State Health Mandates Challenging Health Savings Account Eligibility

To help chronically ill Americans afford the high costs of prescription drugs, 11 states have adopted so-called copay accumulator “adjustment” laws. The rules allow consumers to use coupons from drug manufacturers to reduce their out-of-pocket expenses at the pharmacy but require their health insurance companies to credit the full cost of the drugs toward their deductibles.

In April, the Internal Revenue Service outlined in a letter to the Illinois Department of Insurance how such schemes constitute “other coverage” under the HSA statute and will disqualify HSA owners from contributing to their accounts, absent any exception for HSA-qualified plans.

Arizona, Arkansas, Arizona, Connecticut, Georgia, Kentucky, Illinois, Louisiana, Tennessee, Virginia and West Virginia already have copay accumulator laws on their books. Arkansas and Kentucky have protections for HSAs in place, while Arizona, Georgia and Virginia, have some protections for HSAs. Oklahoma will enact retroactive HSA protection next year and ABA is encouraging Tennessee to do the same. The remaining states must pass curative legislation to bring their laws back into compliance.

ABA’s HSA Council secured a carve-out for HSAs in the model law on copay accumulators that was recently adopted at the annual meeting of the National Council of Insurance Legislators held last week in Phoenix. The council plans to make the departments of insurance in the states aware of the model law and to inform the debate at the national level about the hazards of laws that, while well-meaning, may have the unanticipated consequence of harming the millions of Americans who insure themselves with Health Savings Account qualified health plans.