RD12 - Virginia's Medical Savings Account Program Study

Executive Summary:
Section 38.2-5603 of the Code of Virginia requires the Joint Commission on Health Care to "monitor the development" of the Virginia Medical Savings Account Plan. Section 38.2-5600 of the Code of Virginia requires the establishment of the Virginia Medical Savings Account Plan and imposes specific responsibilities concerning development of the plan on four state agencies. These agencies are the Department of Taxation, Department of Medical Assistance Services, Workers' Compensation Commission, and the Bureau of Insurance. At its May 1, 2001 meeting, the JCHC directed staff to complete this review.

Based on our research and analysis during this review, we concluded the following concerning the Virginia Medical Savings Account Plan:

• A medical savings account (MSA) is a two-part individual health insurance plan, consisting of a high deductible catastrophic policy and a tax-exempt individual savings account.

• Federal law imposes limits on the number and size of tax-exempt MSAs.

• Relatively few MSAs have been established in the United States.

• Legislation (i.e., the Virginia Medical Savings Account Plan) was enacted in 1995 to promote the use of MSAs in Virginia.

• Virginia's MSA statute is based on a model (i.e., the American Health Care Plan) developed by the Jeffersonian Health Policy Foundation.

• The American Health Care Plan represents a significant departure from Virginia's current health care delivery system and marketplace.

• According to Virginia's MSA statute: 1) the Department of Taxation is required to develop a tax credit proposal for MSAs; 2) the Workers' Compensation Commission is required to utilize MSAs for the provision of health care services; 3) the Department of Medical Assistance Services is required to develop a federal waiver proposal for the use of MSAs; and 4) the Bureau of Insurance is required to monitor the availability of high deductible, catastrophic health insurance policies.

• Development and implementation of the Virginia MSA plan has not occurred, and there has been no implementation activity at all since August, 1997.

• Each of the four responsible state agencies have identified and raised implementation issues and other concerns regarding the MSA statute.

• The Department of Taxation has indicated that an MSA tax credit proposal could be developed.

• Given the passage of time since the statute was enacted in 1995 and the limited activity in implementing it, some substantive modifications to the statute may be warranted.

A number of policy options were offered for consideration by the Joint Commission on Health Care regarding the issues discussed in this report. These policy options are listed on page 31.

Our review process on this topic included an initial staff briefing, which comprises the body of this report. This was followed by a public comment period during which time interested parties were given the opportunity to provide written comments to us regarding this report. However, no public comments were received in response to this report.

On behalf of the Joint Commission on Health Care and its staff, I would like to thank the Department of Medical Assistance Services, the Bureau of Insurance, the Workers' Compensation Commission and the Department of Taxation for their cooperation and assistance during this study.

Patrick W. Finnerty
Executive Director
December 2001