House passes Small Business Health Fairness Act

Legislation aims to boost health insurance by expanding coverage and lowering costs for working families

In a bid to improve the health insurance purchasing clout of small businesses, House Republicans recently dusted off a piece of legislation more than a decade old as part of their on-going effort to repeal and replace the Affordable Care Act (ACA).*

The bill would allow the establishment of nationwide “association health plans” (AHPs) that could be offered by professional or trade groups, chambers of commerce, etc. Small businesses could buy coverage through these associations, theoretically gaining strength in numbers to enhance their bargaining leverage with insurers…leading to cheaper, better coverage and lower administrative costs for employers that face limited resources.**

Although the idea of association health plans is not a new concept, they often escaped close supervision because neither states nor the federal government had clear regulatory authority over them. So, Congress amended federal law to allow states to regulate these plans. With the passage of the ACA in 2010, the Obama administration required association health plans to meet a new set of small-group standards (i.e. the essential health benefits package).

This proposal has the potential to change/reverse that direction; it would eliminate most state regulation and put oversight – along with certification – in the hands of the Department of Labor. While certain requirements like the prohibition on lifetime and annual coverage limits would still apply, plans could offer stripped-down coverage and would have more latitude in setting premiums. What’s more, they could operate in multiple states and generally avoid state-mandated benefits and other state insurance rules.

H.R. 1101 now heads to the Senate, where its fate is uncertain.

* The earlier bill passed the House in 2003 but didn’t advance.

**Due to their size and economies of scale, large businesses have the ability to negotiate on behalf of employees for high-quality health care at more affordable costs. By offering a qualified group health plan under ERISA, these large employers are also exempt from a myriad of state rules and regulations.

2017 HSA Limits

Revenue Procedure 2016-28 essentially status-quo

Yesterday, the IRS provided the inflation adjusted deduction limitations for annual contributions made to a HSA under Section 223 of the Internal Revenue Code. These amounts are updated annually to reflect cost-of-living adjustments.  

Contribution Limits                                                                                                         Self-only coverage = $3,400 (an increase of $50)                                                    Family coverage = $6,750*

High Deductible Health Plan (HDHP)                                                                                A HDHP is defined as a health plan with an annual deductible not less than $1,300 for self-only coverage or $2,600 for family coverage, while annual out-of-pocket expenses may not exceed $6,550 (self-only) or $13,100 (family).*

*Unless noted, the amounts are unchanged and reflect current 2016 levels.

 

Hatch, Paulsen Introduce Bill to Enhance HSAs, FSAs

Legislation Aims to Ease the Burden of Rising Health Care Costs*

Senate Finance Committee Chairman Orrin Hatch (R-UT) and House Ways and Means Committee member, Erik Paulsen (R-MN) recently introduced the Health Savings Act of 2016, which seeks to simplify and expand HSAs and FSAs.

Created to give Americans control over their personal health care spending, these plans have grown in popularity despite needing critical updates to match our changing health care system. For example, when HSAs were first made available back in 2003, these plans only covered 454,000 lives. Today, 19.7 million individuals are covered under a health plan that is HSA-eligible.

Among other things, the comprehensive legislation clarifies that individual employees’ contributions to HSAs and FSAs should not be counted toward the calculation of the Cadillac Excise Tax. Some additional highlights include:

HSA catch-up contributions (spouses)                                                             Current law allows HSA-eligible individuals age 55 or older to make additional catch-up contributions each year. However, the contributions must be deposited into separate HSA accounts even if both spouses are eligible to make catch-up contributions. This section would allow the spouse who is the HSA account holder to double their catch-up contribution to account for their eligible spouse. 

Prescription and Over-the-Counter Med. Allowance                                              The bill stipulates that a reimbursement of expenses incurred for any prescription or over-the-counter medicine or drug shall be treated as a reasonable medical expense. 

HSA Interaction                                                                                                      The HOPE Act of 2006** allowed employers that offered FSAs or HRAs to roll over unused funds to an HSA. However, unused FSA funds could not be rolled over to a HSA unless the employer offered a “grace period” (instead of the usual Dec. 31 “use or lose”). Furthermore, the amount to be rolled over was prohibited from exceeding the amount in said account as of Sept. 21, 2006 – effectively limiting most employees from accessing/utilizing these unused funds in order to help seed their HSAs. This section provides employers greater opportunity to roll-over funds from employees’ FSAs or HRAs to their HSAs in a future year in order to ease the transition.

TASC is dedicated to maintaining/expanding employee benefit programs on a tax-advantaged basis, and we applaud Congress’ recognition of the importance of enhancing access to health-based accounts. These tools provide a means of financing evolving health care needs and services, helping American families save for and manage their medical expenses. (Note: On average, FSA and HSA Participants are middle class families…meaning, they earn roughly $57,000 per year, which is less than 300% of the federal poverty level).

Full text of S. 2499 / H.R. 4469:                      https://www.congress.gov/114/bills/s2499/BILLS-114s2499is.pdf

*Health care costs are expected to rise by an average of 5.8% annually between now and 2024.

**Public Law 109-432

Obama’s Budget Proposal Tweaks Cadillac Tax

Administration’s outline also has a potential impact on Flex Plans

Last week, the Obama Administration released its (final) budget proposal for the 2017 fiscal year. And although presidential budgets are usually viewed as highly partisan documents, there are a few noteworthy provisions in this particular budget proposal that will be of interest to TASC Providers / Clients.

Cadillac Tax Changes                                                                                                   As ACA supporters attempt to ease the opposition toward this controversial policy item, which is unpopular with both political parties,* the administration is backing what they’ve dubbed “sensible improvements” in an effort to decrease the likelihood that employer plans will trigger the excise tax.

Health plan costs by geographic regions                                                                   Under the proposal, a health plan would be considered high cost and subject to the tax if it exceeded the greater of the current law threshold ($10,200 for individual coverage and $27,500 for family coverage) or a new “gold plan average premium” which would be determined/calculated and published for each state.** A family multiplier would be applied to this amount to create the family threshold. This reform is intended to protect employers from paying the tax only because they are in high-cost locales and ensure that the penalty remains targeted at the appropriate population (i.e. those with overly generous plans).

GAO study                                                                                                                     The President’s budget also requires that the Government Accountability Office (GAO) study the potential effects of the excise tax on entities with unusually sick employees…presumably leading to legislative measures if the study finds that such firms are adversely impacted.

FSA salary reduction                                                                                            Currently, each employee’s actual FSA salary reduction contribution is counted in determining whether the cost of coverage for that employee exceeds the limit and is subject to the excise tax. But under the new recommendations, employers would determine the average amount of FSA salary reduction contributions for similarly situated employees and use that average amount in determining the cost of coverage.

Elimination of Dependent Care FSAs                                                                          As part of the administration’s attempt to increase the child and dependent care tax credit and create a larger credit for taxpayers with children under the age of 5, dependent care FSAs would no longer be permitted.  The executive branch believes that the new credits would provide better assistance to families with children then is currently available through a dependent care FSA.

Of course, the budget request of a president in his final year in office – particularly one facing a hostile Congress – is unlikely to lead to enacted legislation. That said, this proposal at least offers an insight into some of the interesting options that the next president might pursue, depending on his/her political leanings.

Overall, these provisions simply fall short of the mark and do not address TASC’s core concerns; in fact, they seem to be just as – if not more – administratively complex than the rule it attempts to replace. While we appreciate recognition of the budget’s implicit acknowledgment that the excise tax is imposed inequitably on those who live in high-cost geographic areas, this adjustment completely disregards the other uncontrollable factors that are used to calculate the tax, as well as the detrimental effects the tax could have on employer-sponsored health care plans.

The Cadillac Tax does nothing to help reduce the cost of health care or improve its quality. Instead, it places unparalleled financial challenges on employers, siphoning off resources that otherwise could sustain or improve benefits for workers and their families. Therefore, TASC continues to support full repeal of the tax or at the very least a carve-out exempting contributions to FSAs, HRAs and HSAs from the tax’s calculation. 

* Clear bipartisan majorities of both the House and Senate have voted to repeal the tax, and ALL presidential hopefuls – including both Democratic candidates – have also publicly called for repeal.

** A “gold” level plan is a tier of coverage found on a state-based or federally-facilitated public marketplace; would be calculated based on a weighted average of the lowest cost (self-only) silver level plans, multiplied (by 8/7) to simulate the cost of an actuarially equivalent gold plan.

Compliance of Premium Reimbursement Arrangements

Earlier today, the Dept. of Labor issued additional FAQs (Part XXII) regarding implementation of PPACA. Specifically, the guidance addresses application of the market reform provisions on HRAs, certain health FSAs and other employer health care arrangements.

TASC Governmental Affairs is currently in the process of reviewing this latest release in order to assess the effect–if any–on our NESP/NEFSA Plan. We will communicate further on this topic in the near future.

Excepted Benefits

Late last Friday, the Dept. of Health & Human Services (HHS), the Dept. of Labor (DOL) and the Internal Revenue Service (IRS) issued proposed rules amending the excepted benefits* regulations.

The statutes establish four categories of excepted benefits…

1) Non-health: automobile insurance, liability insurance, workers compensation, and accidental death/dismemberment coverage;
2) Limited Scope: vision, dental, long-term care and certain health FSAs;**
3) Non-coordinated: specified diseases/illnesses coverage (such as cancer policies) and hospital indemnity insurance; and
4) Supplemental: Medicare, the Civilian Health & Medical Program or Tricare.

The guidance released last week appears to impact the second category of excepted benefits highlighted above (limited scope). TASC Governmental Affairs is currently in the process of reviewing this new information in order to assess the effect – if any – on our products and services. We will communicate further on this topic in the near future.

* Excepted benefits are generally exempt from the healthcare reform requirements added by HIPAA and PPACA.

** These benefits must either be provided under a separate policy, certificate, contract, etc. or otherwise not be an integral part of a group health plan, whether insured or self-insured.

“Use-or-Lose” Rule Modified for Health FSAs

$500 Rollover Provides Greater Flexibility to Plan Participants

Yesterday, the Treasury and IRS issued a notice modifying the long-standing “use-or-lose” rule for health flexible spending arrangements (FSAs). To make health FSAs more consumer-friendly and provide added flexibility, the updated guidance permits employers to allow plan participants to rollover up to $500 of their unused health FSA balances remaining at the end of a plan year.

This action seems to directly reflect public comments received by the agencies in recent years; an overwhelming majority of feedback pointed to the difficulty for employees of predicting future needs for medical expenditures, the need to make FSAs accessible to employees of all income levels, and the desire to minimize incentives for unnecessary spending at the end of the year.

For nearly 30 years, employees eligible for health FSAs have been subject to the use-or-lose rule, meaning that any account balances remaining unused at the end of the year are forfeited. Under current law, plan sponsors have the option of allowing employees a grace period permitting them to use amounts remaining unused at the end of a year to pay qualified FSA expenses incurred for up to two and a half months following year-end.

As with all new legislative activity, TASC’s Governmental Affairs team is closely examining the new rollover policy and its impact on our Clients and their employees. In fact, we are currently in the process of analyzing how the policy will work with a Client’s optional “grace period” and/or “run-out period” to determine what – if any – adjustments need to be made operationally in order to best serve our customers…and then will update our guidelines, procedures and administrative materials accordingly.

More information to follow; be on the look-out for additional communication from TASC (including here at the Capital Connection) in the coming weeks, in an effort to ensure peace of mind for TASC Providers, Clients and Participants!

Click here to view the document (in its entirety): IRS Notice 2013-71

AgriPlanNOW / BizPlanNOW Section 105 Plans

Recent guidance issued by the IRS (Notice 2013-54) and Dept. of Labor (Technical Release 2013-03) regarding annual limit provisions will impact some business owners across the nation. Already the mandated PPACA changes are causing a state of confusion and uncertainty. In what ways will this legislation impact AgriPlanNOW/BizPlanNOW Section 105 Plans?

As always, TASC is working hard to research what’s best for you. Meanwhile, the recent government shutdown, ongoing debt limit negotiations, and PPACA implementation issues—not to mention the myriad of conflicting interpretations—elicit our present course of action: make no hasty decisions. Even in the calmest of times, it makes the most business sense to gather all the facts before setting or changing a direction that affects the administration of AgriPlanNOW/BizPlanNOW Plans. This philosophy of analysis has never been more apt than in today’s windy climate.

At present we do know that Health Reimbursement Arrangement (HRA) plans covering fewer than two employees (i.e. one) will experience no change….no matter whether the Plan is paired with group or individual insurance, is for medical or dental & vision expenses, includes or does not include a maximum limit cap, and so on. Simply put, nearly all AgriPlanNOW/BizPlanNOW Plans are unaffected by this guidance.

We are investigating the potential impact on our customers with multiple-employee plans and accessing what changes need to be made. As we work out the details, we will analyze these Clients to better understand their health insurance coverage, medical expenses, and account history. Once we gather this information and have more clarity on regulations, requirements, and timing, we will work with these Clients to identify the appropriate plan design to best ensure their maximum tax benefits continue.

Stay tuned; continue to monitor this site for further updates.

Alert: Agencies Issue Clarifying Guidance

Late Friday, the Dept. of Labor (DOL) and the Internal Revenue Service (IRS) issued guidance on how the annual limit and preventive services rules will apply to the Patient Protection & Affordable Care Act (PPACA). IRS Notice 2013-54 and DOL Technical Release 2013-03, which mirror each other, specifically address what type of HRAs, FSAs and other employer healthcare arrangements will/will not be considered compliant as of January 1, 2014.

TASC Governmental Affairs is currently reviewing this complicated guidance to assess the effect on our products and services. We will communicate further on this topic in the near future.