On January 3, 2012, the IRS released Notice 2012-9 which restates and clarifies its prior guidance on the requirement under the Affordable Care Act (Healthcare Reform) to report the cost of employer-sponsored health coverage on employees’ annual forms W-2 (using box 12, code DD). Notice 2012-9 supersedes the prior guidance issued under Notice 2011-28 and clarifies various aspects of the reporting requirement. The reporting requirement is effective starting with the 2012 forms W-2 for calendar year 2012 that employers are generally required to furnish to employees in January 2013.

The requirement applies to most employers, including federal, state and local government entities, churches and other religious organizations, and employers that are not subject to continuation coverage requirements under COBRA, to the extent such employers provide applicable employer-sponsored coverage under a group health plan. Employers who only sponsor self-insured group health plan coverage that is not subject to COBRA are not required to report the cost of the coverage on Form W-2.

Notice 2012-9 clarifies that until further notice, the exemption for federally recognized Indian tribal governments is expanded to include employers that are tribally chartered corporations wholly owned by federally recognized Indian tribal governments.

This information is provided as guidance. Sterling HSA and Sterling SIA do not provide tax advice. For clarification and details, readers of this information should contact their tax advisor.

We are acting on feedback from clients who tell us that waiting until May for us to send Form 5498-SA is not helpful, as many of you file your tax report by April 15 or earlier.  Expect to receive all tax-related reports on your HSA account by the end of this month. In case you’re wondering about those reports, below is a quick summary:

• Form 1099-SA – This form records all the disbursements you’ve generated in 2011. For many of us, we associate any 1099 form in the context of taxable income.  That is NOT the case with HSAs.  Form 1099-SA simply tells the IRS what amounts were spent from your HSA account and whether any of those dollars were used for “nonqualified” expenses. Sterling will also send the IRS an electronic version of Form 1099-SA. Please note that we will report to the IRS that distributions were for qualified medical expenses except in those instances in which we had knowledge of an unqualified distribution or if you closed your account. If your records indicate to the contrary, please let us know, so that we may correct our files. If you spent zero dollars out of your HSA account in 2011, then you will NOT receive Form 1099-SA. Please know that account fees are not reported as distributions from your account. We are not tax advisors, but we understand that these fees may also be deductible as “Other Miscellaneous Deductions”. Please consult your tax preparer.

• Form 5498-SA – This form records all contributions made to your HSA account in 2011, regardless of who makes them. If you did not make any contributions, then you will not receive this form. Note that you are allowed to make contributions for the 2011 tax year up to April 15, 2012. If you decide to do so, then we will reissue your form 5498-SA by no later than May 31, 2012. Please remember that unless you tell us differently, any contributions received in 2012 will be posted to your account as 2012 contributions. If you intend the contributions for 2011, then you need to note that online (the pull down category allows for “prior year” contributions) or write it on the check.

While Sterling sends you forms that can help you prepare your tax return, these forms are not to be sent to the IRS. Instead, you need to send Form 8889 along with your tax return. This form can be obtained from the IRS website here: http://www.irs.gov/pub/irs-pdf/f8889.pdf. While we can’t complete this form for you, your statement is a key source of information and should help you. Again, if you plan to add more deposits to your HSA account for tax year 2011, then you will need to add those amounts to what is included on the attached statement when you file your taxes. By the way, we’ve heard from many clients that filing your tax returns without Form 8889 could cause the IRS to give you special attention, so please include this form in your tax filing.

2011 Contributions – In case you’re planning to maximize your tax-deductible contribution for 2011, please remember that you and your employer may contribute in total up to $3,050, if you are under 55 years of age and have single HSA compatible health coverage, and up to $6,150 if you are under 55 years of age and have family HSA compatible health coverage. If you are 55 years old and over and not receiving Medicare benefits, then you may also contribute an additional “catch-up” contribution of  $1,000. Your spouse is also entitled to a catch-up contribution if he/she meets the eligibility requirements noted above. For your spouse to make the catch-up contribution, he/she will need to open a spousal HSA account. It’s a quick and easy process and we’d be happy to help.

Problem With Excess Contributions – Please compare your year-end statement against the contribution limits noted above. If you’ve contributed in excess of those limits, then you need to let us know immediately so we can help you correct this. If you fail to do so, then the IRS will levy an excess contribution penalty. To prevent that from happening, please call us at 800.617.4729. Customer service representatives are available Monday – Friday from 8 am to 6 pm Pacific time.

Tax Issues for Residents of California, Alabama and New Jersey – While HSA contributions enjoy federal tax advantages, remember that if you live in California, Alabama or New Jersey, your contributions are not tax-advantaged for state income tax purposes. That means for residents in these three states, contributions are not tax-deductible, employer contributions are considered taxable income, and any interest earned is considered income for state tax purposes.

2012 Contributions – In 2012, the maximum amount that can be contributed to your HSA is $3,100 for accountholders under age 55 with single coverage and $6,250 for accountholders under age 55 with family coverage. “Catch-up” contributions of $1,000 for accountholders who are 55 years or over are allowed. Spouses age 55 and over may also contribute $1,000 towards a “catch up” account, but they must have a spousal HSA account.

Sterling does not offer tax advice, but if you have questions about this information, please call or email at 800-617-4729 or customer.service@sterlinghsa.com. Customer service representatives are available Monday – Friday from 8 am to 6 pm Pacific time.

What is self insurance?

Under self insured plans, the employer provides health benefits to employees using its own funds, rather than pay fixed premiums per employee per month to a health insurance carrier. The employer is responsible for funding payments needed to pay for plan benefits and pays for claims as they are incurred.

An essential principle of self insurance is the concept that health insurance protects against two areas of exposure: predictable costs and unpredictable costs. Self insured employers assume the risks associated with predictable claims costs. Unpredictable costs, such as shock claims or catastrophic losses, are generally covered under stop loss (excess loss) contracts issued by an insurance carrier.

Self insurance provides a proven and effective mechanism for employers to control the flow of its money, gain investment income, and gain complete control of the health benefits plan design.

What is stop loss?

Stop Loss, also known as Excess Loss, limits an employer’s liability so that the employer does not take 100% of the risk for catastrophic claims. Under stop loss, specific coverage covers catastrophic claims on one individual at a specified deductible (also known as employer’s retention). Aggregate coverage covers claims that significantly exceed the expected claims level for the entire group of covered persons (the aggregate attachment point).

Who is Sterling’s stop loss carrier?

Sterling has contracts with multiple “A” rated stop-loss carriers, enabling us to work with clients with a small employee population, as well as with large corporations. We work with clients who have claims experience and those who don’t throughout the country.

Why is self insurance gaining in popularity?

The passage of the Patient Protection and Affordable Care Act (PPACA), commonly known as Healthcare Reform, makes self insurance more appealing than ever because self insured employer plans are exempted from state mandates and explicitly exempted from some requirements under PPACA. Less than 20% of the current reform mandates apply to self insured arrangements.

Self insured plans give employers greater cost control. Health benefits costs for employers increased at a rate of 7.3% in 2011 and are expected to increase by 8.5% in 2012, considerably more than the general rate of inflation as measured by the CPI. By self insuring, employers have greater control over cash flow as funds are expended only when employees submit a claim. Moreover, Sterling’s disciplined approach to benefit design increases the opportunities for cost savings as employees are engaged more directly in cost-effective alternatives. Finally, employers enjoy access to and transparency of utilization data to guide wellness programs and other strategies designed to reduce cost. Employers can review reports on a regular basis and monitor trends specific to the company workforce.

How many people are covered under self insurance?

The number of employees in the U.S. covered under self insured health plans has increased from 44% in 1999 to nearly 60% today. The fastest growing market segment is employer sponsored groups with fewer than 1,000 employees – 29% of employers in 2008 compared to 48% in 2010.

How does self insurance compare to fully insured plans?

Fully Insured:

• Employer pays a fixed monthly premium to the insurance carrier.
• Premium covers expected claims and administrative costs, as well as insurer’s risk charge.
• When claims are lower than expected, the insurance carrier keeps the difference. If actual claims are higher than expected, insurance carrier pays the difference.
• There is little transparency for employers to understand the details of healthcare costs and little incentive for employer engagement.
• Frequently, there is little incentive or engagement on the part of employees to make healthy, cost conscious choices.

Self Insured:

• Employer pays a fee to a plan administrator (TPA) who performs functions such as claims processing and securing discounts from providers and to a stop loss reinsurer who pays for claims above a predetermined level.
• Employer pays the actual claims incurred by enrolled employees and their dependents and must budget accordingly.
• Employers can design the health plan to meet the needs of the company and employees, including real incentives for employees to participate in wellness and pharmacy care management programs that reduce costs.
• Employers have a direct financial incentive to be much more proactive in engaging employees to improve health status.

What is Sterling SIA’s role in self insurance?

Sterling functions as a third party administrator (TPA) to manage the employer’s self insured plan. We do so through our partners and our own staff and proprietary systems. Sterling works with employers and their benefits consultants to develop custom benefit design, underwrite stop loss insurance, implement the benefit plan, manage the Sterling HealthAssets™ accounts for employees, and provide customer support to employers and employees.

Contact us today for more information.

We are pleased to share these photographs taken at the food banks as we delivered the donations.

Los Angeles Mission

Having begun as a small rescue mission in 1936, Los Angeles Mission is now among the nation’s largest service providers to the homeless. The Los Angeles Mission provides hot meals, safe shelter, clothing, personal care and life-transforming long-term rehabilitation to hungry and homeless men, women and children. The Los Angeles Mission is also a Sterling client.

Sterling Regional Sales Representative Tammera Callahan at the Los Angeles Mission

Second Harvest Food Bank

A Sterling client, Second Harvest Food Bank of Santa Clara and San Mateo Counties has been providing services to the community since 1974. They are the single largest non-profit provider of food to low-income people in the area – the majority of whom are families with dependent children and senior citizens.

Sterling Senior Director of Sales Darrell Perkins at Second Harvest Food Bank

Austin Food Bank/ Capital Area Food Bank of Texas (not pictured)

Now in its 31st year of service, the Capital Area Food Bank of Texas (CAFB) provides food and grocery products to more than 300 Partner Agencies in 21 Central Texas counties. In Fiscal Year 2010-11, CAFB provided more than 24 million pounds of food. The CAFB service area covers 19,064 square miles in Central Texas.

Rhode Island Community Food Bank

Since 1982, the Rhode Island Community Food Bank has solicited, stored and distributed surplus food and grocery products to qualified member agency programs that provide food to Rhode Island’s hungry. Millions of pounds of donated food and nonfood household products are distributed into the community through our network of 250 member agency food programs across Rhode Island.

Sterling Director of Sales Marina Weiss at the Rhode Island Community Food Bank

“Thank you for sending the wonderful holiday e-card. What a wonderful idea to donate to food banks particularly at this time of year, and in our name. Thank you!”
- Malcolm T. from Hawai‘I

“Thank you for such wonderful donations to people who really need it! Happy New Year to all at Sterling as well!”
- Sterling Accountholder

“What a great idea!!!! Thank you!”
- Tessa H.

From all of us at Sterling Health Services Administration, we wish you & yours a Sterling holiday season and another year of health & happiness.

As we did last year, Sterling and our employees are donating to food banks in our markets throughout the country as a way of saying thanks to our clients and our partners. The organizations were selected by our employees
and some are Sterling clients.

Second Harvest Food Bank serving Santa Clara and San Mateo counties of Northern California
Los Angeles Mission serving the Greater Los Angeles area
Austin Food Bank serving twenty-one counties in Central Texas
Rhode Island Community Food Bank serving Rhode Island & South Attleboro, Massachusettes

Look for photos on Facebook and the Sterling blog later this month when we present our donations in your honor.

Happy Holidays from Sterling Health Services Administration!

New Sterling Services:

• Login Once for Access to HSA, HRA and FSA Accounts – We’ve made it easier for you to access account information online. If you have multiple accounts with Sterling, such as an HSA and HRA, or HSA and FSA, just one login at www.sterlinghsa.com now provides access to account information and transaction tools for HSAs, HRAs and FSAs. You may remember that each product required a separate login until now. At this time, COBRA account access still requires a separate login to our WebCOBRA portal. Product web guides with more details can be downloaded by clicking the buttons below.

• Fast Account Balances Via Phone – You can get your HSA,HRA and FSA account balances anytime just by calling 800-617-4729, pressing 1 at the prompt, and entering your Sterling account number. The response to this new service has been very positive, making it easy for you to access information on funds available anytime from anywhere.

Industry Updates:

• HSA contribution limits for 2012 increased to $3,100 for individuals and $6,250 for families, regardless of the health plan deductible. Accountholders over 55 can make a $1,000 annual catch up contribution as well.

• For Transit and Parking FSAs, the 2012 benefit amounts are $240 per month for parking (a $10 monthly increase) and $125 per month for transit (down from $230).

If you are a Sterling Accountholder or Subscriber, download your web portal guides below:

If you are a Sterling Employer Client, download your web portal guides below:

Questions? Contact Sterling customer service by calling 800-617-4729 or emailing customer.service@sterlinghsa.com. Now through February 2012, we have extended customer service hours and are available to help you from 6 am to 8 pm PT.

If you cannot see the video above, click here to view.

As people across our great country gather around their Thanksgiving tables to celebrate with family and friends, it seems an appropriate time to reflect and be grateful for the many blessings of the past year, as some of our employees have done here. Happy Thanksgiving to you and yours!

“I am thankful for healthy children, an awesome husband, strong parents, great siblings and terrific friends.”
Julie, Regional Sales Representative – Austin, Texas

“At this time of year, I’m reminded of how lucky I am to have such a beautiful family, wonderful friends and a fantastic career. Be sure to remember to give to those in need this holiday season. Giving is receiving.”
Morgan, Senior Director of Sales – Southern California

“I am very thankful for the children and husband I was given, for the BIG family I was blessed with and for everyday I live.”
Josie, Account Finance – Oakland Office

“I am grateful for my wonderful husband, beautiful children and adorable grandchildren.”
Chris B., EVP, Business Development – San Francisco Bay Area, California

“I am thankful for friends, coworkers and family who keep me laughing and joyous all year long.”
Teri, Manager-Employee Services & Training – Oakland Office

“This Thanksgiving I count my blessings for my family, friends, the wonderful experiences of my life, and my great job at Sterling.”
Nancy, Chief Marketing Officer – Seattle, Washington

“I’m thankful for the many blessings in my life, my wonderful wife and three children and our health!”
Chris C., Vice President of Sales – Dallas, Texas

“A great time to reflect and be thankful for everything we have; think about those who have lost loved ones for that is the only thing in this world that cannot be replaced.”
Duarte, Chief Operating Officer – Oakland Office

Please share what you are thankful for this year in the Comments below.

The “2011 Employer and Account Holder Surveys,” commissioned by ACS and conducted by Buck Consultants, show a  majority of small employers (77 percent) believe that High Deductible Health Plans (HDHP) with an HSA are key in controlling health care costs.

Additionally, more than half (56 percent) of account holders have found that their HSA-qualified plan provides an affordable health care option.

The surveys show that HSAs put consumers in the driver’s seat when it comes to managing their health services and care. Three-quarters of respondents say the ability personally to control their own health costs is an “extremely” or “very” important benefit of HSAs.

Not only are account holders setting aside more money than before they had an HSA to cover potential medical costs (54 percent), but they are also engaging in healthier lifestyle choices (18 percent), researching preventive care programs (18 percent), shopping for lower priced prescription drugs (28 percent), and planning health care better throughout the year (31 percent). Individuals perceive that they consume medical services at approximately the same rate but are shopping for care more than before.

Employers and employees are benefiting from more educated, responsible health and wellness decisions, but the benefits don’t end there. HDHPs are less costly to employers for both individual and family coverage. Employers report that the cost of providing HSA-qualified plans is less than the cost of providing a standard Preferred Provider Organization (PPO). The average direct cost to provide an HDHP/HSA is $5,469 for individual coverage and $9,909 for family coverage. In comparison, the average PPO cost is $7,158 for individuals and $10,691 for family.

Other significant findings include:

2011 Employer Survey

• The average employer that implemented an HDHP and HSA program has 49 percent of eligible employees enrolled in the HDHP.
• Sixty-nine percent of employer respondents contributed to their employees’ HSA accounts.
• Employers’ contributions to HSAs average $1,000 for individual coverage and $1,500 for family coverage.

2011 Account Holder Survey

• Seventy-two percent of account holders indicated that they actively chose the HSA-qualified plan although other plan options exist for them.
• Eighty-two percent of account holders surveyed reported that the ability to save tax-free money was “extremely” or “very” important in selecting an HSA-qualified plan.
• Seventy-nine percent of respondents state that having an HSA is valuable to them.
• Sixty-four percent of respondents state that their HDHP/HSA combination meets their family’s needs.

These surveys, commissioned in the fall of this year by ACS and conducted by Buck Consultants, both of which are Xerox companies, generated more than 14,000 existing account holder and 300 employer responses. The surveys are the largest ever conducted on the subject of HDHPs and HSAs.

For more information on Health Savings Accounts, visit our website or contact a Sterling sales representative today.

We offer your clients a flexible, integrated, single source Sterling Level Funding solution designed specifically for employer groups of 25 – 250 employees (may vary by state).

3 key benefits set Sterling Level Funding apart:

• No claims experience required for groups under 100.
• No individual health statements required for groups over 50.
• All excess claims funds are returned to the client, even if they terminate at the end of the plan year.

Our proposals will show your clients how self-insurance saves them money even if they have a challenging claims year!

Your clients can custom build their benefits plans or choose from our plan designs that include CDHP, PPO, EPO, HRA and HSA plans (groups 25 – 50 must choose from the Sterling plan designs). Our Level Funding program includes medical, dental and vision claims management, discounted pharmacy benefit management (qualified rebates go to employers and employees), and a nationally recognized wellness program complete with Sterling paid financial incentives for employees.

All this and Sterling’s long history of expert education and administration of HSAs, HRAs, FSAs, POPs, and COBRA promises to satisfy your clients. Remember that discounts apply for multiple products administered by us.

Click on the button below to download Sterling Level Funding collateral. Contact a Sterling sales representative today to let us help you develop self-insurance proposals for your clients. If you aren’t a Sterling producer partner, complete the short form on our website and we’ll contact you to sign up. We look forward to working with you in 2012!