Category: Flexible Spending Accounts

Sterling and SeeChange Partner for Better Healthcare

Sterling Health Services Administration is very pleased to announce our preferred administrator endorsement by SeeChange Health for health savings accounts (HSAs), health reimbursement arrangements (HRAs), flexible benefit plans (FSAs), and COBRA administration.

We share a common philosophy about the importance of employee engagement in lowering healthcare costs. SeeChange Health’s new approach to health insurance actually rewards members with enhanced benefits, such as reduced out-of-pocket exposure, for taking steps to stay healthy. Together we’ll work with clients to design a health benefits program that helps employees achieve better health and quality of life, resulting in a more productive workforce and lower, stable premiums for the long term.

The SeeChange and Sterling combination offers a diverse portfolio of plans, stellar network, and competitive prices from SeeChange, along with Sterling’s single source expertise in HSAs, HRAs, FSAs, and COBRA.

To learn more, visit www.sterlinghsa.com and www.seechangehealth.com/brokers.

Contact us for more information about special SeeChange Health and Sterling HSA opportunities.

No Comments by Sterling HSA on September 7, 2011
filed in COBRA, Consumer Directed Health Plans, Flexible Benefit Plans, Flexible Spending Accounts, For Producer Partners, Health Reimbursement Accounts, Health Savings Accounts, Partners and Resources

Employer Compliance Update: June 30 Deadline for FSA, HRA & HSA Amendments

Last year’s Affordable Care Act (ACA) restricted the ability of employer health plans, including flexible spending arrangements (FSAs) and health reimbursement arrangements (HRAs), to reimburse expenses incurred for over-the-counter (OTC) medications.  Funds from these accounts can no longer be used to purchase items like aspirin, allergy and cold medications without a written doctor’s prescription. The pharmacist must fill prescriptions for these  items to be qualified expenses. There are still many over-the-counter medical products that can be purchased using FSA, HRA and HSA funds without a  doctor’s prescription. Examples include contact lens solutions and diabetic test kits and supplies. Accountholders should check before they purchase.

Sponsors of FSAs face a June 30, 2011 deadline for amending their plans to comply with this ACA restriction.This restriction actually became effective as of January 1, 2011. Ordinarily, the IRS requires that FSA amendments be adopted before they take effect.  Moreover, proposed IRS regulations state that any failure to satisfy this requirement results in all employee contributions to the FSA becoming taxable.  Perhaps recognizing the severity of this result, the IRS in Notice 2010-59 granted FSA sponsors an additional six months to adopt amendments designed to comply with this restriction.  That six-month extension expires on June 30, 2011.

A similar restriction applies to the reimbursement of expenses for OTC medications under health savings accounts (HSAs).  However, the consequences of non-compliance under such arrangements differ from those that apply under FSAs or HRAs.  Distributions from an individual’s HSA for OTC medications that are not prescribed by a physician are treated as “nonqualified” distributions.  They are therefore includible in the individual’s taxable income, and also subject to a 20% penalty tax.

All Sterling Health Services Administration Employers are in compliance.
No action is necessary on the part of Sterling Employers.

In amendments to their FSAs or HRAs, employers need to keep in mind several key points.  First, such an amendment should be retroactively effective as of January 1, 2011.  This date applies regardless of an arrangement’s plan year, and even if an FSA has been amended to take advantage of the two month “grace period” allowed by the IRS.  However, any expenses for OTC medications that were incurred before January 1, 2011, may still be reimbursed after that date, even without a prescription.

Another point to be addressed in any FSA or HRA amendment involves the treatment of OTC items other than medications.  Notice 2010-59 made clear that expenses for equipment (such as crutches), supplies (such as bandages), and diagnostic devices (such as blood sugar test kits) may still be reimbursed under an FSA or HRA, even without a prescription.  In other words, the prescription requirement applies only to OTC medications.

Finally, any amendment to an FSA or HRA that allows participants to use debit cards to purchase OTC medications should take into account additional IRS guidance.  For instance, Notice 2010-59 granted such arrangements an additional fifteen days (through January 15, 2011) to comply with the requirement of a physician’s prescription for an OTC medication.  IRS Notice 2011-5 then outlined specific procedures that must be followed if debit cards will continue to be an option for the purchase of OTC medications after January 15, 2011.  In general, these procedures are designed to ensure that these cards can be used to purchase OTC medications only after a prescription has been obtained.

As stated earlier, all Sterling Health Services Administration Employer clients are in compliance and no action is necessary on your part. If you have any questions or concerns, please contact us at 800.617.4729.

No Comments by Sterling HSA on June 15, 2011
filed in Flexible Benefit Plans, Flexible Spending Accounts, For Employers, Health Reimbursement Accounts, Health Savings Accounts, Healthcare Flexible Spending Accounts, Healthcare Reform
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U.S. Senator Orrin Hatch Introduces Legislation to Strengthen and Expand HSAs & FSAs

Note: The office of U.S. Senator Orrin Hatch (R-Utah) issued the following press release today, May 26, 2011. We previously covered this topic here as well.

HATCH INTRODUCES LEGISLATION TO STRENGTHEN, EXPAND HSAs, FSAs
Provides American Workers, Retirees with Common-Sense Way of
Helping Pay for Health Services

WASHINGTON – U.S. Senator Orrin Hatch (R-Utah), Ranking Member of the Senate Finance Committee, today unveiled the Family and Retirement Health Investment Act of 2011, bicameral legislation to strengthen and expand Health Savings Accounts (HSAs) and Flexible Spending Arrangements (FSAs) for American workers and retirees. Companion legislation was introduced in the U.S. House of Representatives by U.S. Rep. Erik Paulsen (R-Minn.).

“This legislation will provide American workers and retirees with a common-sense way of improving access to quality, affordable health care,” said Hatch. “These health plans empower Americans to take control of their health and well-being. Health Savings Accounts and Flexible Spending Accounts allow consumers to make informed decisions about their health care and will help restrain costs by putting people in charge of their health choices.”

This year health care costs are expected to rise by eight percent, more than double the rate of inflation. HSAs and FSAs provide individuals with opportunities to put away tax free savings for everyday medical expenses.  When Congress first made HSAs available, these plans only covered 454,000 lives.  Today, more than 10 million people are covered under a health plan that is eligible for an HSA.

The Family and Retirement Health Investment Act of 2011 will streamline these health care products and simplify them for American families, seniors, and entrepreneurs.

Specifically, the legislation will:

  • allow a husband and wife to make catch-up contributions to the same HSA
  • remove the onerous new restrictions on the use of HSA and FSA dollars for the purchase of over-the-counter drugs
  • allow individuals to roll-over up to $500 from their FSA accounts
  • clarify the use of prescription drugs as preventive care that will not be subject to an HSA-eligible plan deductible
  • reauthorize the use of Medicaid health opportunity accounts
  • promote wellness by expanding the definition of qualified medical expenses to encourage more exercise and better diet
  • allow seniors enrolled in Medicare Part A to continue contributing to their HSAs
  • allow for the purchase of low-premium health insurance and long-term care insurance with HSA dollars

###

To see this press release on the Senate Committee on Finance website, click here.

For more information on HSAs and FSAs, or Sterling Health Services Administration, visit our website or contact us at 877.617.4729.

No Comments by Sterling HSA on May 26, 2011
filed in Flexible Benefit Plans, Flexible Spending Accounts, For Employers, For Producer Partners, Health Savings Accounts, Healthcare Flexible Spending Accounts
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Hatching a Bill to Take HSAs to a New Level

President of HSA Consulting Services and author of The Common Sense Guide to Health Savings Accounts, Ro y Ramthun recently contributed this article to CDHC Solutions – the member-based networking community for the consumer-driven health care industry and audience of CDHC Solutions magazine. CDHC Solutions hosts the latest industry news, newest innovations, best practices, and recent trends in addition to supplying a platform for employers, consumers, and health care solutions providers to interact and discuss consumer-directed health care commerce (CDHC).

The article discusses the upcoming introduction of a new bill which presents several key potential changes to health savings accounts (HSAs), as well as flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs).

Hatching a Bill to Take HSAs to a New Level

By Roy Ramthun, President of HSA Consulting Services

Health Savings Accounts (HSAs) continue to grow as businesses look for ways to control employee benefit costs. While this trend should not change under the new health reform law, there have been some technical issues not addressed in the Tax Relief and Health Care Act of 2006 (P.L. 109-432).

That could change soon because Sen. Orrin Hatch (R-Utah) will be introducing a bill that will help take HSAs to another level, regardless of whether the health reform law is repealed or stays in place. This bill is significant because Sen. Hatch will be the highest ranking GOP member of the U.S. Senate Committee on Finance, which has legislative jurisdiction over the Internal Revenue Code, where HSAs were created. Sen. Hatch could also become the Committee’s next Chairman, depending on the outcome of upcoming elections in 2012.

The bill also would repeal the two most egregious provisions relating to consumer-driven health care in the new health reform law. First, the bill would repeal the limitation on tax-free reimbursement of over-the-counter medicines without a prescription for HSAs, as well as Flexible Spending Arrangements (FSAs) and Health Reimbursement Arrangements (HRAs). Second, the bill would repeal the limitation on deductibles imposed at $2,000 for single coverage and $4,000 for family coverage under plans offered by small businesses.

Changes to HSA Eligibility
Once a person turns 65, they usually no longer contribute to their HSA because of automatic enrollment in Medicare Part A. However, the current deductible for hospital coverage under Medicare Part A is very high, almost $1,200 per admission, nearly equal to the minimum deductible required for HSA-qualified plans. The Hatch bill would allow Medicare beneficiaries enrolled only in Part A to continue to contribute to their HSA accounts.

Great Flexibility in Using HSA Funds
Currently, people may only use their HSA account to pay for health insurance premiums when they are receiving federal or state unemployment benefits or are covered by a COBRA continuation policy from a former employer. The Hatch bill would allow HSA funds to be used to pay premiums for HSA-qualified policies under any circumstances.  The Hatch bill also would allow HSA funds to be used to reimburse all qualified medical expenses incurred after HSA-qualified coverage begins as long as the account is established by April 15 of the following year. Currently, expenses incurred before one’s HSA account is established cannot be reimbursed tax-free.

To help people stay healthy, Sen. Hatch’s bill would allow HSA funds to be used for new types of expenses, including:

  • Exercise and physical fitness programs (up to $1,000 per year)
  • Nutritional and dietary supplements, including meal replacement products (up to $1,000 per year)

Some primary care doctors are charging patients a flat annual fee in exchange for the right to receive medical services on an “as-needed” basis through the year. Currently, the IRS does not permit HSA funds to be used to pay these fees because there is no direct billing for individual services provided by the physician and the arrangement is not considered “insurance.” The Hatch bill would allow HSA funds to be used to pay these annual fees.

Rollovers and Catch-Up Contributions
The changes made by Congress in 2006, though well-intended, make it very difficult for employees to ever be able to roll over unused funds in an FSA or an HRA to help fund their HSAs. The Hatch bill simplifies the process for rollovers in order to ease the transition to HSAs from FSAs and HRAs.

HSA-eligible individuals age 55 or older may make additional catch-up contributions of $1,000 each year. However, the contributions must be deposited into separate HSA accounts even if both spouses are eligible to make catch-up contributions. The Hatch bill would allow married couples to put their catch-up contributions into one account.

Expanded Definition of “Preventive” Drugs
HSA-qualified plans may cover preventive care services without applying the policy deductible. Although the IRS allows certain types of prescription drugs to be considered “preventive care,” it generally does not permit plans to include “maintenance drugs” taken by persons with chronic conditions. The Hatch bill would provide additional flexibility to health plans that want to provide coverage for these medications and remove a perceived barrier to HSAs for people with chronic conditions.

About the Author:
Roy Ramthun is President of HSA Consulting Services, a health care consulting practice specializing in Health Savings Accounts and consumer-driven health care issues. Prior to forming his consulting practice, Ramthun was the Special Assistant to the President for Economic Policy at the White House. As a member of the National Economic Council staff, Ramthun was the senior health policy advisor to President George W. Bush regarding health care issues involving the Internal Revenue Code (primarily HSAs), Medicare, Medicaid, and the Federal Employees Health Benefits Program.

Click here to access the original publication of this article.


Sterling Health Services Administration
What do you think about these proposed changes? We would enjoy hearing your comments.

Watch for updates on this bill – and other healthcare reform issues – on our website and our Facebook page, as well as on this blog.

2 Comments by Sterling HSA on January 28, 2011
filed in Flexible Spending Accounts, Health Reimbursement Accounts, Health Savings Accounts, Healthcare Reform
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