IRS increases 2020 HSA limits
Recently, the Internal Revenue Service (IRS) announced an increase in the annual limit on deductible contributions to HSAs. The annual limit will increase by $50 for individuals and $100 for families in 2020. Continue reading this blog post for more on this increase to HSA limits.
Employees will be able to sock away some extra money into their health savings accounts next year.
The annual limit on deductible contributions to an HSA will jump by $50 for individuals and $100 for families next year, the IRS announced Tuesday.
For 2020, the annual limit on deductible contributions will be $3,550 for individuals with self-only coverage, a $50 increase from 2019, and $7,100 for family coverage, a $100 increase from 2019.
The minimum deductible for a qualifying high-deductible health plan also will increase to $1,400 for self-only coverage and $2,800 for family coverage.
Annual out-of-pocket expenses will see an even bigger jump next year. Deductibles, copayments and other amounts that do not include premiums will have a maximum limit of $6,900 for individual coverage next year, up from $6,750 in 2019, and $13,800 for family coverage, up from $13,500 in 2019.
HSA enrollment continues to grow, especially as employees look at the accounts as a way to save for medical expenses in retirement. The number of HSAs grew 13% over the past year to top 25 million, according to research firm Devenir, while assets grew 19% to $53.8 billion. Devenir projects the number of HSAs to hit 30 million by 2020, with $75 billion in total assets and $16.7 billion in investment assets.
More employers are also offering employees contributions to their accounts. Indeed, the average HSA employer contribution rose to $839 last year, up 39% from $604 in 2017, according to Devenir. All told, employer contributions totaled almost $9 billion last year.
HSAs also saw a boon this year with Amazon’s decision to allow consumers to use the accounts to buy thousands of items on its site, a move that was ballyhooed as a positive for HSA customers, as well as Amazon. Items will be listed on Amazon as “FSA or HSA eligible” on the individual product pages; a full list of items can also be browsed on Amazon’s website.
“By accepting HSA dollars, Amazon is finally giving this untapped savings tool its moment to shine,” David Vivero, co-founder and CEO at Amino, an employee financial wellness platform, wrote recently in an Employee Benefit News blog. “Every payment method or currency — whether it’s dollars, airline miles, bitcoins or credit cards — depends on reliable large-scale merchant acceptance to become truly mainstream.”
Amazon’s chief competitor, Walmart, allows consumers to use HSA and FSA cards to purchase medical items, as well.
HSA contribution limits are updated annually to reflect cost-of-living adjustments. The increases are detailed in Revenue Procedure 2019-25 and take effect in January.
SOURCE: Mayer, K. (28 May 2019) "IRS increases 2020 HSA limits" (Web Blog Post). Retrieved from https://www.benefitnews.com/news/irs-announces-2020-hsa-limits
4 ways to help employees master their HDHPs in 2019
Do you offer High Deductible Health Plans (HDHPs) to your employees? Whether your employees are HDHP veterans or newbies, there are things companies can do to help improve employee understanding. Read this blog post to learn more.
With 2018 in the books, now is a great time to give HDHP veterans and newbies at your company some help understanding — and squeezing more value out of — their plans in 2019.
Here are four simple steps your HR team can take over the next few months to put employees on the right track.
1. Post a jargon-free FAQ page on your intranet
When: Two weeks before your new plan year begins
Keep your FAQ at ten questions (and answers!), maximum. Otherwise, your employees can get overwhelmed by their health plans and by the FAQ.
When writing up the answers, pretend you’re talking directly to an employee who doesn’t know any of the insurance jargon you do. Keep it simple and straightforward.
Make sure your questions reflect the concerns of different employee types: Millennials who haven’t had insurance before, older employees behind on retirement, employees about to have a new kid, etc. To get a clear sense of these concerns, invite a diverse group of 5-7 employees out for coffee and ask them.
Some sample questions for your FAQ might be:
• Is an HSA different from an FSA?
• Do I have to open an HSA?
• How much money should I put in my HSA?
• This plan looks way more expensive than my PPO. What gives?
2. Send a reminder email about setting up an HSA and/or choosing a monthly contribution amount
When: The first week of the new plan year
When your employees don’t take advantage of their HSA not only do they miss out on low-hanging tax savings, your company misses out on payroll tax savings, too.
So right at the start of the new year, send an email that explains why it’s important to set up a contribution amount right away.
A few reasons why it’s really important to do this:
- You can’t use any HSA funds until your account is fully set up and you’ve chosen how much you’re going to contribute.
- If you pay for any healthcare at all next year, and don’t contribute to your HSA, you’re doing it wrong. Why? You don’t pay taxes on any of the money you put into your HSA and then spend on eligible health care…which puts real money back in your pocket. (Last year, the average HSA user contributed about $70 every two weeks and saved $267 in taxes as a result!)
- There’s no “use it or lose it” rule! Any money you put into your HSA this year is yours to use for medical expenses the rest of your life. And once you turn 65, you can use it for anything at all. A Mediterranean cruise. A life-size Build-a-Bear. You name it.
3. Give your HDHP newbies tips on navigating their first visit to the doctor and pharmacy
When: The week insurance cards are mailed out
When employees who are used to PPO-style co-pays realize they have to pay more upfront with their HDHP, they can get…cranky. And start to doubt their plan choice — or worse, you as their employer choice.
So set expectations ahead of time to avoid employee sticker shock and to prevent you from getting an earful. Specifically, remind employees which types of visits are considered preventative care (and likely free) and which aren’t. Then explain their options when it comes to paying for — and getting reimbursed for — the visit.
4. Share tips on saving money on care with all your HDHP users
When: Any time before the end of the first quarter of the year
Specifically, you might recommend that your employees:
- Check prescription prices on a site like Goodrx.com before they buy their meds
- Visit an urgent care center instead of the ER, if they’re sick or hurt but it’s not life-threatening
- Use a telemedicine tool (if your company offers one) to get free online medical advice without having to leave their Kleenex-riddled beds
Sure, following this communication schedule requires extra elbow grease. But if you defuse your employees’ stress and confusion early, they’ll feel more prepared to take control of their healthcare and get the most out of their plans. And as a bonus, you and your team get to spend less time answering panicked questions the rest of the year.
SOURCE: Calvin, H. (2 January 2019) "4 ways to help employees master their HDHPs in 2019" (Web Blog Post). Retrieved from https://www.benefitnews.com/opinion/4-ways-to-help-employees-master-their-hdhps-in-2019
ACA Cost-Sharing Limits for 2016
Originally posted by Laura Kerekes on June 4, 2015 on thinkhr.com.
The Affordable Care Act (ACA) requires nongrandfathered group health plans to limit the total cost-sharing (deductibles, co-pays, and co-insurance) paid by participants for in-network essential health benefits in a plan year. For the 2015 plan year, the ACA cost-sharing limits are $6,600 if self-only coverage or $13,200 if other than self-only coverage (i.e., family coverage). Often referred to as “out-of-pocket maximums,” the limits are subject to change for inflation each year.
For 2016, two important changes will take effect. First, the cost-sharing limits will increase to $6,850 and $13,700, respectively. Secondly, the self-only limit of $6,850 will apply to each covered person regardless of whether enrolled for self-only coverage or family coverage.
FAQ XXVII, released jointly by the Departments of Labor, Health and Human Services, and the Treasury, provides that:
- ACA cost-sharing limits apply to nongrandfathered group health plans, including “small” or “large” group policies and self-funded health plans.
- Deductibles, co-pays, and co-insurance, paid by the participant, must be counted toward the annual cost-sharing limits (out-of-pocket maximums). However, plans are not required to count amounts paid for nonessential health benefits, services not covered by the plan, or services received from out-of-network providers.
- For plan years beginning in 2016, the self-only cost-sharing limit applies to each person regardless of whether they have self-only or family coverage. The FAQ provides the following example:
“Assume that a family of four individuals is enrolled in family coverage under a group health plan in 2016 with an aggregate annual limitation on cost sharing for all four enrollees of $13,000 (note that a plan is permitted to set an annual limitation below the maximum . . . aggregate $13,700 limitation for coverage other than self-only for 2016). Assume that individual #1 incurs claims associated with $10,000 in cost sharing, and that individuals #2, #3, and #4 each incur claims associated with $3,000 in cost sharing (in each case, absent the application of any annual limitation on cost sharing). In this case, because, under the clarification discussed above, the self-only maximum annual limitation on cost sharing ($6,850 in 2016) applies to each individual, cost sharing for individual #1 for 2016 is limited to $6,850, and the plan is required to bear the difference between the $10,000 in cost sharing for individual #1 and the maximum annual limitation for that individual, or $3,150. With respect to cost sharing incurred by all four individuals under the policy, the aggregate $15,850 ($6,850 + $3,000 + $3,000 + $3,000) in cost sharing that would otherwise be incurred by the four individuals together is limited to $13,000, the annual aggregate limitation under the plan, under the assumptions in this example, and the plan must bear the difference between the $15,850 and the $13,000 annual limitation, or $2,850.”
Note that the current ACA cost-sharing limits, and the changes for 2016, only affect plans with high out-of-pocket maximums. Many plans are not affected because they have out-of-pocket maximums that are much lower than the amounts allowed by the ACA, or because they already apply reasonable individual maximums for both single and family coverage plans. Group policies issued in certain states also may be subject to lower limits due to state insurance laws. Therefore, many plans may not be affected by the ACA changes for 2016. On the other hand, high deductible health plans (HDHPs) that are designed for compatibility with health savings accounts (HSAs), are likely to be affected by the changes.
HSA-Compatible High Deductible Health Plans
HDHPs that qualify as permissible coverage in connection with an HSA — called HSA-compatible HDHPs — must comply with IRS rules for minimum deductible amounts and maximum out-of-pocket amounts. Most HSA-compatible HDHPs are nongrandfathered health plans, so they are subject to the ACA cost-sharing limits or the IRS maximum out-of-pocket amounts, whichever is less.
For 2016, the maximum out-of-pocket amounts for a HSA-compatible HDHP will be:
- $6,550 if self-only coverage, or
- $13,100 if family coverage.
If, however, the 2016 HDHP is a nongrandfathered health plan, the maximum out-of-pocket amount foreach individual with family coverage will be limited to $6,850 with respect to in-network essential health benefits. For many HDHPs, this will be a significant change for 2016.
Summary
The guidance provided in FAQ XXVII does not affect grandfathered health plans or any plans for plan years before 2016. For nongrandfathered plans, including HSA-compatible HDHPs, employers and benefit advisors are encouraged to review the guidance to ensure compliance with the ACA cost-sharing limits for 2016.
