Evolution Benefit’s Efforts to Impose Substantiation on HSAs

MEMORANDUM

Page 1 of 6

To: Coalition Members and Opinion Leaders

From: Dan Perrin

Re: House Ways and Means Staff Back New Fees for Corporations to Review and Approve How Americans with HSAs Spend their Own Money

 

Date: April 5, 2008

1) There is considerable anger and alarm that John McManus, formerly the Staff Director of the Health Subcommittee of the Committee of Ways and Means to then Chairman Bill Thomas (R-CA), is attacking HSAs by convincing the Democratic Ways and Means Committee staff to amend the HSA statute on behalf of one of his clients by impairing a central HSA tenet; the right of individuals to control their health care spending when using their own money.

2) The story begins when Mr. McManus was working for Chairman Thomas and Chairman Thomas did not include HSAs in the Medicare Rx bill, when Chairman Thomas reported his portion of the bill out of his Committee. Substantial pressure was required to get Chairman Thomas to agree to add the HSA provision in the House Rules Committee. In fact, John McManus helped make the HSA inclusion happen. (It turns out that the two Members of Congress who switched their no votes to yes to pass the Medicare Prescription Drug bill did so to make HSAs law, so without HSAs, President Bush would not have passed the Medicare Prescription Drug bill.)

3) Now, Evolution Benefits, a third-party administrator and one of Mr. McManus’s lobbying clients wants to get paid the way they do with Flexible Spending Accounts – by reviewing every single expenditure made by employees, called “substantiation” — and then reimbursing the employee each time they spend the employer’s money from the FSA.

4) Evolution Benefits can double what it charges employers if HSAs are subject to evaluation by a third party administrator – which is the point of convincing Democrats to hurt HSAs by eliminating consumer control over their own money.

5) The money in employees’ FSAs is the employer’s money, not the employees. That is why, unless the employee spends all the FSA money each year, they “lose it.” In fact, it never belonged to them in the first place. This is also why employees with FSAs cannot invest those funds in IRA approved investments, like you can with HSAs.

6) Since FSA money is the employer’s there is no quibble that employers should be able to review what employees spend out of the FSA; it’s the employer’s money.

7) The money in a HSA belongs to the account holder, not the employer or anyone else. Now, to subject that individual to a costly “review” of how they spend their own money, is like telling you that all your expenditures on your car will be reviewed by a third-party administrator.

8) It is hard to understand how the Democrats could walk right into this one: they are always being accused by the Republicans of wanting to control American’s health care, or subjecting Americans to government controlled health care. Democrats are always boasting that they want to expand the number of Americans covered and give them choice, not mandates. Now, the Democrats are subjecting Americans with HSAs to a corporate review of how they spend their own money that will imperil the ability of those Americans with HSAs to keep affording them. (More than 25% of those individuals whose employer does not provide health insurance, and who bought HSAs last year, were uninsured. They became insured because HSAs are affordable.)

9) What is amazing is that we have been down this path before. HMOs tried to review and approve all the health care access for each insured, and HMOs lost market share, went out of business or changed their business model, because Americans do not like having their health care controlled, especially by corporations.

10) Just to be clear: Democrats are empowering some corporations to charge Americans with HSAs higher monthly fees to review the expenditures of their own money. This is not a winner politically.

11) This precedent means that expenditures from IRAs should also be “substantiated.” The message is clear, we (the Democrats) think you cannot make your own decisions, so we are going to force you to pay a company to review your decisions and then we will give you access to your own money but only after we decide whether or not you made the right choice in the first place.

12) How did John McManus lure the Democrats into this obvious political ambush? He took HSA expenditures that Evolution Benefits thought, might, perhaps, maybe violate the expenditure rules and began waiving them around Congress that individuals were abusing their HSAs.

13) All Evolution Benefits could tell was that account expenditures were coming from a cruise line, or a casino or – shocker of shockers – a rental car company. There are handful of actual examples that have been circulating around the Hill, courtesy of Evolution Benefits. They say their data says 25% of transactions come from non-medical providers. Is Wal-Mart a medial provider? At Wal-Mart you can get glasses (an allowable expense), prescriptions (an allowable expense) or go to one of their in store clinics or to buy first aid or Tylenol or Advil or Aspirin (all allowable).

14) (For all those who have a problem with corporations taking your expenditures – even if they do not identify to the politicians and the staff who you are – and spreading them all over Capitol Hill, I join you in that concern.) But this is what happens when Evolution Benefits uses its data to try and double its revenue from HSAs by getting the Democrats to agree to force corporate control on individuals who are spending their own money. And then force the individuals to pay a monthly fee to be subjected to this control.

15) But back to the rental cars, casinos and cruise lines. People are allowed to spend on things not on the list of allowable expenses from their HSA, but if they do, then they pay income tax and a 10% penalty on the money.

16) But there are reasons that you could spend money from your HSA on a cruise or at a casino or on a rental car, and that expenditure be allowed. For example, without taxes or penalty, you can spend from your HSA to:

  • Travel to see a doctor or provider, and you if need to rent a car, you can spend from your HSA.
  • If you get sick on a cruise ship and need medical care, you can pay the ship’s doctor, buy prescription drugs or get a massage.
  • If you had a crown break on the cruise or get a tooth ache, you can see the ship’s dentist and pay from your HSA.
  • Say you have to travel and for your medical care and you stay at a casino, you can pay for your room with your HSA funds.
  • If you have paid thousands of dollars out-of-pocket to meet your deductible, and want to reimburse yourself from your HSA at a casino, no problem. You are allowed.

17) It is interesting that out of an estimated tens of millions of transactions from each year associated with HSAs, ten actual examples that show specifically where the expenditure occurred are the best Evolution Benefits can come up with – and given they want to double their revenue, you have to wonder how the Democrats on the Ways and Means Committee agreed to empower corporate supervision over how Americans spend their own money. And force the HSA policy holder to pay companies like Evolution Benefits to do it.

18) Below is a summary list of allowable expenditures for FSAs, Health Reimbursement Arrangements (HRAs), and HSAs.

The following information from the IRS offers a summary of some of the healthcare expenses that are eligible, without taxes or the 10% penalty, through your Health Savings Accounts (HSA). This list is not all-inclusive and examples and specific requirements are subject to change by the Internal Revenue Service.

For specific descriptions of what is covered under each of these areas, please see IRS Publication 502 Medical and Dental Expenses, available online under “Forms and Publications” at http://www.irs.gov/pub/irs-pdf/p502.pdf or by calling 1-800-829-3676. For tax advice, consult your tax advisor.

ABDOMINAL SUPPORTS
ACUPUNCTURE
AIR CONDITIONER (when necessary for relief from difficulty breathing)
ALCOHOLISM
AMBULANCE
ANESTHETIST
ARCH SUPPORTS
ARTIFICIAL LIMB or PROSTHESIS
ARTIFICIAL TEETH
AUTOETTE (when used for relief of sickness/disability)
BIRTH CONTROL
BLOOD TESTS
BLOOD TRANSFUSIONS
BRACES
BRAILLE BOOKS, MAGAZINES
CAR ADAPTATIONS
CARDIOGRAPHS
CHILDBIRTH/DELIVERY
CHIROPRACTORS
CHRISTIAN SCIENCE PRACTITIONERS
CONTACT LENSES
CONTRACEPTIVE DEVICES (by prescription)
CONVALESCENT HOME (for medical treatment only)
CRUTCHES
DENTAL TREATMENT
DERMATOLOGIST
DIAGNOSTIC DEVICES
DOCTOR’S FEES
DRUG ADDICTION
DRUGS (prescription)
ELASTIC HOSIERY (prescription)
EYEGLASSES
EYE SURGERY
FEES PAID TO HEALTH INSTITUTE PRESCRIBED BY A DOCTOR
FERTILITY ENHANCEMENT
FICA AND FUTA TAX PAID FOR MEDICAL CARE SERVICE

FEES PAID TO HEALTH INSTITUTE PRESCRIBED BY A DOCTOR
FERTILITY ENHANCEMENT
FICA AND FUTA TAX PAID FOR MEDICAL CARE SERVICE
FLUORIDATION
GUIDE DOG
GUM TREATMENT
GYNECOLOGIST
HEALTH INSTITUTE
HEARING AIDS
HOSPITAL SERVICES
HYDROTHERAPY
INSULIN TREATMENT
INSURANCE PREMIUMS
LABORATORY FEES
LEAD PAINT REMOVAL
LEARNING DISABILITY/SPECIAL EDUCATION
LEGAL FEES
LODGING (away from home for outpatient care)
LONG-TERM CARE INSURANCE PREMIUMS
MEDICAL CONFERENCES
MEDICAL INFORMATION PLAN
MEDICINES OR DRUGS
MENTALLY RETARDED, SPECIAL HOME
METABOLISM TESTS
NEUROLOGIST
NURSING HOME
NURSING SERVICES
OBSTETRICIAN
OVER-THE-COUNTER MEDICATIONS
OPERATIONS OR SURGERY
OPHTHALMOLOGIST
OPTICIAN
OPTOMETRIST
ORAL SURGERY
ORGAN TRANSPLANT (including donor’s expenses)
ORTHOPEDIC SHOES

ORTHOPEDIST
OSTEOPATH
OXYGEN
PEDIATRICIAN
PHYSICIAN
PHYSIOTHERAPIST
PODIATRIST
POSTNATAL TREATMENTS
PRACTICAL NURSE FOR MEDICAL SERVICES
PRENATAL CARE
PRESCRIPTION MEDICINES
PSYCHIATRIC CARE
PSYCHOANALYSIS
PSYCHOLOGIST
PSYCHOTHERAPY
RADIUM THERAPY
REGISTERED NURSE
SMOKING CESSATION PROGRAMS
SPECIAL SCHOOL COST FOR THE HANDICAPPED
SPINAL FLUID TEST
SPLINTS
STERILIZATION
SURGEON
TELEPHONE (for the hearing impaired)
TELEVISION (for the hearing impaired)
THERAPY or COUNSELING
TRANSPLANTS
ULTRA-VIOLET RAY TREATMENT
VACCINES
VASECTOMY
VITAMINS (if prescribed)
WEIGHT LOSS PROGRAM
WHEELCHAIR
WIG
X-RAY FEES

19) All Coalition members should contact (by phone and fax them a letter) U.S. House Democratic Members of the Ways and Means Committee and urge them not subject HSAs to substantiation for the foregoing reasons.

20) Here is a list of the Democratic members of the U.S. House of Representatives that sit on the Committee on Ways and Means: http://waysandmeans.house.gov/members.asp?cong=18

21) There are no Republicans that we know of that agree with what Evolution Benefits wants, and we will be working to find a Republican to offer an amendment to strike the provision if it is not pulled prior to mark-up.

22) If the forgoing reasons are not enough to oppose substantiation, here are some others:

· Banks and Credit Card companies will no longer offer debit cards with HSAs;

· It will force what are efficient consumer experiences into the age of paper, 90% of FSA transactions are paper – 90% of HSA purchases are electronic;

· The tens of millions of dollars spent to allow HSAs to interact in the normal electronic retail environment, and with their insurer and with their bank will have be wasted and have to be redesigned and rebuilt; and,

· The main idea of HSAs is to get away from third-parties and third-party administrator who are standing between the patient and their doctor or their provider. This brings them back.

23) Here is the draft letter from the HSA Coalition that will go to each Democratic Member of the U.S. House Committee on Ways and Means on Monday afternoon – since the mark-up for the bill containing substantiation will be on Tuesday. The letter has that 30 second ad feel to it. Coalition Members with suggested changes to the draft letter can email them to me at the email above.

April 7, 2008

The Honorable John Lewis

Member, Committee on Ways and Means

U.S. House

Washington, D.C. 20510

Dear Congressman Lewis:

Tomorrow at the Ways and Means Committee mark up, the bill will contain a provision to force Americans with Health Savings Accounts to pay new and additional monthly fees to corporations so that every expenditure from their Health Savings Account is reviewed, approved and weeks later, paid.

We oppose this provision and urge you to use your good offices to have it removed from the bill before mark-up, or vote for an amendment to strike the provision.

We do not believe you support higher profits for corporations at the expense of forcing bureaucracy and control over Americans who are spending their own money.

Our understanding is that this provision was inserted by Committee staff at the request of Mr. John McManus (a former Chairman Thomas (R-CA) staffer) on behalf of his client, Evolution Benefits, which is in the business of charging monthly fees to review and “substantiate” each purchase of a bottle of Tylenol or aspirin.

Millions of transactions have been conducted by Americans from their Health Savings Accounts, and we are certain that they will be strongly opposed to corporate interference of how they spend their own money on their health care, and furthermore, will oppose being forced to pay a new monthly fee so some third-party corporation can conduct that interference, because of a new law.

This is especially true since 90% of HSA transactions are electronic, and the companies that would benefit from these new monthly fees conduct 90% of their reviews of expenditures by paper.

Sincerely,

Dan Perrin

Executive Director

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