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June 27, 2007
Health Savings Account Comparability Regulations Proposed by IRS
The IRS has issued proposed regulations on how employers can comply with the comparable contribution requirements for Health Savings Accounts where an employee has not established a Health Savings Account by December 31st or an employee has not notified the employer that he or she has established a Health Savings Account.
The regulations also address the acceleration of employer contributions for the calendar year for employees who have incurred qualified medical expenses exceeding the employer's cumulative HSA contributions when the expenses were incurred. In general, these proposed regulations affect employers that contribute to employees' Health Savings Accounts.
Employers may rely on these regulations for guidance pending the issuance of final regulations. Alternatively, until the publication of final regulations, employers may continue to rely on the last sentence of Q&A-6(a) of Proposed Reg. §54.4980G-4, which provides that an employer is not required to make comparable contributions for a calendar year to an employee's HSA if the employee has not established an HSA by December 31st of the calendar year.
Employee has not established a Health Savings Account by December 31
The proposed regulations provide a means for employers to comply with the comparability requirements with respect to employees who have not established an HSA by December 31, as well as with respect to employees who may have established an HSA but not notified the employer of that fact. To comply with the comparability rules for a calendar year with respect to such employees, the employer must comply with a notice requirement and a contribution requirement.
Notice requirement
Pursuant to the proposed regulations, to comply with the notice requirement, an employer must provide written notice:
- to all such employees (as discussed above);
- by January 15 of the following calendar year;
- that each eligible employee who, by the last day of February, both establishes an HSA and notifies the employer that he or she has established the HSA, will receive a comparable contribution to the HSA.
The notice may be delivered electronically. In addition, the proposed regulations provide sample language that employers may use as a basis in preparing their own notices.
Contribution requirement
For each such eligible employee who establishes an HSA and so notifies the employer by the end of February, the employer must contribute to the HSA by April 15 comparable contributions (taking into account each month that the employee was a comparable participating employee) plus reasonable interest.
Acceleration of employer contributions
The proposed regulations also address the acceleration of employer contributions to employees' Health Savings Accounts. For any calendar year, an employer may accelerate part or all of its contributions for the entire year to the HSAs of employees who have incurred, during the calendar year, qualified medical expenses exceeding the employer's cumulative HSA contributions at that time. If an employer accelerates contributions for this reason, these contributions must be available on an equal and uniform basis to all eligible employees throughout the calendar year and employers must establish reasonable uniform methods and requirements for acceleration of contributions and the determination of medical expenses. An employer is not required to contribute reasonable interest on either accelerated or non-accelerated HSA contributions.
The proposed regulations also provide that an employer that accelerates contributions to the Health Savings Accounts of its employees will not fail to satisfy the comparability rules because an employee who terminates employment prior to the end of the calendar year has received more contributions on a monthly basis than employees who work the entire calendar year.
Comments and public hearing
Written or electronic comments on these proposed regulations must be received by August 30, 2007. Send submissions to: CC: PA: LPD: PR (REG-143797-06), Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044.
A public hearing has been scheduled for September 27, 2007, beginning at 10 a.m. in the Auditorium, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC. (72 FR 30501, June 1, 2007.)
Posted by Wiley Long at 09:53 AM | Comments (0)
June 24, 2007
Study Shows Health Savings Account Penetration Reaches 5%
According to a study by Information Strategies, Inc. (ISI), Health Savings Accounts have had varying levels of adoption when taken on a state-by-state basis but are approaching 5% of all healthcare insurance users on a nation-wide basis.
The company's analysts reviewed data from all 50 states, surveys this year of more then 5,000 healthcare insurance users, reports from 2,900 firms and other information sources.
Among the states with the highest Health Savings Account penetration, 5-7% were Wisconsin, Texas, Georgia, Florida, Illinois, Ohio, Tennessee and Kentucky.
Amongst the lowest with penetration levels below 2% are New York, New Jersey, Rhode Island, Hawaii and Vermont.
“Clearly, there are states that have welcomed Health Savings Accounts and others that are still fighting consumer directed healthcare offerings,” said JoAnn Laing, ISI’s President & CEO.
“We made our estimates based on research with individuals and firms offering Health Savings Accounts as well as thousands of respondents to our ongoing surveys, more than 22,000 who have answered questionnaires or participated in focus groups since the inception of Health Savings Accounts,” she added.
“In some states, the regulatory bodies have made it easier to offer Health Savings Accounts while in others, such as New Jersey, the insurance commission has not moved as quickly,” she added.
Laing also reported that some insurance providers have shared their data with ISI and others have not.
Posted by Wiley Long at 11:02 AM | Comments (0)
June 21, 2007
Another Health Savings Account Bill Introduced
U.S. Rep. Charles Boustany, R-Lafayette, introduced legislation to expand access to Health Savings Accounts.
The legislation would build intergenerational "wealth for health" savings by allowing adult children to inherit health investment plans. The Promoting Health for Future Generations Act of 2007 (H.R. 2639) also aims to remove current hurdles that limit veterans and seniors in Medicare from accessing Health Savings Accounts.
"Health Savings Accounts have greatly expanded coverage, but this bill makes them more practical for the working families, veterans, and Medicare seniors who benefit from them," said Boustany, a retired cardiovascular surgeon. "By allowing adult children to inherit a Health Savings Account in the same way that a spouse can, this measure will help working families build 'wealth for health' savings that can be passed on to other generations."
Under current law, families and individuals are unable to deposit their own money in a Health Savings Account after they receive care through Medicare or the VA. Boustany's legislation would eliminate this inequity, providing for increased growth and greater control over personal Health Savings Accounts.
"In removing these barriers, we are putting healthcare decisions back in the hands of the seniors and veterans who know best," Boustany added. "When you consider Medicare's looming financial problems, the affordable coverage and savings contained in this bill make it practical for patients and providers alike."
Posted by Wiley Long at 10:04 AM | Comments (2)
June 18, 2007
New Bill to Include Domestic Partners to Health Savings Account Tax Breaks
New legislation has been introduced in the U.S. Senate that would extend the same favorable Health Savings Account tax treatment to health insurance coverage offered to employees' domestic partners that employer coverage provided to employees' spouses and dependents now receive.
Under the measure introduced Wednesday by Sens. Maria Cantwell, D-Wash., and Gordon Smith, R-N.H., the cost of employer-paid coverage provided to a domestic partner or other nondependent, nonspouse beneficiary, would not be added to an employee's taxable income.
Additionally, employees could withdraw on a tax-free basis funds in their Health Savings Accounts to be reimbursed for medical expenses incurred by a domestic partner. Currently, such withdrawals would be taxable to the employee, with an additional 10% penalty tax imposed.
The measure also would exclude the value of coverage in determining employees’ wages for Social Security payroll tax purposes, as well as permit special trusts—known as voluntary employees’ beneficiary associations—to provide health insurance to employees’ domestic partners without the trusts losing their tax-exempt status.
A group of nearly three dozen major employers—including such well-known companies as Coors Brewing Co., General Mills Inc. and Hewlett-Packard Co. have banded together through the Business Coalition for Benefits Tax Equity to support the bill, said James Delaplane, who represents several members of the coalition and is a partner with Davis & Harman L.L.P. in Washington.
Increasingly, employers have decided to extend health care coverage to employees' domestic partners because they believe it will help them to attract and retain employees, Mr. Delaplane said. “Now, it is time for the tax code to catch up,” he said.
Posted by Wiley Long at 10:16 AM | Comments (0)
June 15, 2007
Maximizing Your Health Savings Account Funds
Health Savings Accounts are gaining popularity because they allow individuals, rather than an HMO or the government, to take charge of their health care. A Health Savings Account combined with a High Deductible Health Insurance Plan gives individuals an economic incentive to become better consumers of health care services because they are now spending their own money up to the level of their high deductible.
More than 4.5 million Americans now own a Health Savings Account. That's triple the number of just two years ago. If you have an HSA, here are seven tips to maximize your success with it.
1 - Take Advantage of preventive services, such as annual physicals, mammograms and pap smears that are covered by your High Deductible Health Plan.
In June 2006, United Healthcare released a three-year study involving 55,000 individuals covered by consumer-driven health plans. Results showed that these patients are more likely to receive preventive care compared to a similar group of patients enrolled in traditional PPO plans.
2 - Seek Out the best health care facilities. When you do need health care services, find an appropriate facility and deal with high quality health care providers. If you go into a hospital for certain high-risk surgeries and conditions (e.g., open-heart surgery), choose a hospital with extensive experience and one that achieves the best results.
3 - Visit the emergency room only for true emergencies. Do not visit an emergency room if you can be seen in a health center or physician's office. The same UnitedHealth study showed that without adverse effects on health outcomes, HSA owners reduced their hospital admissions by 22 percent for those needing acute care, and 8 percent for the chronically ill.
4 - Research information about your illness or injury. When possible, seek out information from reputable sources (e.g., PHC4, the Leapfrog Group, WebMD, MedlinePlus) about your illness or injury.
5 - Switch to over-the-counter drugs whenever possible. Certain medications formerly sold only by prescription are now available over-the-counter. By switching to an over-the-counter alternative with the approval of your physician (e.g., using Prilosec instead of Nexium; Claritin instead of Allegra), costs drop as much as 80 percent.
6 - Be aware of potential medical errors. More than 1 million medical errors occur every year in U.S. hospitals, costing more than $2 billion. Patronize hospitals that use "computerized order entry" of medications, which reduces serious prescribing errors in hospitals by more than 50 percent.
7 - Adopt a healthy lifestyle. Your first, second and third priorities should be to stay healthy. If you stay healthy, you will preserve money in your HSA. The money then carries over to the next year, earns investment income, and is available to pay for future "eligible medical expenses." Throw away the cigarettes, exercise, eat well, and avoid the growing obesity epidemic. When you do, you preserve money in your HSA.
Learn what a Health Savings Account can do for you at: http://www.health--savings--accounts.com
You can also find some resources to help you Maximize Your HSA on our HSA for America Memebers Benefits page.
Posted by Wiley Long at 10:18 AM | Comments (2)
June 12, 2007
Health Savings Accounts for Retirement
Not to long ago, we experienced the shifting of responsibility for retirement savings from the employer to the employee. This shift was accomplished by employer implementation of the now common 401(k) plan. Those of us who take advantage of 401(k) plans appreciate the role the plans play in our ability to retire.
We are now in the midst of a similar shift of primary responsibility in providing for our family's health care. This shift makes use of a Health Savings Account. Even the mechanics are similar.
A Health Savings Account provides for an opportunity to save. The employee has the option, but not the legal obligation, to contribute to their Health Savings Account. Amounts contributed to a Health Savings Account are portable meaning that employees can take the account if they change jobs.
HSA rules have been simplified effective for 2007. The contribution amount is no longer linked to the deductible of the related health insurance plan. Instead, the deductible amounts are fixed so long as the related insurance plan qualifies as a high-deductible health plan. Now, the contribution limit is either $2,850 for an individual with self-only coverage or $5,650 for an individual with family coverage.
Note that individuals who are covered by an eligible health insurance plan can make contributions up to the limits listed above. The amounts contributed may, but are not required to, be used to pay or reimburse out-of-pocket medical expenses. Amounts that are not used to reimburse health costs can remain in the account and earn interest until such time as more significant expenses are incurred.
You might be thinking that this only benefits those who can afford to save amounts in excess of current now-reimbursed health care costs. Hardly. Any employee can use an HSA to convert non-deductible out-of-pocket costs to "pre-tax," or deductible, status.
Assume that Average Joe qualifies to participate in an HSA. Average Joe has a wife and a baby. Between the three of them, they spend $3,000 on health, dental and vision care, excluding insurance premiums. Joe can make deductible contributions to his HSA and then take distributions to reimburse for the family's qualifying costs. Or Joe can not participate in the plan and pay the same costs with after-tax dollars. The difference is that Average Joe will pay about $750 more in taxes if his combined state and federal tax rate is 20 percent and he fails to take advantage of the HSA.
Recent law changes mean that individuals can make a once-in-a-lifetime tax-free rollover from an Individual Retirement Account to an HSA. This could mean substantial tax savings, since distributions from the IRA will normally be fully taxable while distributions from the HSA will not be taxable provided they represent payments or reimbursements for health care costs.
Learn more about HSAs at: http://www.health--savings--accounts.com
Posted by Wiley Long at 10:16 AM | Comments (4)
June 07, 2007
IRS to Accelerate Health Savings Account Contributions
The IRS has proposed regulations proposed that would allow employers that contribute to employees' Health Savings Accounts to accelerate contributions for employees whose medical care expenses are greater than what the employer has so far contributed to the Health Savings Account during the year.
Such an acceleration would enhance the appeal of Health Savings Accounts by reducing employees' concerns that their Health Savings Account could be exhausted if they incur big medical bills early in the year before employers make all of their contributions.
The proposed rule would apply to Health Savings Accounts that are not part of Section 125 programs, in which employees make pretax contributions to their Health Savings Account. Benefit experts say such an acceleration of employer contributions to Health Savings Accounts that are part of Section 125 programs already is permitted.
Posted by Wiley Long at 09:10 AM | Comments (0)
June 04, 2007
Employers Expand Health Savings Account Options
A recent survey in Colorado and Wyoming shows the number of employers offering Health Savings Account plans rose sharply during the past year.
A poll of 634 companies in Colorado and Wyoming by the Mountain States Employers Council shows momentum building for the addition of Health Savings Accounts, Health Reimbursement Accounts and other such "consumer driven" health plans to their benefit menus.
The current-year survey shows 52 percent of employers either offering or considering consumer-driven plans, compared with 42 percent in 2006.
"Our 2006 Health and Welfare Plans survey revealed this growing interest in consumer-directed health plans by both employers and their employees," council President and CEO Michael Severns said in a statement announcing the findings. "Our 2007 survey clearly demonstrates this trend is continuing."
Results of the new survey, released May 18, show the number of employers offering Health Savings Accounts more than doubling during the year, from 7 percent to 15 percent.
The survey also tracked, for the first time in its 60-year history, the total number of employees enrolled in employer-offered health plans, finding that 84 percent were participating.
Among the 48 Northern Colorado employers participating in the survey, 15 percent were already offering Health Savings Accounts or Health Reimbursement Accounts. Still, the vast majority, 92 percent, relied on preferred-provider organization, or PPO, health-care plans.
The survey also measured the growth in employers' cost of providing health-care coverage, finding that the rate of increase had stayed at 11 percent for the third consecutive year. That rate is half the 22 percent growth rate posted in 2002. The poll showed employers, on average, paid for 85 percent of the employee-only plan coverage and 67 percent of coverage for family plans.
Learn more about how a Health Savings Account can benefit you at: http://www.health--savings--accounts.com
Posted by Wiley Long at 10:27 AM | Comments (0)