Yesterday, the House passed two bills that would expand HSA coverage:
The Restoring Access to Medication and Modernizing Health Savings Accounts Act of 2018 (HR 6199)
This Act would:
- Allow plans flexibility in providing first dollar coverage up to $250 for a single and $500 for a family for additional services, such as those related to treatment of chronic conditions and telehealth services.
- It would also make certain OTC drugs a qualified medical expense.
- Allow HSA funds to pay for direct primary care up to $150 per month for an individual and $300 per month for a family.
- Expand HSAs to allow physical activity, fitness and exercise related services (i.e., gym memberships, sports equipment) to be qualified medical expenses (up to $500 for an individual and $1,000 for a family).
- It would also loosen some of the contribution restrictions on spouses who have a flexible spending account (FSA) at their employer.
- Allow employees, at the employer’s discretion, to convert their FSA and HRA balances into an HSA contribution upon enrolling in a high deductible health plan with an HSA. The conversion amount is capped at $2,650 for an individual and $5,300 for family coverage.
Increasing Access to Lower Premium Plans and Expanding Health Savings Accounts Act of 2018 (HR 6311)
This Act would:
- Increase the maximum contribution to health savings accounts (HSAs) to $6,650 for an individual and $13,300 for a family.
- Allow both spouses to make catch-up contributions to the same health savings account. Under current law, if both spouses are HSA-eligible and age 55 or older, they must open separate HSA accounts for their respective “catch-up” contributions. This provision would allow both spouses to deposit their catch-up contributions into one account.
- Allow working seniors enrolled in Medicare Part A to contribute to an HSA.
- Allow individuals in a bronze or catastrophic health plan to contribute to an HSA.
- Allow balances on flexible savings accounts to be carried over.
- Allow HSAs opened within 60 days after gaining coverage under a HDHP as having been opened on the same day as the HDHP. This would give a grace period between the time coverage begins through an HDHP and the establishment of an HSA. Currently, HSA funds can only be used for qualified expenses after the HSA has been established.
- It would also delay the Affordable Care Act’s health insurance tax for another two years to 2021.
There are a handful of other healthcare related bills yet to be taken up by the House. It is unclear if they will act prior to the August break (beginning July 30th). Both of the above Acts will most likely be taken up by the Senate after the break.
Diversified Group will be following the progress of these bills closely and will provide updates as they are received.
On June 19, 2018, the U.S. Department of Labor released the final rule on Association Health Plans (AHPs). The rule seeks to expand health coverage among small employer groups and self-employed individuals. It will make it easier for small business to join together to purchase health insurance without the myriad of regulations individual states and the Affordable Care Act (ACA) imposes on smaller fully insured employers. AHPs are not required to provide the essential health benefits (EHBs) package included in the ACA. The plans have been intended to provide less expensive options for small businesses, regional collectives, and industry groups that may not be able to purchase insurance through the public exchanges.
The rule broadens the definition of an employer under the Employee Retirement Income Security Act of 1974 (ERISA), to allow more groups to form association health plans and bypass rules under the Affordable Care Act. ERISA is the federal law that governs health benefits and retirement plans offered by large employers. Below is a comparison of the original proposed rule and the final rule just released.
The final rules confirm that self-insured Association Health Plans are considered Multiple Employer Welfare Arrangements (MEWAs) and does not curtail a state’s ability to regulate self-insured AHPs. This means that self-insured AHPs will be subject to MEWA laws in each state where coverage is offered/where members are located. Self-insured AHPs will have to follow the MEWA rules of the state with the most restrictive rule on an issue by issue basis. The final rule did leave an opening for future self-insured AHPs with the following language on page 96 of the 198 page regulation: “a potential future mechanism for preempting State insurance laws that go too far in regulating self-insured AHPs…” But for now, there is not anything in the final regulation designed to help self-insured AHPs thrive.
On May 21, 2018, the Internal Revenue Service (IRS) issued Revenue Procedure 2018-34 which indexes the contribution percentages for 2019 for purposes of determining affordability of an employer’s plan under the Affordable Care Act (ACA). For plan years beginning in 2019, employer-sponsored coverage will be considered affordable if the employee’s required contribution for self-only coverage does not exceed 9.86 percent of the employee’s household income for the year for purposes of the employer shared responsibility rules. This is an increase from the 2018 affordability threshold percentage of 9.56%. The 2019 increase in the affordability percentage for employer shared responsibility purposes means that employers will be able to charge employees a slightly higher price for their health benefits and still meet the “affordability” test.
Since an employer would not know an employee’s household income, IRS Notice 2015-87 confirmed that ALEs using an affordability safe harbor may rely on the adjusted affordability contribution percentages if they use one of three affordability safe harbor methods. The three safe harbors to measure affordability are Form W-2 wages from that employer, the employee’s rate of pay or the federal poverty line (FPL) for a single individual. The affordability test applies only to the portion of the annual premiums for self-only coverage and does not include any additional cost for family coverage. Also, if an employer offers multiple health coverage options, the affordability test applies to the lowest-cost option that also satisfies the minimum value requirement.
Below is an example of how the percentage change impacts an employer’s monthly affordable amount using the three safe harbor tests. The example assumes an employee earns $10/hour.
$10 / hour
|Rate of Pay
|Federal Poverty Line*
*Based on Jan. 2018 FPL of $12,140
Under the ACA, employees (and their family members) who are eligible for coverage under an affordable employer-sponsored plan are generally not eligible for the premium tax credit from the Exchange. This is significant because the ACA’s employer shared responsibility penalty for applicable large employers (ALEs) is triggered when a full-time employee receives a premium tax credit for coverage under an Exchange.
In October, a bipartisan group of senators introduced a bill that would ease the ACA reporting mandates for employer-sponsored health plans. The bill would roll back the reporting requirements of Section 6056 and replace them with a voluntary reporting system. The bill would also allow payers to transmit employee notices electronically rather than having to send paper statements by mail.
While self-funded health plans must now comply with Sections 6055 and 6056, it is not yet clear how the bill would affect Section 6055 requirements. Senators Rob Portman of Ohio and Mark Warner of Virginia, sponsors of the bill, say their proposal would give the government a more effective way of applying premium tax credits to consumers who purchase insurance through an Exchange, something the administration has been trying to accomplish.
The ACA has required people to have what the government has classified as minimum essential coverage, or else pay a penalty which now amounts to 2.5% of modified adjusted gross income over the income tax filing threshold.
While the House version of tax reform did not change the penalty in any way, the Senate version cut the penalty to 0% and in joint conference debates, the reduction was kept in the bill that was just passed by both houses. The Senate provision is not a repeal of the penalty, but instead a reduction, which could be increased by Congress in the future. While lower corporate and personal tax rates will take effect this year, this reduction will not become effective until 2019.
We often hear of professional athletes succeeding under pressure by staying “in the moment” and remaining focused on the things that are within their control. This challenge can be applied to the uncomfortable position all of us find ourselves in today – somewhere between complying with existing laws and anticipating the unknowns coming from Washington.
While the IRS has relaxed enforcement of the individual mandate and acknowledged problems in the ACA reporting system, it has confirmed that an applicable large employer is still subject to an employer shared responsibility payment if it fails to offer coverage to 95% of its full-time employees. We continue to help large employers offer minimum essential coverage to avoid penalties, when appropriate, and track offers of coverage to comply with reporting requirements on IRS forms 1094 and 1095.
Other matters remain up in the air as well, including the so-called Cadillac tax on high-cost health plans and any changes in maximum contributions that may be made to HSAs, which would require legislative action. While any significant ACA repeal, replace or repair efforts appear to be overshadowed by the Administration’s interest in tax reform, we continue to monitor developments in healthcare reform and keep our clients and partners informed. It’s our way of doing what we can and remaining “in the moment.”
On November 8, 2017, the IRS announced that, for the first time, it would begin enforcement of the employer mandate under the Affordable Care Act (i.e., the assessment of tax penalties against large employers failing to provide affordable, minimum value health coverage to substantially all employees). The initiation of active enforcement efforts now comes as a surprise, as many anticipated that the IRS would not begin such efforts under the Trump administration.
Over the next few weeks, affected employers will receive an assessment letter to all employers the IRS believes owe ANY penalty under the ACA’s employer mandate. From guidance we have received, this could be due to:
- Anticipated and appropriately assessed tax
- Unanticipated, but appropriately assessed tax
- ACA reporting errors
Any employer anticipating they COULD be receiving an assessment should be on the lookout. If you receive an assessment letter, ACT QUICKLY.
Questions? Concerns? Call Us!
We’re here to help, please contact Carol Parda-Ziolko at (888) 322-2524 ext. 427 or by email.