Summary of Benefit Coverage Requirements for Health FSAs and HRAs

May 1st, 2012 | No Comments |
Category: Compliance and Regulatory, DOL, ERISA, FSA, Flexible Spending, HHS, HIPAA, HRA, Health Reimbursement, IRS, PPACA, Section 125 Plans, Uncategorized

Does an employer have to provide a copy of the Summary of Benefits and Coverage (“SBC”) to enrollees of Health Flexible Spending Accounts (“Health FSA”) or Health Reimbursement Arrangements (“HRA”)?

The SBC requirement applies to group health plans (both insured and self-insured) and insurers (as defined by applicable provisions of the PHSA, ERISA, or the Code) but not to certain “excepted benefits,” PHSA § 2715(a), as added by PPACA, Pub. L. No. 111-148 (2010). Grandfathered group health plans must comply with this mandate, as provided in PPACA, Pub. L. No. 111-148, § 1251(a)(3) (2010), as amended by PPACA, Pub. L. No. 111-148, § 10103(d)(1) (2010).

When is a Health FSA or a HRA considered an excepted benefit?

Health FSA:
A health FSA is considered an excepted benefit for a “class of participants” if the health FSA is a health FSA under Code Section 106(c)(2) and satisfies two conditions:
*Maximum Benefit Condition: The maximum benefit payable under the health FSA to any participant in the class for a year cannot exceed two times the employee’s salary reduction election under the health FSA for the year (or, if greater, the amount of the employee’s salary reduction election for the health FSA for the year, plus $500), as provided in Treasury Regulations Section 54.9831-1(c)(3)(v)(B);DOL Regulations Section 2590.732(c)(3)(v)(B);HHS Regulations Section 146.145(c)(3)(v)(B); and

*Availability Condition: Other nonexcepted group health plan coverage (e.g., major medical coverage) must be made available for the year to the class of participants by reason of their employment, as provided in Treasury Regulations Section 54.9831-1(c)(3)(v)(A);DOL Regulations Section §2590.732(c)(3)(v)(A); HHS Regulations Section146.145(c)(3)(v)(A).

Neither the regulations nor the preamble to the regulations explains what is meant by the term “class of participants.” The term appears to preclude a “participant-by-participant” approach to determining whether benefits under a health FSA are excepted benefits.

Examples of Health FSA Funding That Meet the Maximum Benefit Condition:

* A one-for-one employer match (employer $600, employee $600).
* An employer contribution of $500 or less (employer $500, employee $200).
Examples of Health FSA Funding That Do Not Meet the Maximum Benefit Condition:
* An employer contribution of more than $500, if employee contributes $500 or less (employer $600, employee $400).
* An employer contribution in excess of one-to-one match, if employee contributes more than $500 (employer contributes $700, employee contributes $600).

Remember: Health FSAs funded exclusively by employee salary reduction contributions (with annual coverage capped by the amount of the annual salary reduction election) will, by definition, satisfy the Maximum Benefit Condition.

HRA:

A 100% employer-paid stand-alone HRA with an annual limit less than or equal to $500 and no carryovers will be considered an excepted benefit if the employer makes major medical insurance available to all employees who are eligible for the HRA. This is the same requirements as provided above for Health FSAs. This is because such an HRA may be considered a health FSA and would qualify as an excepted benefit. Likewise, a retiree-only HRA or limited-purpose HRA (i.e., that provides only vision and dental benefits) would also be considered an excepted benefit .

The above HIPAA exceptions will not apply to most HRAs. HRAs that can be used for medical expenses generally and that permit carryovers or that provide an employer-funded benefit of more than $500 will not be considered excepted benefits.

American Benefits can create SBCs for non excepted FSAs and HRAs. Contact your benefits administrator or support@amben.com

no comments >

HHS issues draft bulletin defining Actuarial Value for Health Plans

March 1st, 2012 | No Comments |
Category: CDHC, Compliance and Regulatory, HRA, HSA, Health Care Reform, Health Reimbursement, Health Savings Accounts, IRS, Taxes, Uncategorized

The HHS has just issued their draft bulletin on defining the “actuarial value” methodology that will be used to calculate AV for health plans, and it is good news for HSAs and HRAs! The rules DO include the employer contributions to accounts in the calculations, which is tremendously beneficial to the attractiveness of the plans. An excerpt from HHS document is below.

The key text is below:

Treatment of Health Savings Accounts and Health Reimbursement Arrangements in Calculating Actuarial Value Section 1302(d)(2)(B) of the Affordable Care Act directs the Secretary to issue regulations under which employer contributions to a health savings account (within the meaning of section 223 of the Internal Revenue Code of 1986) may be taken into account in determining the level of coverage for a plan of the employer. Calculation of the AV of high-deductible health plans (HDHP) linked to a health savings account (HSA) or a health plan linked to a health reimbursement arrangement (HRA) poses a special challenge. Simply calculating the AV of the HDHP based on the insurance product could understate the value of coverage and some HDHPs could fall below the level of a bronze plan based on the HDHP alone. Yet accounting for the total coverage provided by the combination of the HDHP and the full value of the HSA or HRA could overstate the AV because, empirically, only a portion of these accounts are used toward health in a given year. The AV calculation should, therefore, reflect an appropriate adjustment to these contributions. We intend to propose that for purposes of calculating the AV of an employer health benefit plan, the annual employer contribution to the employee’s HSA associated with a qualifying HDHP and the amount made available for the first time in a given year under a HRA that is linked to an employer health benefit plan shall be considered part of the benefit design of the health plan. In calculating the AV of the combined HDHP and HSA or combined employer health benefit plan and HRA, the calculation would assume that the employer contribution to the HSA or HRA is used by the employee to pay for cost-sharing. Accordingly, these amounts would be credited to the numerator of the AV calculation. This means that the AV calculator would include any current year HSA contributions and amounts first made available under an HRA as an input into the calculator that can be used to determine the AV of an employer health benefit plan. For example, if a HDHP with a $3,000 deductible has an AV of 55 percent and the employer provides an HSA contribution of $1,000, that contribution would be applied towards the numerator of the AV calculation. However, because generally only a portion of an HSA is used in a year for health services, HSA contributions would be adjusted so that the employer receives the same credit for HSA contributions in the numerator of the AV calculation as it would receive for the same amount of first-dollar insurance coverage. The same rule would apply for amounts first made available under an HRA. In the individual market, we intend to propose that HSA contributions paid directly by the individual would not count towards AV. Finally, we note that the method used to evaluate the HSA or HRA impact on health plan AV has no bearing on the opportunity of employers to offer HSAs or HRAs, or the tax treatment of HSA contributions or amounts made available under an HRA.

no comments >

Are You Really Saving Money By Self Administering Your HRA?

February 23rd, 2012 | No Comments |
Category: CDHC, COBRA, Cafeteria Plans, Compliance and Regulatory, FSA, Flexible Spending, HIPAA, HRA, Health Care Reform, Health Reimbursement, Medicare, Taxes, Uncategorized
 
Posted by RENEE KUHS, Compliance Attorney

Do you think you’re saving money by administering your health reimbursement arrangement (HRA)?  In our experience, many employers that self-administer an HRA often overlook important compliance obligations that put them at financial risk.  Failure to comply with the following requirements is common and can be costly. 

 COBRA

 An HRA is a group health plan subject to COBRA.  Employees that experience a qualifying event are entitled to continue coverage under the employer’s HRA.  An employer that fails to extend COBRA coverage to HRA participants can be subject to substantial fines.  Employers can be fined up to $110 per day for failure to provide an initial notice or election notice.

 HIPAA Privacy

 An HRA is a self-funded health plan and governed by the HIPAA Privacy Rules.  Employers that offer a fully-insured health plan and sponsor an HRA often overlook their HIPAA Privacy obligations.  In order to administer an HRA, the entity processing the claims receives protected health information (PHI) which is protected by HIPAA.  Employers that offer a fully-insured health plan will rely on the insurance carrier to comply with the HIPAA Privacy Rules.  However, the HRA compliance obligations rest with the employer.  Employers that do not comply can be subject to civil penalties of up to $100 per violation.

 Medicare Reporting

 An HRA is a group health plan subject to Medicare Secondary Payer (MSP) provisions.  New reporting requirements went into effect in the fourth quarter of 2010.  Employers are required to provide HRA coverage information to the Centers for Medicare and Medicaid Services (CMS).  The information reported to CMS will allow better coordination of payer responsibilities between the group health plan and Medicare.  Failure to comply could result in fines of up to $1,000 per day.

 Plan Documents

 An HRA is an employee welfare plan under ERISA.  ERISA requires that every warfare plan be established and maintained pursuant to a written instrument.  The written instrument or plan document serves to define what expenses are eligible for reimbursement, the amount of employer contribution, and whether the funds may be rolled over from year to year.  Not only could an enforcement action be brought against an employer for failure to have a plan document, but it is difficult for the employer to prove plan terms and enforce its provisions.

If you are administering an HRA for your employees and are concerned about your compliance status, please feel free to contact support@amben.com  or rcummings@amben.com

 

no comments >

EBRI Study – HSA and HRA Accounts Continue Growth Trend

February 15th, 2012 | No Comments |
Category: CDHC, Compliance and Regulatory, Flexible Spending, HRA, HSA, Health Care Reform, Health Reimbursement, Health Savings Accounts, IRS, PPACA, Taxes, Uncategorized

www.myhealthguide.com

MyHealthGuide Source: Employee Benefit Research Institute (EBRI), 1/2012, EBRI New Release and EBRI Full Text Brief with ChartsExecutive Summary

ASSET LEVELS GROWING

  • In 2011, there was $12.4 billion in health savings accounts (HSAs) and health reimbursement arrangements (HRAs), spread across 8.4 million accounts, according to data from the 2011 EBRI/MGA Consumer Engagement in Health Care Survey, sponsored by EBRI and Matthew Greenwald & Associates.
  • This is up from 2006, when there were 1.3 million accounts with $873.4 million in assets, and 2010, when 5.4 million accounts held $7.3 billion in assets.

AFTER LEVELING OFF, AVERAGE ACCOUNT BALANCES INCREASED

  • After average account balances leveled off in 2008 and 2009, and fell slightly in 2010, they increased in 2011. In 2006, account balances averaged $696.
  • They increased to $1,320 in 2007, a 90 percent increase.
  • Account balances averaged $1,356 in 2008 and $1,419 in 2009, 3 percent and 5 percent increases, respectively.
  • In 2010, average account balances fell to $1,355, down 4.5 percent from the previous year. In 2011, average account balances increased to $1,470, a 9 percent increase from 2010.

TOTAL AND AVERAGE ROLLOVERS INCREASE

  •  After declining to $1,029 in 2010, average rollover amounts increased to $1,208 in 2011.
  •  Total assets being rolled over increased as well: $6.7 billion was rolled over in 2011, up from $3.7 billion in 2010.
  • The percentage of individuals without a rollover remained at 13 percent in 2011.

HEALTHY BEHAVIOR DOES NOT MEAN HIGHER ACCOUNT BALANCES AND HIGHER ROLLOVERS

  • Individuals who smoke have more money in their accounts than those who do not smoke. In contrast, obese individuals have less money in their account than the non-obese.
  • There is very little difference in account balances by level of exercise. Very small differences were found in account balances and rollover amounts between individuals who used cost or quality information, compared with those who did not use such information.
  • However, next to no relationship was found between either account balance or rollover amounts and various cost-conscious behaviors. When a difference was found, those exhibiting the cost-conscious behavior were found to have lower account balances and rollover amounts.

DIFFERENCES IN ACCOUNT BALANCES

  • Men have higher account balances than women, older individuals have higher account balances than younger ones, account balances increase with household income, and education has a significant impact on account balances independent of income and other variables.

DIFFERENCES IN ROLLOVER AMOUNTS

  • Men rolled over more money than women, and older individuals had higher rollover amounts than younger individuals. Rollover amounts increase with household income and education, and individuals with single coverage rolled over a slightly higher amount than those with family coverage.

About EBRI

The Employee Benefit Research Institute is a private, nonprofit research institute based in Washington, DC, that focuses on health, savings, retirement, and economic security issues. EBRI does not lobby and does not take policy positions. Visit www.EBRI.org.

no comments >

Health savings accounts surpass $12.4 billion

February 8th, 2012 | No Comments |
Category: CDHC, COBRA, Compliance and Regulatory, Flexible Spending, HRA, HSA, Health Care Reform, Health Reimbursement, Health Savings Accounts, IRS, Taxes, Uncategorized

By

February 1, 2012

By year-end 2011, health savings accounts surpassed $12.4 billion in nearly 6.8 million accounts, according to market research from broker/dealer firm Devenir.

The company surveyed the top 50 HSA providers in the health savings account market, and predicts the HSA market will reach $27.6 billion in assets by the end of 2015.

“We continue to see strong growth in the HSA marketplace as well as steady increases in average balances”, said Eric Remjeske, president and co-founder, in a a statement.

Key findings from the Devenir December 2011 survey and research report:

  • Steady growth. HSAs continue to see consistent growth as the total number of HSA accounts rose to almost 6.8 million with assets totaling $12.4 billion, a year over year increase of almost 20 percent for accounts and a nearly 26 percent increase in assets for the period from December 31st, 2010 to December 31st, 2011.
  • Average account balances at the end of 2011 grew to $1,841 from $1,751 at the end 2010, a 5.1 percent increase. When you eliminate identified zero balance accounts that average rises to $2,179.
  • Existing accounts average balances have grown at an average of 31 percent each year from the year they were opened since 2005.
  • Contributions and withdrawals. HSA accountholders carried forward 24 percent of their contributions over the past year into 2012.
  • HSA investment dollars continue to grow.  HSA investment assets reached an estimated $960 million in December, a 34 percent year over year increase and are projected to reach $4.7 billion by end of 2015.

 

no comments >

CMS Cuts Some Slack on HRA Reporting Rules

September 28th, 2011 | No Comments |
Category: CDHC, Compliance and Regulatory, HRA, Health Reimbursement, Uncategorized

The Centers for Medicare and Medicaid Services (CMS) provided badly needed relief to Health Reimbursement Arrangement (HRA) administrators in an Alert that was issued on Thursday.

HRAs have been subject to a quarterly reporting requirement under Medicare Secondary Payer (MSP) rules that have been in effect for years. What this means is that HRA administrators must provide participant data to CMS so it can determine when Medicare is primary or secondary coverage to an employer-provided HRA.

One key exception was for participants with an annual benefit level of less than $1,000. Effective October 3, 2011, the Alert increases that threshold to $5,000. The practical impact will be a significant reduction in the number of participants who must be reported.

Another important change relates to participants who have exhausted their account balances for the year, where the employer has already fully funded the account. These participants should now be reported to CMS as terminated.

For the past two weeks, there were several indicators that CMS might relax this reporting requirement. A September 7, 2011, teleconference indicated to us that CMS might make this change, and we anticipate that other positive changes may be in the works.

Stay tuned.

no comments >
< previous page