Defunding, Health Savings Accounts and Chaos!!

Well here we are…things are starting to heat up regarding health care reform.  There are many questions that remain unanswered and I think that each of us need to be prepared to have answers that actually raise more questions than satisfy our curiosity to begin with.  The sheer enormity of this act makes the very nature of implementation overwhelming.  Thus chaos!  I want to devote the first part of this week’s message to some general thoughts about defunding Obamacare, and the second part will be more practical with some information about how the act affects Health Savings Accounts.

To Defund or not to Defund…that is the question.  I am not going to weigh in on the political realities of this question, but I really want to focus on what defunding this act would mean to the average citizen of America.  To defund the act without delaying the portion of the bill which requires individuals to actually purchase health care would be problematic for the very people that this law is intended to help.  If health insurance premiums are as expensive as we are being led to believe in the exchange environment, individuals and small business simply won’t purchase the policies and thus will pay the fines.  Defunding means the following:

1.     No government subsidies for lower income people

2.    No small business tax credits for employers

3.    No incentive for carriers to compete for this market segment (read higher premiums)

4.    Millions of Americans remain uninsured and under the law responsible for a fine for not purchasing health insurance

Regardless of my personal point of view on the law, defunding only complicates the matter in my mind.  For small employers, Logan Lavelle Hunt may have a solution in the form of Association Health Plans, but for the individual consumer that does not have a group health plan; this makes a bad deal even worse.  We shall see how this all plays out, but like anything else in this world, the 11^th hour panic has ensued and generally speaking, no good decision comes under this amount of pressure.

Health Savings Account rule changes.

On September 13, the Department of Labor and the Internal Revenue Service  issued guidance clarifying how the Patient Protection and Affordable Care Act applies to Health Reimbursement Arrangements (HRAs), Health Care Flexible Spending Arrangements (FSAs), and certain other types of plans.

 

Key provisions include:

 

HRAs for Active Employees – For plan years beginning in 2014, employers cannot offer a stand-alone HRA to employees. Employers can only offer HRAs that are integrated with a group health plan.

Integrated HRAs – For an HRA to be integrated with a group health plan, the following requirements must be met:

·         The HRA is only available to employees enrolled in group coverage;

·         The employer must offer a group health plan that provides minimum value or that does not consist solely of excepted health benefits.

·         The employee must be enrolled in a group health plan (either the employer’s plan or another plan such as coverage through a spouse);

·         If the group health plan is self-insured and does not cover certain Essential Health Benefits (EHBs), the HRA cannot be used to reimburse EHBs that are not covered by the group health plan; and

·         The employee can waive future reimbursements from the HRA at least annually, and the remaining amounts in the HRA are forfeited if employment ends.

Retiree HRAs – A stand-alone retiree HRA that is used to pay health insurance premiums will be considered an employer-sponsored group health plan providing minimum essential coverage. As a result, a retiree covered by an HRA will not be eligible for premium tax credits through the Marketplace/Exchange.

FSAs – A health care FSA does not have to comply with PPACA if:

·         The employer also offers group health plan coverage; and

·         The maximum annual FSA benefits payable to any employee do not exceed two times the employee’s contribution (or, if greater, do not exceed $500 plus the employee’s contribution).

Employer Payment Plans – Employers may not reimburse an employee’s premiums or pay premiums directly to an insurance company to purchase individual health insurance for an employee.

EAPs – An employee assistance program (EAP) will generally be considered not subject to PPACA market reforms, provided that the EAP does not provide significant medical care benefits.   

For more details, here is a link to the guidance:

Application of Market Reform and other Provisions of the Affordable Care Act to HRAs, Health FSAs, and Certain other Employer Healthcare Arrangements

Peace!