IRS Announces HSA and HDHP Limitations for 2018

On May 4, 2017, the IRS released Revenue Procedure 2017-37 setting dollar limitations for health savings accounts (HSAs) and high-deductible health plans (HDHPs) for 2018.  HSAs are subject to annual aggregate contribution limits (i.e., employee and dependent contributions plus employer contributions).  HSA participants age 55 or older can contribute additional catch-up contributions.  Additionally, in order for an individual to contribute to an HSA, he or she must be enrolled in a HDHP meeting minimum deductible and maximum out-of-pocket thresholds.  The contribution, deductible and out-of-pocket limitations for 2018 are shown in the table below (2017 limits are included for reference).

Note that the Affordable Care Act (ACA) also applies an out-of-pocket maximum on expenditures for essential health benefits. However, employers should keep in mind that the HDHP and ACA out-of-pocket maximums differ in a couple of respects.  First, ACA out-of-pocket maximums are higher than the maximums for HDHPs.  The ACA’s out-of-pocket maximum was identical to the HDHP maximum initially, but the Department of Health and Human Services (which sets the ACA limits) is required to use a different methodology than the IRS (which sets the HSA/HDHP limits) to determine annual inflation increases.  That methodology has resulted in a higher out-of-pocket maximum under the ACA.  The ACA out-of-pocket limitations for 2018 were announced are are $7350 for single and $14,700 for family. 

Second, the ACA requires that the family out-of-pocket maximum include “embedded” self-only maximums on essential health benefits.  For example, if an employee is enrolled in family coverage and one member of the family reaches the self-only out-of-pocket maximum on essential health benefits ($7,350 in 2018), that family member cannot incur additional cost-sharing expenses on essential health benefits, even if the family has not collectively reached the family maximum ($14,700 in 2018).

The HDHP rules do not have a similar rule, and therefore, one family member could incur expenses above the HDHP self-only out-of-pocket maximum ($6,650 in 2018). As an example, suppose that one family member incurs expenses of $10,000, $7,350 of which relate to essential health benefits, and no other family member has incurred expenses.  That family member has not reached the HDHP maximum ($14,700 in 2018), which applies to all benefits, but has met the self-only embedded ACA maximum ($7,350 in 2018), which applies only to essential health benefits.  Therefore, the family member cannot incur additional out-of-pocket expenses related to essential health benefits, but can incur out-of-pocket expenses on non-essential health benefits up to the HDHP family maximum (factoring in expenses incurred by other family members).

Employers should consider these limitations when planning for the 2018 benefit plan year and should review plan communications to ensure that the appropriate limits are reflected.

The American Health Care Act Passes the House of Representatives

Yesterday (May 4, 2017) , the House of Representatives narrowly passed the American Health Care Act of 2017 (AHCA), which contains major parts that would repeal and replace the Affordable Care Act (commonly referred to as Obamacare or ACA).  The next obstacle the bill faces is making it through the Senate, which proves to be a formidable challenge.

The nonpartisan Congressional Budget Office has not had time yet to analyze the current version of the bill, but this is expected next week. The bill must now pass the Senate and could get pushed back to the House if it sees changes in the upper chamber.

In the meantime, here are some highlights we know about the bill based on how it is written today and how it would work:

• The AHCA bill would eliminate the requirement that people buy health insurance (known as the individual mandate).  
• The bill would eliminate penalties for large employers (50+ employees) that do not provide insurance to their employees.
• The bill would impose a penalty for people who don’t maintain continuous health insurance. The AHCA would create a penalty for people who have a gap in their health insurance of more than 63 days.  People buying insurance in the individual market who have a gap of 63 days or longer could be charged a “late enrollment penalty” by the carriers that could be up to 30% of the premium price.
• The bill would end Medicaid expansion.
• The bill would cut Medicaid spending.
• The bill would change how subsidies to buy health insurance are allocated.
• The bill keeps requirements that insurers must sell coverage to everybody.
• The bill would allow states to change which benefits insurers are required to provide to people who buy plans on their own. The AHCA would allow states to waive the current requirements of “Essential Health Benefits” (aka EHB) under Obamacare that are imposed on plans or allow states to set up their own list of EHBs that insurers must cover in the individual market.
• The bill would allow insurers to charge older people more than under the current law. The ACA limits insurers to charging older customer to 3 times a much as younger customers in the individual market. The AHCA expands that ratio to allow insurers to charge older customers 5 times as much as younger customers (it was 10 times prior to Obamacare).
• The bill would allow states to let insurers charge older people even more. Under the AHCA, states could seek a waiver from the federal government regarding the age ratios which would let them set their own ratios above the 5 times ratio set by the government.
• The bill would allow states to end requirements that insurers cover pre-existing conditions.
• The bill could lead to states setting up special insurance programs for high cost patients. The main requirements for a waiver on pre-existing conditions is that states must set up some kind of program to cover the most costly customers (aka high risk pools).
• The bill could impact the benefits covered by employer sponsored insurance.
• The bill would keep the insurance exchanges in place.
• The bill would allow kids to stay on their parent’s plan until age 26.
• The bill would repeal multiple taxes that helped fund the ACA.
• The bill would cut federal spending by hundreds of billions of dollars.
• The bill would return over the counter medications to the list of qualified medical expenses for the 2017 tax year.
• The bill would reduce the tax penalty on health savings accounts from 20% to 10% for distributions that are not used for qualified expenses.
• The bill would repeal the limitation of $2500 on health FSA contributions.
• The bill would increase H.S.A. contributions for a year to equal the maximum on the sum of the annual deductible and out of pocket expenses.
• The bill would allow both spouses to make catch up contributions in one H.S.A.

We will continue to keep you up to date on the bill as it progress through legislation.

Proposed Changes for the Summary of Benefits and Coverage (SBC)

On December 22, 2014, the Departments of Health and Human Services (HHS) issued proposed regulations for changes to the Summary of Benefits and Coverage (SBC).

 

The proposed regulations clarify when and how a plan administrator or insurer must provide an SBC, shortens the SBC template, adds a third cost example, and revises the uniform glossary. The proposed regulations provide new information and also incorporate several FAQs that have been issued since the final SBC regulations were issued in 2012.

 

These proposed changes are effective for plan years and open enrollment period beginning on or after September 1, 2015. Comments on the proposed regulations will be accepted until March 2,2015 and are encourages on many of the provisions.

 

New Template

 

The new SBC template eliminates a significant amount of information that the Departments characterized as not being required by law and/or as having been identified by consumer testing as less useful for choosing coverage.

 

The sample completed SBC template for a standard group health plan has been reduced from four double-sided pages to two-and-a-half double-sided pages. Some of the other changes include:

 

• An additional cost example for a simple foot fracture treated in an emergency room, which will be added to the two current examples. This new example is proposed as a health problem that any individual could experience, while the two current examples- having a baby and managing type 2 diabetes- affect only certain individuals.
• The coverage example calculator will be authorized for continued use and updated claims and pricing data for the two existing exampled and the third example will be provided.
• References to annual limits for essential health benefits (EHBs) and preexisting condition exclusions  will be removed.
• Information regarding minimum essential coverage (MEC) and minimum value (MV) has been revised and must be included in the SBC. This effectively ends a temporary enforcement safe harbor that previously permitted statements about MEC and MV to be included in a cover letter rather than in the SBC.
• Premium information may be included in an SBC, but it is not required.
• All SBCs must include an issuer website where the individual policy or group certificate of coverage can be reviewed and obtained. Plan administrators are not required to include a website separate from the issuer website.
• SBCs for individual policies will be required to disclose whether abortion services are covered or excluded and whether coverage is limited to services for which federal funding is allowed.

 

Glossary Revisions

Revisions to the uniform glossary have also been proposed. The glossary must be available to plan participants upon request. Some definitions have been changed and new medical terms such as claim, screening, referral and specialty drug have been added. Additional terms related to health care reform such as individual responsibility requirement, minimum value and cost-sharing reductions have also been added.

 

Paper vs Electronic Distribution

SBCs may continue to be provided electronically to group plan participants in connection with their online enrollment or online renewal of coverage. SBCs may also be provided electronically to participants who request an SBC online. These individuals must also have the option to receive a paper copy upon request.

 

SBCs for self-insured non-federal government plans may continue to be provided electronically if the plan conforms to either the electronic distribution requirements that apply ERISA plan or the rules that apply to individual health insurance coverage.

 

Types of Plans to Which SBCs Apply

The regulations confirm that SBCs are not required for expatriate health plans, Medicare Advantage plans or plans that qualify as excepted benefits. Excepted benefits include:

 

• Employee Assistance Plans (EAPs) that meet the requirements to be excepted benefits
• Health Savings Account (HSAs) because they are not group health plans
• Dental and vision coverage that meet the requirements to be excepted benefits

 

SBCs are required for:

• Health Reimbursement Arrangements (HRAs) because they are considered group health plans
• Health Flexible Spending Accounts (FSAs) if they do not qualify as excepted benefits

Grandfathered Health Plans – What Are They?

You may have heard a lot about how the Affordable Care Act (ACA) is going to change health insurance in the next year, but does it all apply to you? If you get your insurance from your employer, there may be a chance that you may be enrolled in a “grandfathered plan” and some of these changes may not affect you – yet.

 

Some health plans were allowed to be exempt from some of the ACA’s rules and protections in the interest of a smooth transition and to allow employers and individuals to keep their current policies in force without having to make substantial changes. Almost half of all Americans who get insurance through their jobs are enrolled in such plans, however that number is expected to continue to decline every year.

 

Consumers should know the status of their plans since that may determine whether they are eligible for certain protections and benefits created by ACA. For example, an employee at a large company may wonder why his employer provided coverage does not included the free preventative services that he has heard about on the news. In order to understand this, you must understand the status of your current medical plan and how grandfathering works.

 

What is a grandfathered plan?

 

Most health insurance plans that existed on March 23, 2013 are eligible for grandfathered status and therefore do not have to meet all of the requirements of the health care law. But if an insurer or employer makes significant changes to a plan’s benefits or how much members pay through premiums, copays, or deductibles, then the plan loses that status.

 

Both individual and group plans can be grandfathered. If you get coverage through an employer and they currently offer employees a grandfathered plan as part of their benefits package, you can enroll in this plan even if you were not enrolled on March 23, 2010.

 

What Rules Does a Grandfathered Plan Have to Follow?

 

A grandfathered plan has to follow some of the same rules other plans so under the ACA. For example, the plans can not impose lifetime limits on how much health care coverage an individual can receive, and they must offer dependent coverage for young adults until age 26.

 

There are many rules, however, that grandfather plans do not have to follow. For example, they are not required to provide preventative care without cost-sharing. In addition, they do not have to offer a package of “essential health benefits” that individual and small group plans must offer beginning 2014. Grandfathered individual plans can still impose annual dollar limits (such as capping key benefits at $750,000 in a given year) and they can deny coverage for children under age 19 if they have pre-existing conditions.

 

How Many People Are Enrolled in Grandfathered Plans?

 

In 2013, 36% of those who get coverage through their employer are enrolled in a grandfathered health plan. This number is down from 48% in 2012 and 56% in 2011, according to the Kaiser Family Foundation Employer Health Benefits Survey. Most plans are expected to lose grandfather status over time though.

 

How Do I Find Out If I’m Enrolled in a Grandfathered Plan?

 

If you want to know more about your coverage, it is best ask your insurance company or your employer’s human resource department about the status of your plan. If your employer is currently offering a grandfather plan, they are required to release a notice to you annually if they are offering benefits through a grandfathered medical plan.

 

Please contact our office for more information regarding if your current plan is considered “grandfathered” or for more information on ACA.