23½
Hours

Click on the youtube video to find the secret to being healthy…then share it with your employees.  Its worth the 10 minutes!

Five reasons to enroll in an HSA

As HSAs continue to grow in popularity, more and more employers are considering
this option for their employees.

But, while employees may see the benefits to the company for moving to an HSA-qualified plan – a lower price point, the flexibility to adjust HSA  contributions in future years, and the potential for better utilization and reduced claims – many business owners worry workers won’t see the value in a plan where they’re responsible for most of their up-front expenses. And, as we all know, perception is reality: if employees don’t think they have a good benefits plan, they don’t, regardless of what the employer is paying.

So how can employers ensure that their employees will appreciate their benefits even after they drop the copays from the plan? The answer, of course, is education and communication – but what should we be communicating? Sure, it’s important that employees know how to access their benefits and utilize the price and quality transparency tools that are available to them, but that alone won’t sell them on the plan.

To really convince employees that this is a good solution for them and their families, we need to show them how an HSA is actually better than some other health plans and tax-advantaged accounts they might already be familiar with. Here are a few >>

^bacto top

Here are five reasons plan sponsors can give to employees to explain why a health savings account is a good option

1. Better than an FSA

An  FSA which allows employees to set aside tax-free dollars to pay for current-year medical expenses, can be a great option if you know how much you’re going to spend on health care this year, but it does require you to be a bit of a fortune teller. If you guess too low on your medical expenses, you forfeit some of the tax savings you could have enjoyed. If you guess too high, you actually lose some of the money you put into your account. And even if you realize that you messed up, you’re not allowed to change your contribution mid-stream.

In many ways, an HSA is actually more flexible than a flexible spending account. Here are some of the distinctive features:

• HSA contributions are not subject to the irrevocable election rule, so employees are not locked in at their original contribution amount. In fact, employers must allow employees to adjust their contributions on a monthly basis at a minimum.
• HSAs do not have a use-it-or-lose-it rule; instead, it’s a use-it-or-keep-it account. Unused funds roll over from year to year, so employees can stash
  away money during the good years and use it when they do have a big medical expense.
• HSAs are also individually owned accounts, so employees take the money with them when they leave. And, as a bonus for employers, because HSAs
  are individually owned, the employer is not responsible for keeping up with expenses – it’s up to the employee to make sure they’re using their accounts for their intended purpose and keeping copies of the receipts.

2. Better than a 401k

The beauty of a 401(k) is that employees can deposit funds in their account, get an immediate tax break, and watch their money grow on a tax-deferred basis, earning investment income along the way. They don’t pay taxes on the money until they actually withdraw it from the account.

An HSA is similar. Employees can deposit funds into their account and earn tax-free interest and investment income year after year. But with an HSA, as long as the funds are used for qualified medical expenses, account holders never pay taxes on the money – it’s not a tax-deferred account like an IRA or a 401(k), it’s actually a tax-free account.

At some point, most of us will have medical needs that we can pay for with our HSA, and even those who don’t will have plenty of things to spend their HSA money on as they grow older – like long term care insurance and Medicare Part B premiums. And, once someone reaches age 65, they can actually use their account like an IRA or a 401(k). If they withdraw funds for non-qualified expenses, they’ll pay taxes but no penalty, while qualified expenses are always tax-free.

3. Better than a raise

HSA-qualified plans tend to have a lower price point than a traditional PPO plan, giving an employer the opportunity to sink some money into their employees’ HSA accounts. There are two reasons that it makes more sense for an employer to deposit the premium savings into the employees’ HSAs than to pass on that savings in the form of a premium discount or a pay raise.

The first is perception. As Steve Neeleman, founder and CEO of HealthEquity, explains, “a $50 per month – or $600 per year – HSA contribution is going to show up every pay period in the employees’ accounts and accumulate. All an employee has to do to appreciate the employer’s ‘gift’ is to log on to their member site and see the monthly contributions. On the other hand, a $50 premium discount – or, in other words, $50 more cash from their employer every month – will soon be forgotten by the employees because their pay has been adjusted and it is buried in their EFT to their bank account…out of sight, out of mind.”

The other reason an HSA contribution makes sense for both the employer and the employee is because $50 really means $50. Neeleman continues, “When an employer puts $50 in an employee’s account, the entire amount is passed on to the employee. The employer does not pay FICA taxes, and the employee receives the $50 completely tax-free. But when an employer gives the employee $50 more income per month, both the employer and the employee have to pay 7.65 percent FICA taxes on that $50 [reduced to 5.65% for employees in 2012]. So it actually costs the employer $53.83 to give the employee $50, and the employee’s fifty bucks quickly becomes $46.17. Of course, that’s not all the employee has to pay – she also owes federal and state income tax. Using a cumulative figure of 20 percent (a pretty low tax rate), another $10 disappears, leaving the employee with only $36.17 extra per month, probably divided over a couple paychecks.” No wonder she forgets about it so quickly.

4. Better than a copay plan

The advantage of a traditional PPO plan is that up-front expenses like doctor visits and prescriptions are predictable because they’re covered by a fixed copayment. Unfortunately, this predictability is lost for someone with larger expenses that cause them to hit their deductible and “maximum out of pocket.” That’s because, on most traditional PPO plans, copayments do not count toward the OOP max – they continue even after the member has reached her deductible and coinsurance stop-loss amounts, so the member’s total exposure is actually uncapped and unpredictable. With an HSA-qualified plan, the member pays more up front for routine expenses like doctor visits and prescriptions, but she still gets the insurance company discount, and this amount is applied toward the plan’s deductible and out of pocket maximum. Out-of-pocket max really means out of pocket max on an HSA-qualified plan – the member knows up front what her worst-case scenario is and can plan accordingly.

5. Better not wait

Many experts expect HSAs to be the plan of the future, especially after the majority of the health reform provisions kick in in 2014. They will likely be the bronze-level “minimum essential benefits” plan that individuals must have in order to avoid a penalty, so enrollment should increase even more rapidly than it already is. But that doesn’t mean we should wait until 2014 to sign up; on the contrary, if we think we may have an HSA some day, then it makes a lot of sense to go ahead and get it today, while premiums are still somewhat manageable and we can afford to sink some money in our accounts. If we wait until
2014, premiums will almost certainly be higher, leaving us less disposable income to set aside for medical expenses. As with any investment, starting
early is always a good idea.

Here are the details of the 2012 HSA limits:

• HSA Contribution Limits: The 2012 annual HSA contribution limit for individuals with self-only HDHP coverage is $3,100 (a $50 increase from 2011), and the limit for individuals with family HDHP coverage is $6,250 (a $100 increase from 2011).
• HDHP Minimum Required Deductibles: The 2012 minimum annual deductible for self-only HDHP coverage remains $1,200 and the deductible for family HDHP coverage remains $2,400.
• HDHP Out-of-Pocket Maximum: The 2012 maximum limit on out-of-pocket expenses (including items such as deductibles, co-payments, and co-insurance, but not premiums) for self-only HDHP coverage is $6,050 (a $100 increase from 2011), and the limit for family HDHP coverage is
  $12,100 (a $200 increase from 2011).

Source:  Eric Johnson, Broker Education and Marketing Director
for Health Equity, a national HSA administrator.

Federal Health Care
Reform Continues

Even though the Supreme Court may undo part or all of the unprecedented Patent Protection and Affordable Care Act (PPACA)—ruling expected any day— the changes that are underway across the health care system in our country will continue. Many of the large insurance carriers have already announced that they will not “undo” what has already been implemented, such as preventive care covered at 100% and dependents covered until age 26.  The upside, as I see it, is that the conversation about fixing healthcare costs has continued because of healthcare reform.  Let’s hope the focus of the continued debate is on access to quality, affordable health care.

Health care reform is in full swing, and there are many items arising from the Patient Protection and Affordable Care Act (PPACA) that may impact your health plan or administrative procedures. What do you need to be aware of in 2012 to satisfy the requirements of new health care legislation soon to take effect? Below are some reminders…

^back
to top

 

Medical Loss Ratio (MLR)

First rebates to be issued Aug. 1, 2012

No direct impact to self-funded plans

For fully insured plans only: Insurers must provide rebates if their MLR (percent of premium spent on medical claims and quality improvement) for policies issued in a state is less than 80% in the small group and individual markets (or 85% in the large group market). The MLR is determined on a state-by-state basis for the state where the policies are sitused, and not on the experience of any single policy.

Women’s preventive health services

For plan years beginning on or after Aug. 1, 2012

A variety of women’s preventive care services will be added to plan coverages, with no individual customer cost sharing. Well-woman visits, screening for gestational diabetes and HPV testing are among the basic services to be covered. Coverage will include contraceptives for non-religious, non-exempt employers. Religiously affiliated employers that do not cover contraceptives today due to religious objections will have a one-year delay until the first plan year beginning on or after Aug. 1, 2013. Prior to that date, Health and Human Services (HHS) will develop a plan to provide this coverage through some other means.

Summary of Benefits and Coverage (SBC) and Glossary of Health
Coverage and Medical Terms

For open enrollment periods and plan years beginning on or after Sept. 23, 2012

Insurers and self-funded employers must provide concise, consistent plan information (a standardized SBC) and access to a uniform glossary that will help individuals more easily understand their benefits, compare plans and comprehend insurance/medical terminology. The SBC and a link to the glossary must be provided to each person eligible to enroll in coverage, for open enrollment periods beginning on or after Sept. 23, 2012. For plan years beginning on or after Sept. 23, 2012, an SBC must be provided to newly eligible and special enrollees, as well as to anyone who requests it. Samples of a completed SBC and the uniform glossary are housed on The Center for Consumer Information and Insurance Oversight (CCIIO) website.* Note: The penalty for “willful” non-compliance is $1,000 per violation per enrollee.

The SBC must follow the regulatory templates, specifically including: Four double-sided-page format in 12-point font

Coverage examples illustrating cost of treatment for: 1) having a baby;

• and 2) managing Type 2 diabetes
• A customer service phone number and website

Your insurance carriers will provide guidance and in many cases the required summaries.

^back
to top

Patient-centered outcomes research fee

For plan years that end after Sept. 30, 2012

Revenues from this fee will fund research to determine the effectiveness of various forms of medical treatment. The initial annual fee of $1.00 per covered life is for plan years that began on or after Oct. 2, 2011. The fee increases to $2.00 in 2013, then to an amount indexed to national health expenditures until 2019, when it no longer applies. Fully insured plans: Most carriers will pay this fee. Self-funded plans: Self-funded plans are responsible for reporting and paying this fee. Reporting and payment using IRS Form 720 is required by July 31 of the calendar year immediately following the last day of the policy or plan year. For example, the fee for the policy or plan year ending on Dec. 31, 2012 must be filed by July 31, 2013. Liability for a plan year ending on Jan. 31, 2013 must be filed by July 31, 2014.

2013 heads up!

Flexible Spending Accounts

Effective Jan. 1, 2013

The health care accounts will be have a $2,500 individual annual maximum election; $5,000 combined for employee and spouse. The new cap applies to plan years that begin after Dec. 31, 2012.

W-2 reporting for 2012 tax year

Beginning with 2012 W-2s distributed in January 2013

Employers that are required to file W-2 forms for 250 or more employees will be responsible for reporting the total cost of their group medical coverage on 2012 tax year W-2 forms distributed to employees in January 2013.

Meanwhile . . .

• Prepare now for 2014, when the employer mandate kicks in. Employers with over 50 full-time employees will pay penalties if they do not provide medical coverage or if that coverage does not meet required standards AND any full-time employee receives premium assistance from the federal government.
• What will the state based Exchanges offer? If employers offer a plan that is too “rich,” their employees may opt out of their employer-sponsored plan for a more affordable one on the Exchange. But, if the employer’s plans don’t meet minimum affordability/coverage standards, they’ll pay a penalty.

 Resource:  CIGNA Healthcare

**Sources include Cigna Healthcare, UnitedHealthcare