It is basically
catastrophic insurance,” Handlan said, and “much more like a self-directed
plan” than a managed Medicare Advantage plan. The money deposited into a
person’s account “is yours to keep” if you stay in the plan. “And it is
portable and goes with you,” just like an employer-plan HSA.
Lasso’s leadership
team believes that employee use of HSAs is paving the way for growing interest
in Medicare MSAs as employees turn 65, retire, and “age into” Medicare. Lasso
is now selling MSAs in 17 states (Arizona, Arkansas, Delaware, Hawaii,
Illinois, Indiana, Kansas, Maryland, Mississippi, Montana, North Carolina,
North Dakota, Pennsylvania, South Dakota, Texas, Utah and Wyoming). In 2020, it
will add nine states (Georgia, Kentucky, Louisiana, Minnesota, Nevada, New
Mexico, Ohio, Rhode Island and South Carolina) and the District of Columbia.
The three other MSA
insurers are Network Health (available
in Wisconsin), Security Health Plan (Wisconsin)
and MVP Health Care (New
York).
One example of an MSA plan
Lasso has designed a
simple product. Customers who have Parts A and B of Medicare, and pay the
typical monthly Part B premium of $135.50, are eligible for a zero-premium MSA
from Lasso (all MSAs must be zero-premium plans). Once a customer signs up for
the policy, Lasso deposits $2,520 into its version of an HSA, as part of its
high-deductible plans.
Depending on where a
person lives in its service areas, Lasso’s annual deductible is either $6,700,
$7,700 or $8,700. Policyholders are responsible for all medical costs below the
deductible, and Lasso will pay all covered expenses above that amount.
According to CMS, the
highest allowable deductible for an MSA is $12,650 this year and will rise to
$13,400 in 2020.
When a person’s
savings account deposit is factored in, their maximum out-of-pocket exposure
for health expenses in a Lasso MSA ranges from $4,180 to $6,180.
MSAs do not include
Part D coverage, so people would need separate drug plans. However, they can
use their health accounts to pay for drugs, as well as certain hearing, dental
and vision expenses that are not covered by original Medicare. Lasso says its
plans will pay the lesser of what health care providers charge or 100 percent
of Medicare’s payment rates for any procedure that Medicare covers.
The maximum
out-of-pocket exposure of a Lasso MSA compares favorably with Medicare
Advantage plans. People with original Medicare and a private Medigap supplement
plan also might find MSAs an attractive alternative.
Who’s buying these plans?
Further, unlike
Medigap plans, access to MSAs is guaranteed every year. This might make them
particularly attractive to disabled Medicare beneficiaries younger than 65.
Right now, people 65 and older have guaranteed rights to Medigap plans when
they first enroll in Medicare. These rights mean that private insurers usually
must sell them a Medigap plan and cannot charge them more money due to their
health conditions. Disabled people generally do not have such rights, but they
can get something very close to such protection from an MSA.
One unanticipated fan
group, the company learned, is RV owners who like being covered while traveling
anywhere in the U.S.
For healthy Medicare enrollees with no chronic health
conditions, an MSA plan can be appealing.
The company has sold
plans to 1,500 customers seven months into its first year, Ritter said. Lasso
hopes to double or triple its customer numbers during Medicare’s 2020 annual
enrollment period, which extends from Oct. 15 through Dec. 7 for plans
effective next Jan. 1.
I doubt that major
private Medicare insurers are looking over their shoulders in concern about
Lasso or other MSA sellers. And I grant you that these plans are not for
everyone.
But for healthy
Medicare enrollees with no chronic health conditions, an MSA plan can be
appealing. I’d look at the fine print here, especially the plan’s annual
deductible. But these plans could cover most routine medical spending for
healthy enrollees and thus act as a less expensive way to insure against
catastrophic health risks.
Correction: Lasso will offer MSAs in nine
additional states in 2020, not 2010 as previously stated.
Phil Moeller is the author of “Get What’s
Yours for Medicare: Maximize Your Coverage, Minimize Your Costs” and the
co-author of the updated edition of The New York Times bestseller “How to Get
What’s Yours: The Revised Secrets to Maxing Out Your Social Security,” with
Making Sen$e’s Paul Solman and Larry Kotlikoff. On Twitter @PhilMoeller or via
e-mail: medicarephil@gmail.com.
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