When I was a boy, my dad used to tell me, “If you don’t know what you’re doing, just ask. Better to ask, son, than to have to come back later to fix something you messed up.”
It’s a mantra that state legislators should take to heart.
Oklahoma is the latest state to pass well-intentioned legislation that unintentionally has adverse consequences for individuals who are covered by Oklahoma-governed health insurance contracts and who want to make health savings account (HSA) contributions.
As background, HSAs – the most tax-advantageous savings vehicle ever designed – are creatures of federal tax law. To make an HSA contribution, the HSA account holder must be enrolled in a qualifying “high-deductible health plan,” or HDHP, another creature of federal law. An HDHP is not allowed to pay a cent in benefits (other than for preventive care) until the enrollee has satisfied their qualifying high deductible.
The IRS has made clear that an HDHP cannot credit, against an enrollee’s high deductible, amounts (like drug manufacturer coupons or other financial assistance) that the enrollee hasn’t incurred and paid. For example, if an HDHP enrollee is prescribed a $2,000 drug, and the drugmaker provides a $500 coupon or discount to the enrollee, the HDHP can’t credit the full $2,000 against the enrollee’s deductible. The HDHP can only credit the $1,500 actually paid by the enrollee.
Oklahoma is not OK (at least, not in this regard)
Last year the Oklahoma legislature passed House Bill 2678 that provided, in pertinent part:
“…a health insurer that provides pharmacy benefits[,] or a pharmacy benefits manager that administers pharmacy benefits for a health plan, …[must] include any amount paid by an enrollee or on behalf of an enrollee by another person when calculating the enrollee’s total contribution to an out-of-pocket maximum, deductible, copayment, coinsurance or other cost sharing arrangement.”
HB 2678 was effective Nov. 1, 2021, with respect to insurance contracts subject to Oklahoma law (typically, those issued in or delivered to Oklahoma).
The law might be a fine idea, but it blows up insured HDHPs subject to Oklahoma insurance law, disqualifying HDHP enrollees from making HSA contributions. According to the state’s department of insurance, the department is working with the legislature to correct the problem. See the department’s bulletin here. The legislature is set to reconvene in early February.
Oklahoma joins Connecticut, which recently passed nearly identical provisions, and Maryland, which several years ago passed a law requiring insured plans to cover male sterilization below any deductible, as states whose legislatures have inadvertently and at least temporarily blown up the ability of HDHP enrollees to make HSA contributions.