HSAs are no substitute for Obamacare credits
Some Iowa Republicans aren't telling you the whole truth
This is an important week as Congress moves closer to deciding whether to extend health insurance tax credits for millions of Americans facing dramatically higher insurance costs next month.
Polls say most Americans want the Affordable Care Act’s enhanced tax credits extended, but most members of Iowa’s congressional delegation apparently don’t agree. Like Ashley Hinson.
Hinson, who is running for the US Senate, instead says she supports putting federal money into Health Savings Accounts, which are tax-advantaged accounts that can be used for qualified medical expenses.
HSAs are a handy tool for politicians who want to seem like they’re offering a credible substitute for the Obamacare tax credits but really aren’t. The proof is in what Republicans don’t tell you about HSAs, which is this: You can’t use them to pay your monthly premium costs.
So, what are they good for?
HSAs and similar accounts are mostly used by higher-income, healthier people in employer-sponsored health plans, according to a recent report by the Government Accountability Office.
Often, they’re used for deductibles and co-pays.
In order to qualify for an HSA, consumers have to purchase a high-deductible insurance plan.
In the Obamacare marketplace, that basically means purchasing a bronze-rated plan. These are the lowest rated of the metal plans. Their monthly premiums are lower than the other plans, but next year, they’ll also have a $7,500 deductible on average, which is much higher than the other plans.
Also, bronze-rated plans only cover 60% of medical costs after the deductible is paid, and out-of-pocket maximums will reach $10,600 next year, except for people with the lowest incomes, which is up from 2025, according to the New York Times.
A leading Republican HSA plan now being considered in the Senate would give $1,000 to people who are ages 18-49 and $1,500 to people between 50 and 65.
That doesn’t sound like it would do much to deal with higher costs, especially for sicker folks, and experts say that older people who don’t qualify for Medicare yet are in an especially difficult position. Critics say lots of people would just drop coverage rather than absorb the higher costs.
Still, I can’t deny the political appeal of HSAs in this debate. Republicans get to say they’re sending money directly to voters and bypassing all those big, bad insurance companies, which make them sound like populists. They just neglect to mention the strings that come attached to HSAs. (The news stories about their plans also tend to skirt the details.)
Nor are the real stakes in this debate given adequate attention.
As two health care experts wrote in the Chicago Tribune on Monday, this isn’t just a debate about dollars and cents, it’s about life and death; including, they write, when it comes to attempts to substitute Health Savings Accounts for Affordable Care Act tax credits.
“… HSA deposits do nothing to prevent the real harm,” write Wendy Netter Epstein, a professor of law and the former faculty director at the Mary and Michael Jaharis Health Law Institute at DePaul University, and Christopher Robertson, who teaches law and public health at Boston University and Harvard University. “The health consequences of losing insurance—or of having insurance that is difficult to affordably use—are well documented. A substantial body of research shows a clear relationship between lack of comprehensive coverage and higher death rates.”
Hinson and other Republicans also have been trying to portray Obamacare tax credits as rife with fraud, and they’re misusing a recent GAO report to do so.
Don’t take their claims at face value. As with HSAs, they won’t tell you the whole story about this audit, which the GAO itself says can’t be extrapolated to represent how all of the Obamacare tax credits are used.
Does it point out risks for fraudulent activity? You bet. But every large federal program runs these risks. This includes programs that Iowa Republicans love and vigorously defend. Like federal tax credits for biofuels.
The Treasury Department’s Inspector General last year reported a real risk for fraud in the biofuels tax credit program. There also have been high-profile instances where thieves used the credits to defraud the government. But when was the last time you heard a Republican in Iowa’s congressional delegation question whether those credits should be continued?
That’s right, never.
They also voted this year to extend generous tax cuts for the wealthy, even though it is abundantly clear many of the richest Americans already don’t pay their fair share of taxes.
An IRS report this year said roughly $600 billion in taxes that were owed went unpaid in 2022. And half of underreported income, by far the biggest part of the problem, was attributable to the top 5% of income earners in the US, according to a study cited by the non-partisan Congressional Research Service.
That $600 billion is an annual amount, and it’s 20 times more than the entire cost of the enhanced yearly Obamacare tax credits at issue here. But when was the last time you heard a Republican politician from Iowa complain about rich tax cheats pushing their burden onto the rest of us?
That’s right, never.
Soon, we’ll know which members of Iowa’s congressional delegation will act to stop health insurance costs from rising dramatically on tens of thousands of their low-income and working-class constituents in this state. And which are simply looking for political cover.
An invitation
The Iowa Writers’ Collaborative is hosting its annual holiday party Wednesday, Dec. 17, from 7-10 p.m. at The Harkin Institute, 2800 University Ave., Des Moines, on the campus of Drake University.
Paid subscribers to the newsletters of Collaborative members are invited to attend for free. The cost for non-members is $35 per person.
This is a good opportunity to meet writers from the Collaborative and enjoy some holiday cheer.
You can RSVP here.
Along the Mississippi is a proud member of the Iowa Writers Collaborative. Please check out the work of my colleagues and consider subscribing. Also, the collaborative partners with the Iowa Capital Dispatch, which provides hard-hitting news along with selected commentary by members of the Iowa Writers Collaborative. Please consider making a donation to support its work, too.
I remember when Health Savings Accounts were all the rage...21 years ago when George W. Bush rolled them out during his Presidential Campaign. Its been 21 years, ACA isn't perfect but at least the Democrats circled the wagons around "some kind of plan" to cover the uninsured--and ACA is just Romney-Care from when Mitt was Governor of Massachusetts. Why can't the GOP come up with ANY kind of plan? Like, zero ideas in 2 decades aside from dusting off W's plan from 2004.
I haven't seen this quality of coverage connecting the removal of health care coverage from working-class and lower-income Iowans directly to tax breaks for the top 1% (both state and federal). This context is vital. Just as vital is writing in a way that is understood by everyday Iowans. (Art Cullen has been accused of this, too) It is often overlooked that this same highly-compensated group is also documented as being the worst at paying their fair share of taxes and committing financial fraud. The dual dynamic of cutting services for the needy while rewarding the tax-averse wealthy is central to the health care debate. More important, it points to the enrichment of the wealthiest of the wealthy under this administration.