myBenefitsBlog.com

2013 HSA Contribution Limits Released

rcummings — Thu, 03 May 2012 15:09:23 +0000

IRS has just issued Revenue Procedure 2012-26, which provides the 2013 cost-of-living contribution and coverage adjustments for HSAs, as required under Code Section 223(g). Most contribution limits and the out-of-pocket amounts have been increased for 2013.

2013 Annual Contribution Limit:

Single coverage: $3,250 (up from $3,100 in 2012)
Family coverage: $6,450 (up from $6,250 in 2012)

2013 Minimum Deductible for HDHP:
Single coverage: $1,250 (up from $1,200 in 2012)
Family coverage: $2,500 (up from $2,400 in 2012)

2013 Maximum Out-of-pocket:
Single coverage: $6,250 (up from $6,050 in 2012)
Family coverage: $12,500 (up from $12,100 in 2012)

For a copy of Revenue Procedure 2012-26, please click on the link below:

http://www.irs.gov/pub/irs-drop/rp-12-26.pdf

Summary of Benefit Coverage Requirements for Health FSAs and HRAs

rcummings — Tue, 01 May 2012 12:57:30 +0000

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

Court Finds Employer Met ERISA’s Voluntary Plan Safe Harbor, Despite Payment of Premiums Through Cafeteria Plan

rcummings — Wed, 14 Mar 2012 00:02:20 +0000

Voluntary benefits that are sold directly to employees may be subject to ERISA as employer-sponsored plans, or may be exempt under the voluntary plan safe harbor, which allows for only minimal involvement by the employer. The plaintiff in this case purchased a short-term disability policy after seeing a presentation by the insurer at his workplace. He later sued under state law after his claim for benefits was denied. The insurer argued that the state-law claims were preempted because the plan was subject to ERISA. The court disagreed, holding that the arrangement met the voluntary plan safe harbor. (As background, a plan falls within the safe harbor if 1) the employer makes no contributions; 2) participation is completely voluntary; 3) the employer’s involvement is limited to permitting the insurer to publicize the program and to collecting and remitting premiums; and 4) the employer receives no consideration for collecting and remitting premiums, other than reasonable compensation.)
The insurer claimed the plan did not meet the safe harbor requirements because the employer’s involvement went beyond that allowed by law. For example, the insurer claimed that the employer endorsed the plan by selecting this particular insurer. But the court found that there was no evidence that this employer went beyond permitting the insurer to publicize the program, distinguishing a case where the employer’s use of a consulting firm when selecting an insurer took the plan outside the safe harbor. Notably, in contrast to other courts, this court held that collecting premiums through the employer’s cafeteria plan did not take the plan out of the safe harbor.
Ballard v. Leone, 2012 WL 665987 (D. Md. 2012)

HHS Issues Health Care Exchange Rules

rcummings — Tue, 13 Mar 2012 00:33:15 +0000

By Joyce Frieden, News Editor, MedPage Today

WASHINGTON — The Department of Health and Human Services has issued the final regulations for implementing the state health insurance exchanges mandated by the Affordable Care Act (ACA).

They allow states more flexibility in determining eligibility for the exchanges than was first given, according to Chiquita Brooks-LaSure, director of coverage policy in HHS’ Office of Health Reform. That change was made after “a lot of input from states and stakeholders,” she told reporters on a Monday afternoon conference call.

The setup of the exchanges “lets consumers easily determine their eligibility for enrollment and easily enroll in coverage that’s right for them,” said Brooks-LaSure. That includes using a single streamlined application so that consumers will get a “consistent eligibility determination” without needing to submit different information for the different plans offered.

Under the ACA, nearly everyone is required to have insurance starting in 2014, and the government will provide financial assistance to those who need it. People who earn less than 133% of the federal poverty level can enroll in Medicaid, and those who are between 133% and 400% of the poverty level will be eligible for tax credits from the federal government in order to buy insurance.

People can use the tax credit to buy health insurance through an exchange in their state. The exchanges will act as “one-stop shops” where people can compare different insurance plans.

For small employers — such as small physician practices — that want to provide health insurance for their employees, the exchanges also will offer a Small Business Health Options Program (SHOP).

SHOP will let small businesses choose among different levels of coverage, depending on what works for them and their budget. SHOP will allow these employers to offer coverage from a number of insurers, but still get one bill and write only one check, according to HHS.

The SHOP program also features tax credits to help make coverage easier for small businesses to afford.

According to HHS, starting in 2014, small employers purchasing coverage through SHOP may be eligible for a tax credit of up to 50% of their premium payments if they:
• Have no more than 25 employees
• Pay employees an average annual wage of less than $50,000
• Offer all full-time employees coverage
• Pay at least 50% of the premium
To view the final regulations, visit:

https://s3.amazonaws.com/public-inspection.federalregister.gov/2012-06125.pdf

HHS issues draft bulletin defining Actuarial Value for Health Plans

rcummings — Thu, 01 Mar 2012 21:59:22 +0000

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.

HSA minimum deductible will rise to $2,500 family and $1,250 individual in 2013

rcummings — Sat, 25 Feb 2012 14:09:09 +0000

The HSA minimum deductible, a benchmark for comparing HSAs with traditional PPO plans, will rise to $2,500 family and $1,250 individual in 2013, the first increase in the past 3 years, according to former Treasury official Roy Ramthun who makes the annual estimate using near-final government data.

A statutory technical freeze on the rise for three years has resulted in the average employee plan deductible without an HSA rising to virtually the same amount as an HSA minimum deductible. This means people who are offered a choice often now see little difference in deductibles if they pick an HSA. Now HSAs will probably rise at closer to the same rate as regular HD plans.

Health reimbursement accounts (HRAs) have no minimums on how much the deductible is or the level of the employer contribution. In real market terms, HRAs typically have lower deductibles and generate less out-of-pocket cost than HSAs. So if anything the faster-rising minimum HSA deductible will make that difference with HRAs even greater from the consumer point-of-view.

Ramthun also announced that the maximum contribution to HSAs in 2013 will hit a new high of $6,450 family and $3,200 individuals (self-only), plus $1,000 for those over 55 who will be allowed a total of $7,450. Anybody can contribute up to the maximum regardless of their deductible (combined EE and ER), so a rise in the total allowed makes HSAs more attractive as investments.

© Interpro Publications 2012

Are You Really Saving Money By Self Administering Your HRA?

rcummings — Thu, 23 Feb 2012 13:31:04 +0000

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

EBRI Study – HSA and HRA Accounts Continue Growth Trend

rcummings — Wed, 15 Feb 2012 14:32:12 +0000

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.

New FAQ’s from DOL for You

rcummings — Tue, 14 Feb 2012 01:33:02 +0000

It wasn’t all about the Summary of Coverage documents last Thursday. The Departments of Labor, HHS and Treasury also issued new guidance on frequently asked questions by employers and health plans concerning the auto-enrollment, employer requirements and waiting periods in PPACA. The agencies have asked for comments on the new guidance, which is due by April 9. NAHU plans to submit a letter on behalf of the whole association, and we also anticipate that our Employers for Flexibility In Health Care coalition will submit detailed comments as well.

For those of you who like who prefer the Cliff Notes version rather than reading the seven detailed questions and their answers, here is a run down of some of the key points made in the document.

Don’t worry about auto-enrollment any time soon.

”The Department of Labor has concluded that its automatic enrollment guidance will not be ready to take effect by 2014.”

What do employers have to do to determining if their coverage is “affordable” or not (a.k.a. whether or not the employee is allowed to drop employer coverage and go seek individual subsidized coverage through a state exchange)?

The document states that “Treasury and the IRS intend to issue proposed regulations or other guidance permitting employers to use an employee’s Form W-2 wages (as reported in Box 1) as a safe harbor in determining the affordability of employer coverage.”

What about a look-back/stability period safe harbor for employers?

“It is anticipated that the guidance will allow look-back and stability periods not exceeding 12 months.”

If you were wondering how and when you are supposed to decide if an employee is full-time or not:

“Treasury and the IRS intend to propose an approach under which the period of time that an employer will have to determine whether a newly-hired employee is a full-time employee (within the meaning of section 4980H) will depend upon whether, based on the facts and circumstances, (a) the employee is reasonably expected as of the time of hire to work an average of 30 or more hours per week on an annual basis and (b) the employee’s first three months of employment are reasonably viewed, as of the end of that period, as representative of the average hours the employee is expected to work on an annual basis.”

Employers are not required to offer coverage to part-time employees.

When does the benefit waiting period clock begin to tick?

“The 90-day waiting period begins when an employee is otherwise eligible for coverage under the terms of the group health plan.”

What is the interaction between 90-day wait periods and employer penalties?

“The upcoming guidance is expected to provide that, at least for the first three months following an employee’s date of hire, an employer that sponsors a group health plan will not, by reason of failing to offer coverage to the employee under its plan during that three-month period, be subject to the employer responsibility payment under Code section 4980H

Summary of Benefit Coverage Final Rule Released

rcummings — Tue, 14 Feb 2012 01:22:45 +0000

The Obama administration released the final rules for the Patient Protection and Affordable Care Act’s (PPACA) Summary of Benefits and Coverage (SBC) on February 9. The requirements have been the subject of much contention between insurers, employers and consumer groups over the past two years, and the final rules have been much anticipated by the benefits community.One of the most contentious parts of the debate about the new requirements was their effective date. PPACA specified that the SBC provisions begin on March 23, 2012, but the law also specified that this final rule be issued by March 23, 2011, so it is almost a year late. To give insurers and employers time to implement the provisions, the new requirements kick in on the first day of the first open enrollment period that begins on or after September 23, 2012. “For administrative simplicity, with respect to disclosures to participants and beneficiaries who enroll in group health plan coverage other than through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees), PHS Act section 2715 and these final regulations apply on the first day of the first plan year that begins on or after September 23, 2012. For disclosures to plans, and to individuals and dependents in the individual market, these requirements are applicable to health insurance issuers beginning September 23, 2012.”The final coverage summary rule also specifies that the SBC requirements apply to all health plans and insurers, not just fully insured plans. NAHU and other groups asked that large group plans be exempted, as they already provide extensive customized information to enrollees and this requirement would just create another expensive compliance requirement, but the Department of Health and Human Services (HHS) ruled that it did not have the authority under PPACA to exempt certain size groups or types of plans from the requirements.

The final rule does remove a requirement that the benefit summaries include premium information, which was a change made in response to concerns articulated by NAHU and other groups that it would be difficult for insurers to put a single figure on a coverage package that might be offered in the small-group and individual market, for example, or not reflect employer premium contributions in the group market.

It also reduces the number of “coverage examples” that must be provided in each SBC from three to two. Under the final rule, insurers will have to illustrate what the plan would cover, and what the patient would pay, under two scenarios—having a baby and managing diabetes.

The rule specifies that it is only providing guidance on what the SBC must contain for the first year of applicability; additional guidance will be provided before January 1, 2014 about how to communicate whether the plan provides minimum essential coverage.

On a technical level, the SBC no longer has to be a standalone document, and it may be provided in color or grayscale. The new materials also create a special rule for cases in which a plan’s terms “cannot reasonably be described in a manner consistent with the template and instructions.” In those cases, plans must make an effort to describe coverage in a consistent manner.

Additional Information:

Summary of Benefits Final Guidance

Diabetes Narrative and Scenario

Maternity Narrative and Scenario

Instruction Guide for Group Coverage