Can I Use My HSA Funds to Pay My Premiums?

Many of you might have a Health Savings Account (HSA) and realize that you have more funds in the account than you need. Maybe you’re not even sure what an HSA is at all. What can the money in your HSA account be used for?

In some cases, you can use the funds in your HSA to pay health insurance premiums. The more you understand your HSA, the more you can make your tax-free money work for you. Let’s take a closer look.

What is a Health Savings Account?

An HSA is a tax-exempt account that you or your employer can contribute money to, and then you can put those funds toward qualified medical expenses. In order to become eligible for an HSA, you have to enroll in a high deductible plan. Your HSA money is yours to keep and will continue to grow tax-free each year.

Qualified medical expenses, as defined by the Internal Revenue Service could include:

• Hospital services
• Prescription drugs
• Long term care
• Birth control
• Health institute treatment

What about health insurance premiums?

A health insurance premium is the monthly fee charged by an insurance company for coverage. The amount of money charged for your insurance premium is determined by your age, health, residence, and more specific details.

Your HSA money can be used toward insurance premiums, but only specific types, such as long-term care coverage, health coverage while you are unemployed, and federal health care continuation coverage, also known as COBRA. If you are 65 and older, HSA funds can also be used to pay for any health insurance, except Medicare Supplement policies.

However, if you try to use your HSA money to pay for general major medical premiums, that would be considered a nonmedical withdrawal and would face taxes and penalties.  Before you decide to use your HSA funds to pay your premiums, make sure your plan qualifies.

Blue Cross Blue Shield Improving Healthcare

Blue Cross Blue Shield Association recently unveiled a new action plan to improve healthcare quality and keep rising healthcare costs down.  According to the press release on their website, BCBSA has designed a comprehensive plan that is interconnected to transform healthcare as we know it.

It ultimately moves away from a fee-for-service model to a more patient-centered plan.  The plan is called “Building Tomorrow’s Healthcare System: The Pathway to High-Quality, Affordable Care in America” and offers a variety of suggestions for improvement in healthcare throughout the nation.

President and CEO of BCBSA, Scott P. Serota, believes the healthcare system needs to face fundamental changes so that everyone can have affordable, quality healthcare services.  The patient needs to be put first and to do so will take some big changes.  The system makes specific recommendations for the government to work with the private sector.  The proposal gives actionable steps the government can take in four key areas.

The first area talked about in the press release is rewarding safety.  They are looking to eliminate unnecessary medical errors and reward the healthcare systems that do so.  They’re looking to do what works.  The incentives in the system are designed to advance the best possible medical care and give rewards to the top outcomes as motivation.

The system strives to reinforce front-line care and inspire healthy living.  With 75% of today’s healthcare costs going towards chronic illness it makes sense to invest more time and money into healthy lifestyles to eliminate the preventable diseases.  It’s estimated that this new system could save about $319 billion over the next ten years, so it’s definitely worth a shot.

States and Health Care Reform

Health insurance has long been a state affair in the USA. Insurance companies were even exempt from many aspects of federal anti-trust law to better enable state regulators to oversee their activities. Yes, there were federal laws that standardized certain aspects of the business—think HIPAA and COBRA. Think about Medicaid, Medicare and SCHIP while you’re at it. But when it came to health insurance regulation the states reigned supreme.
Enter Congress and President Barack Obama stage left. With the passage of the Patient Protection and Affordable Care Act the federal role in shaping and regulating health insurance shifted significantly to Washington, DC. The Secretary of the Department of Health and Human Services is now arguably the most important health insurance regulator in the country. The Department of Labor and Internal Revenue Service will also play significant roles in determining the future of the nation’s health insurance market and the choices (or lack of choices) Americans have to meet their health care coverage needs. No wonder critics of the PPACA condemn the law as a “federal takeover.”
That the nexus of health plan oversight has shifted to the federal government is beyond argument. The new health care reform law touches everything from how medical plans are designed, priced, offered, maintained and purchased. To conclude that state insurance regulators are shunted to the sideline, however, dangerously overstates the case. In fact, the PPACA invests tremendous flexibility in the states, allowing them to implement the federal requirements in what will likely be very divergent ways.
Rebecca Vesely, writing in Business Insurance, makes this clear in her article describing how two states, Vermont and Florida, are taking strikingly different paths in addressing health care reform. Vermont has taken the first step toward creating a single payer system by 2017. Legislation to set up a five member board to move the state in this direction has already been enacted. And while many details need to be worked out (funding, to name one) and Vermont will need to obtain a waiver from the Centers for Medicare and Medicaid Services to put the package together, the state is further down the road to single payer than any other.
Then there’s Florida where the move is in the opposite direction. That state is seeking to shift virtually all of its Medicaid population from government coverage into private plans starting in July 2012. These private managed care plans would be offered through large health care networks with health plan profits above five percent shared with the state. Whether this approach will achieve the $1.1 billion in first year savings promised by the Governor or not, it has brought new participants into the Medicaid marketplace such as Blue Cross and Blue Shield of Florida.
The Business Insurance article includes a prediction by Boston University law professor Kevin Outterson that the Obama administration will sign off on the waivers Vermont and Florida need to move forward.
What the starkly different approaches to reigning in skyrocketing health care costs being taken by Florida and Vermont demonstrates is the broad flexibility states retain in shaping their own health care destiny. Yes, federal waivers are required, but that would be the case even if the PPACA had never passed—Medicaid is a federal program after all. The CMS web site lists 451 state waivers or demonstration projects in place today. The concept of allowing experimentations and exceptions is ingrained in the Medicaid program just as they are in the Patient Protection and Affordable Care Act. There’s nothing wrong with this any more than having shock absorbers on a car is an indictment of an automobile’s chassis or tires.
The marked variation in approaches being taken by Vermont and Florida are extreme examples of what we’ll see as states implement exchanges and other aspects of the Patient Protection and Affordable Care Act. Of course, whether this is good news or bad news depends a great deal on the state in which you live and work. States that are heavily tilted toward one party or the other (I’m looking at you California and Wisconsin) could make some of their residents yearn for the federal government to step in and keep things in perspective. Given the way the PPACA preserves state powers, however, they are going to be disappointed.

Lessons for American on Health Insurance

I’ve heard a lot of shocking things since arriving in England five months ago on my sabbatical. But nothing has had me more gobsmacked than when, earlier this month, I was chatting with James Morrow, a Cambridge-area general practitioner. We were talking about physicians’ salaries in the UK and he casually mentioned that he was the primary breadwinner in his family.
His wife, you see, is a surgeon.
This more than any other factoid captures the Alice in Wonderland world of GPs here in England. Yes—and it’s a good thing you’re sitting down—the average GP makes about 20% more than the average subspecialist (though the specialists sometimes earn more through private practice—more on this in a later blog). This is important in and of itself, but the pay is also a metaphor for a well-considered decision by the National Health Service (NHS) nearly a decade ago to nurture a contented, surprisingly independent primary care workforce with strong incentives to improve quality.
Appreciating the enormity of this decision and its relevance to the US healthcare system requires a little historical perspective.
As I mentioned in a previous blog, the British system cleaves the world of primary care and everything else much more starkly than we do in the States. All the specialists (the “ologists,” as they like to call them) are based in hospitals, where they have their outpatient practices, perform their procedures, and staff their specialty wards. Primary care in the community is delivered by GPs, who resemble our family practitioners in training and disposition, but also differ from them in many ways.

GP training is the only pathway to primary care here—there isn’t the mixed bag of general internists, pediatricians, family practitioners, and scattered community-based subspecialists one finds in the States. (An important side effect of this is that the primary care community speaks in a single voice, not the cacophony you often hear from our primary care fields.) Training to become a GP takes five years: a three-year GP residency following the two foundational years (similar to our old rotating internships) that everyone does.
Prior to 2004, GPs were poorly paid, and had very low status and little incentive for improvement. Most practices were organized in groups of one to three physicians, and very few had a sophisticated information technology or management infrastructure. Most people—physicians and patients—saw primary care as a relatively weak link in the NHS system, and few top students became GPs. The primary care world was a demoralized mess.
In other words, just like the current state of American primary care.
In the US, when we talk about the need to increase compensation for primary care doctors, we are constrained by the political realities of a shrinking healthcare budget and the knowledge that any bump in PCP pay would almost certainly have to come from cuts to specialists. In this environment, talk of anything beyond a 5-10% raise is rapidly dismissed as being as real as the tooth fairy.
Around 2000, the NHS saw what had happened to the GP world, and decided it was absolutely vital to reinvigorate primary care. Having a strong GP workforce is the cornerstone of universal access to care, and 80% of all MD visits here are to GPs (vs. 58% to PCPs in the US). Moreover, keeping costs down depends on population management and limiting the use of expensive hospital-based consultants and technology.
Wisely, the NHS did not simply throw money at the problem. Rather, it chose to link a pay raise with a new program to promote improvement. In 2004, the NHS negotiated a new contract with GPs, which included a “Quality and Outcomes Framework” (QOF), an unprecedentedly far-reaching pay-for-performance system in which GP practices could earn substantial sums based on performance on over 100 quality measures. The NHS underestimated the degree to which the QOF would transform practice: before the program was launched, it estimated that GPs would hit 75% of the targets; the actual number proved to be 90%.
The new GP contract did have its intended effect of bumping GPs’ salaries and improving their lifestyle. Many GPs saw their salaries go up by 20, 30, even 50%! Moreover, the NHS limited GP practice hours to 8 am-6:30 pm, weekdays only, creating alternative ways (mostly through a series of urgent care clinics and, of course, through emergency rooms) for patients to receive after-hours care. The lives of GPs improved overnight, and the field immediately saw an uptick in its status and desirability.
In previous posts, I’ve discussed my perception that many UK hospital-based physicians, after years of working in the NHS bureaucracy, have developed a kind of learned helplessness. Life as a GP is somewhat different. While they have to work under NHS policies (and, in this regard, they too recognize that resistance is largely futile), they aren’t employed by the NHS the way the specialists are. Rather, they are in private practice, and they generally own their own practices (the difference from the US is that in the UK there is only one payer—the NHS). This makes them more entrepreneurial than their specialist colleagues.
Dr. James Morrow is a very bright, articulate and sophisticated GP who is both an empathic physician and a savvy businessman. He has an undergraduate degree from Cambridge (where he lived in Oliver Cromwell’s dorm room as a freshman) and a medical degree from Oxford. Along the way, he also picked up a law degree, mostly for fun. In other words, he is not your average bloke. Nevertheless, the day I spent with him earlier this month did tell me a lot about the world of the British GP, and the lessons this holds for the US as we struggle to reinvent our dysfunctional system of primary care.
James works with seven MD partners (along with a few other physicians and a couple of NPs) in Sawston, a small town about 10 miles south of Cambridge. The practice is housed in a pleasant and nicely appointed office building. There is plenty of bustle in the patient and provider areas and in the full-service pharmacy, which is owned and managed by the practice. Fading photographs of Cambridge-area GPs from eras past grace the walls of the hallways.
But the most prominent wall decoration is a large white board, located in the practice’s main thoroughfare, its grids filled with data on the group’s performance on the QOF measures. All the doctors, nurses and staff track these numbers daily because their livelihood, literally, depends on them. In addition to tracking process and outcome data via the white board, the practice’s sophisticated computer system allows caregivers to track their adherence to evidence-based quality measures and to see how the practice is doing against benchmarks and bonus thresholds.
The practice’s peer review process is also robust, more so than in most US outpatient practices. James’s partners meet for about three hours each week to review not only business and scheduling matters, but also clinical performance data. They sometimes bring in a specialist for a mini-lecture on a key topic. In addition to measures in areas like hypertension control and asthma management, they review every case in which a patient goes to the ED, is admitted to the hospital, and is referred to a subspecialist.
Yes, the decision to refer even a single patient to a cardiologist or nephrologist needs to be defended. As far as I could tell, this is not because the costs of subspecialty consultation come out of the practice’s resources (although this may soon change, as the Cameron government’s plans to turn over most of the healthcare budget to GPs, called “commissioning,” are rolled out over the next few years). Rather, it seemed to me to be an issue of professional pride.
Can you imagine a US primary care practice reviewing every one of its subspecialty consults? They wouldn’t have any time left over to see any patients.
These reviews flow from the UK’s overall care model, which requires that all patients go through their GP in order to access subspecialty care and most sophisticated tests (one vivid example: a GP cannot order a CT scan or MRI—they need to be ordered by subspecialists). They don’t call this “gatekeeping” here, but that’s precisely what we would call it in the US. While American patients want to be able to see the toenail specialist without having to see their PCP, this is one of many areas in which the British (both patients and providers) seem to accept this type of control as the price one pays for the benefits of universal access and remarkably low cost.
The GPs have a reasonably wide array of skills, and they are encouraged to become local practice experts in a given domain. James, for example, had some additional training in surgery and neurology, and so he sometimes sees curbside consults from his partners in these areas. One of his partners trained initially in pediatrics but later decided she wanted to retrain to be a GP (note that there is no office-based general pediatrics in the UK—you bring your kids to the GP; pediatricians are hospital-based specialists). So she’s the go-to person for tough kid-related problems in the Sawston practice.
The practice has a state-of-the-art computer system, one of six endorsed by the NHS and capable of data sharing between ambulatory practices and labs. As I discussed previously, the NHS completely bollixed up IT implementation in the hospitals through a ham handed top-down process. Conversely, IT implementation in the GP world—which involved NHS subsidies but bottom-up decision-making and implementation, has gone well. The result is that a British GP is more likely than an American PCP to have a robust computer system in his or her office. Sadly, these outpatient systems don’t talk to the (relatively few) inpatient systems, so there is a lot of paper, faxing, and scanning still, which surprised me in a unified system. This will need to be addressed.
James’s office runs efficiently, and there is a powerful sense of ownership and hands-on management. The office is run by Gerard Newnham, a sophisticated former Department of Justice administrator who walks around with a lanyard that says “LEAN” (referring to the quality improvement technique, not the body habitus.) By way of contrast, most of the space on the second floor of the Sawston office building is leased to the NHS, which is the sole provider of certain outpatient services such as physical therapy, nutrition counseling, and audiology. Looking at these two floors tells you all you need to know about government vs. market-driven efficiency: while every inch of the first floor is used optimally, the upstairs offices are often used by these NHS-employed staffers perhaps one or two days a week, though rent is being paid for full-time use.
I asked James about his billing department and he told me it consisted of one person whose job is to deal with “insurance companies.” I told him that an eight-physician practice in the US would probably have two or three staff members to handle insurance issues. “What does your insurance person do?” I asked, since his practice (like most GP practices here) does not accept private insurance. “Oh, her job is to fill out forms for our patients applying for life insurance.” In other words, they have zero FTEs dedicated to billing. Wow.
While the GPs I’ve met (about half-a-dozen) were all far more content than their US PCP counterparts, they do complain about silly NHS rules, just as their hospital-based comrades do. But the vibe is different: by virtue of owning their practices and having some independence from the NHS, there is less resignation, a greater sense of innovation, and a greater culture of ownership.
James Morrow is an unusual guy, and his office is a model practice. The overall picture of general practice in the UK is less rosy than what I saw in Sawston. I’ve heard from specialists who deride the banker’s hours and begrudge the GPs their higher pay. As in this headline from the Daily Express, some believe the QOF pays doctors extra for simply doing what they should be doing anyway. The evidence that the QOF has resulted in improved quality is positive but not overwhelming, and—as with most pay-for-performance schemes—there have been unintended consequences such as declining performance in non-compensated measures.
And then there are the usual complaints that we hear about family physicians (“jack of all trades…” and inappropriate consults are ones I’ve heard from some specialists). GPs’ practice volumes are high, and visits tend to be relatively short (partly because of the capitated payments and the small number of malpractice suits, the documentation load is lower than ours, which improves efficiency). GP training programs are too haphazard; for example, by the luck of the draw, some trainees will get little pediatrics experience despite this being an important part of their later jobs. Finally, there is a general belief that the quality of GPs is not uniformly high, and many practices remain poorly organized and continue to operate without the level of peer scrutiny and skill development that one sees in larger GP or hospital-based practices. Some of this is the lingering effect of the pre-2004 era, when few doctors who had any choice in the matter entered general practice.
But the British GP’s life today seems to be a relatively happy one. The NHS has decided that its ability to provide universal access and a decent level of care at a manageable cost depends completely on the presence of a robust primary care system, staffed with good and contented physicians. This, it seems to me, is a very wise decision.
The Republicans’ main beef against Don Berwick—which led to his decision this week to step down as Medicare chief— was that he once said that he “loved” the National Health Service. As I’ve made clear in my posts from Britain, there is much about the NHS that I don’t love—it is too bureaucratic, and its top-down tendencies stifle innovation. But if the US could emulate the UK’s system for delivering primary care and supporting outpatient generalists, I am certain we’d improve the effectiveness and sustainability of our own healthcare system very quickly.