A growing number of consumers and employers are managing their health care expenses by pairing a high-deductible health plan with a health savings account. Under such a model, consumers, employers, or both deposit tax-free contributions into an HSA, which appreciates in value over time (like a retirement account). Those tax-free dollars are used to cover qualified, out-of-pocket health care costs until a plan’s deductible is met. In the event of an expensive health care event – like a chronic disease or a catastrophic injury – the high-deductible health plan acts as a backstop to prevent additional out-of-pocket expense.
HSAs are an important tool used to encourage consumers to invest in their own health care needs and manage costs, by offering big tax savings; anywhere from $3,650 for self-only coverage or up to $7,300 for family coverage in 2022. Presumably, Oklahoma state legislators support HSAs, which greatly benefit constituents. Unfortunately, due to pressure from the pharmaceutical lobby and poorly thought-out legislation, tax benefits associated with HSAs may be eliminated for some Oklahoma consumers.
House Bill 2678, passed in 2021 and now Oklahoma law, was introduced at the behest of the pharmaceutical industry and branded as a “pro-consumer” bill. The stated intention was to make it easier for users of HSAs to use “coupons” to purchase brand-name drugs, rather than relying on more affordable, generic counterparts. Coupons are issued by many big pharmaceutical brands to entice consumers to purchase their specific drugs, rather than encourage the consumer to shop for less expensive generic options. HB 2678, in theory, gives consumers more options and more financial support if they choose more expensive options.
Unfortunately, the unintended consequences of this new policy affected consumers more profoundly than the intended ones. In fact, Oklahoma law now conflicts with federal law, meaning that any consumer covered under a HDHP/HSA model who uses coupons to purchase brand-name drugs may now lose all tax benefits derived from an HSA, which could mean hundreds or even thousands of dollars of lost tax benefits.
Oklahomans who utilize the HSA model and coupons have exercised informed choices based on federal tax rules that the Oklahoma Legislature has now contradicted on the fly, without thorough examination of the negative effects to consumers and taxpayers alike. If you utilize the HSA health care option and use coupons to purchase prescription drugs, please seek counsel to understand and prepare for this potential tax hit.
All consumers should be asking lawmakers to unravel the damage done by HB 2678. Pharmaceutical companies are the winners here, not consumers. Meanwhile, the tax benefits enjoyed by Oklahoma families, used to support and manage their health care costs, have been gutted. Oklahoma lawmakers created this problem; it is now incumbent on them to fix it.
Ericka McPherson is executive director of Oklahoma Families for Affordable Health Care.
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