Medical savings accounts on the upswing
By David Albertson
As of 2012 there was $17.8 billion in health savings accounts (HSAs) and health reimbursement arrangements (HRAs), spread across 11.6 million accounts, according to data from the latest EBRI/MGA Consumer Engagement in Health Care Survey, sponsored by the Employee Benefit Research Institute and Matthew Greenwald & Associates.
That’s up from 2006, when there were 1.3 million accounts with $873.4 million in assets, and 2011, when 8.5 million accounts held $12.4 billion in assets.
The balances continue to grow as more employers adopt high-deductible, consumer-driven health plans combined with HSAs/HRAs. However, assumptions about these plans are not always proving true. For example, analysts predicted that individuals given more control over funds for health care services would become more cost conscious as they became more educated about the actual prices of those services. However, according to EBRI, no evidence was found to support this, nor was there evidence that healthy behaviors had any real correlation with account balance.
Among other findings from the EBRI/MGA survey:
After leveling off, average account balances increased. After average account balances leveled off in 2008 and 2009, and fell slightly in 2010, they increased in 2011 and 2012. In 2006, the average account balance was $696. It increased to $1,320 in 2007, a 90% increase. Account balances averaged $1,356 in 2008 and $1,419 in 2009, 3% and 5% increases, respectively. In 2010, average account balances fell to $1,355, down 4.5% from the previous year. In 2011, average account balances increased to $1,470, a 9% increase from 2010. It increased to $1,534, or 4%, in 2012.
Total and average rollovers increased. After declining to $1,029 in 2010, average rollover amounts increased to $1,206 in 2011 and remained there in 2012. Total assets being rolled over increased: $9.7 billion was rolled over into HSAs and HRAs in 2012, up from $6.8 billion in 2011. The percentage of individuals without a rollover was 11% in 2012.
Differences in account balances. Men have higher account balances than women, older individuals have higher account balances, account balances increase with household income, and education has a significant impact on account balances, independent of income and other variables.
Individual providers of HSAs likewise report significant growth in account balances over the past year, and bullish expectations for additional increases.
Among the HSA leaders, UMB Healthcare Services, a division of UMB Financial Corporation, announced that account balances for its HSAs grew 55% during the previous 12 months, surpassing $615 million dollars as of Jan. 31, 2013. The number of HSAs also grew to nearly 320,000 individual accounts, up dramatically from the 220,000 following open enrollment last year.
UMB Healthcare Services also saw a 29% increase in the number of debit cards it provides for Flexible Spending Accounts (FSAs), HRAs) and HSAs. Today, the number of cards in circulation has grown to more than 2.8 million.
According to the January 2012 annual census by America’s Health Insurance Plans’ Center for Policy and Research, the number of people with HSA/HDHP coverage rose to more than 13.5 million, up from 11.4 million in January 2011.
“Our HSA growth continues to reflect the trend we are seeing nationwide as more individuals and employers move toward consumer-directed health accounts,” said Dennis Triplett, CEO of UMB Healthcare Services. “We are now challenged with educating the growing number of employers and account holders on all that these accounts can offer toward future financial stability, beyond day-to-day health care expenses.”
Source: https://ebn.benefitnews.com/news/medical-savings-accounts-on-upswing-2731569-1.html
Regulation Roundup: The Hits Keep On Coming
Source: United Benefit Advisors
The federal government in the past few weeks has kept up the fast pace of pumping out benefits-related guidance -- a trend that started at the end of 2012 -- with a set of final and proposed regulations for the health care reform law, a final HIPAA rule and a compromise on the Obama administration's coverage requirement for contraceptives.
HIPAA: The Department of Health and Human Services (HHS) released its HIPAA omnibus final rule in late January. The final rule establishes new rights for individuals to access their health information, calls for updates to business associate contracts, beefs up privacy protections for patients and gives the government more power to enforce the law, according to a HealthLeaders Media article.
Employers should expect tougher policing of HIPAA-related infractions by federal agencies, experts say.
"The 'good old days' of voluntary compliance and 'slaps on the wrist' seem to be a thing of the past," Brad M. Rostolsky, a partner with Reed Smith, LLP, told HealthLeaders Media. "As a result, it's important that regulated businesses, from the top down, are seen to have buy-in to HIPAA compliance efforts."
Contraception Compromise: HHS has tweaked its requirement that religious nonprofit organizations provide their female members coverage for birth control, according to a PPACA Advisor release from United Benefit Advisors (UBA). Instead, insurance companies, after being notified of the employer's objection to the coverage, would be required to provide coverage at no cost to workers through separate policies. If the employer is self-insured, it can use a third party to set up a separate health policy that would provide coverage for contraceptives. The costs for this action may be be offset by the fees that insurers will pay to participate in the government-run health care exchanges, slated to go online in 2014.
Affordability: The IRS finalized a rule that clarified that the health coverage "affordability" requirement (that an employee's premium contribution not exceed 9.5 percent of household income) under the Patient Protection and Affordable Care Act (PPACA) will be based on self-only coverage, according to a Business Insurance online report. Employers with plans that fail that test face a $3,000 penalty for each full-time employee who is not offered affordable coverage and instead receives a premium subsidy from the government to purchase insurance in a health care exchange. The proposed regulation left open the possibility that the affordability test might have applied to family coverage, but the IRS removed that scenario with its final rule.
HRAs: A new set of frequently asked questions posted by federal agencies limits the use of health reimbursement arrangements (HRAs) in the coming government-run health insurance exchanges, an online report by the Society for Human Resource Management (SHRM) notes. The FAQs state that an HRA that is not integrated with a group health plan but instead functions as a "stand-alone" benefit falls under the PPACA provision that limits the annual amount an individual is required to spend on health care coverage. The report points out that this restriction means funds from stand-alone HRAs can't be used to buy individual coverage through the online exchanges, slated to open in 2014.
Timothy Jost, a professor at Washington and Lee University School of Law, told SHRM that many employers were hoping to offer employees "a fixed-dollar contribution" through an HRA. Such a move "would permit the employee to take advantage of the tax subsidies currently available through HRA coverage but get the employer out of the health insurance business." For many employers, this now will not be possible.
Minimum Coverage: A proposed PPACA rule clarifies what types of services would be considered "minimal essential coverage," UBA reports. Services such as on-site clinics, limited-scope dental and vision, long-term care, disability income and accident-only income would not qualify as employer-sponsored minimal essential coverage. More details can be found in the Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2013-02-01/pdf/2013-02141.pdf
Exchange Notice Delay: Employers who were concerned about a fast-approaching deadline to distribute notices on the exchanges can relax for a few more months. The Department of Labor (DOL) has pushed the date (originally March 1) to late summer or early fall. The DOL is preparing model language for the notice, and a final date will be announced later, the agency said.
Additional proposed regulations addressing open issues under PPACA
The Department of Health and Human Services (HHS), the Internal Revenue Service (IRS) and the Department of Labor (DOL) have recently issued more FAQs and proposed rules that address several employer obligations under the Patient Protection and Affordable Care Act (PPACA).
Notice of Exchange Has Been Delayed
On Jan. 24, 2013, the DOL issued a FAQ that delays the due date for providing employees with a notice about the affordable health exchanges. The notice had been due March 1, 2013 but the due date has been delayed until late summer or early fall of 2013. The delay will result in the notice being provided closer to the start of open enrollment for the exchanges, which will begin Oct. 1, 2013, for a Jan. 1, 2014, effective date.
To read the FAQ, click here: https://www.dol.gov/ebsa/faqs/faq-aca11.html
HRA Restrictions
Because PPACA prohibits annual dollar limits on essential health benefits, HRAs that are not integrated with other group health coverage (usually a major medical plan) will not be permitted after Jan. 1, 2014.
The Jan. 24, 2013, DOL FAQ also addresses HRAs, and states that an employer-provided HRA will not be considered integrated (and therefore will not be allowed) if it:
- Provides coverage through individual policies or individual market coverage; or
- Credits amounts to an individual when the individual is not enrolled in the other, major medical coverage
Existing HRAs that cannot meet the 2014 requirements generally will be allowed to reimburse expenses incurred after 2014, in accordance with the terms of the plan.
Premium Tax Credit/Subsidy
On Feb. 1, 2013, the IRS issued a final regulation that provides the long awaited answer of whether family members of an employee who has access to affordable self-only coverage are eligible for a premium tax credit/subsidy. The answer is that they are not – if the employee has access to affordable self-only coverage, the spouse and children are also considered to have access to affordable employer-sponsored coverage, and therefore the spouse and children are not eligible for premium tax credits/subsidies. To read the final IRS rule, click here:
https://www.gpo.gov/fdsys/pkg/FR-2013-02-01/pdf/2013-02136.pdf
Minimum Essential Coverage
On Feb. 1, 2013, HHS and the IRS issued two proposed regulations that provide details on the individual shared responsibility requirement.
PPACA requires that non-exempt individuals obtain “minimum essential coverage” or pay a penalty. Minimum essential coverage includes individual insurance, Medicare, Medicaid, CHIP, TRICARE, VA and similar government programs, and employer-sponsored coverage. The proposed IRS rule defines minimum essential “employer-sponsored” coverage as an insured or self-funded governmental or ERISA welfare benefit plan that provides medical care directly or through insurance or reimbursement. (An HMO is considered an insured plan.)
Generally, any policy offered in the small or large group market that meets the above requirements will be minimum essential coverage. The proposed IRS regulation states that these types of coverage will not qualify as minimum essential employer-sponsored coverage:
- Accident only
- Disability income: Liability, including general, automobile, and supplemental liability;
- Workers compensation
- Automobile medical payment
- Credit only
- On-site medical clinics
- Limited scope dental or vision
- Long-term care, nursing home care, home health care, community-based care or any combination of these
- Specified diseases or illness
- Hospital indemnity or other fixed indemnity insurance
- Medicare supplement
- Similar limited coverage
Public comments are due March 18, 2013. To read the proposed IRS rule, click here: https://www.gpo.gov/fdsys/pkg/FR-2013-02-01/pdf/2013-02141.pdf
The HHS proposed rule provides details on how an individual can claim an exemption from the individual shared responsibility penalty.
Public comments on this rule also are due March 18, 2013. To read the proposed HHS rule, click here: https://www.gpo.gov/fdsys/pkg/FR-2013-02-01/pdf/2013-02139.pdf
Women’s Preventive Care Services
Proposed rules that would make it simpler for religious organizations and religious-affiliated not-for-profit organizations like hospitals and schools that have a religious objection to providing contraceptive services were released by the DOL on Feb. 1, 2013. These employers would notify their insurer of their objection, and the insurer automatically would be required to notify the employees that it will provide the coverage without cost sharing or other charges through separate individual health insurance policies.
For religious-affiliated workplaces that self-insure, the third party administrator would be expected to work with an insurer to arrange no-cost contraceptive coverage through separate individual health insurance policies.
The administration believes the cost of free contraceptive coverage will be offset by fewer maternity claims, but is exploring allowing an offset of the cost against federally facilitated exchange user fees.
The proposed rule offers no exemption for private employers that object to covering contraceptive services on religious or moral grounds.
The proposed rule is here: https://www.ofr.gov/OFRUpload/OFRData/2013-02420_PI.pdf
Important: Some of these rules are still in the “proposed” stage, which means that there may be changes when the final rule is issued. Employers should view the proposed rules as an indication of how plans will be regulated beginning in 2014, but need to understand that changes are entirely possible.
HIGHLIGHTS OF THE PATIENT-CENTERED OUTCOMES / COMPARATIVE EFFECTIVENESS FEE
Important: these highlights describe the rules based on the actual law and proposed regulations. Most likely, therefore, the rules will take effect largely as described here, but some of the details may change.
- The fee applies from 2012 to 2019, based on plan/policy years ending on or after Oct. 1, 2012, and before Oct. 1, 2019
- The fee is due by July 31 of the year following the calendar year in which the plan/policy year ended
- The first fee is due July 31, 2013, for calendar year plans and for those on October, November and December plan years
- The first fee is not due until July 31, 2014, for those with plan years that start February through September.
- The fee will be calculated and paid by:
- The insurer for fully insured plans (although the fee likely will be passed on to the plan)
- The plan sponsor of self-funded plans
- This includes health reimbursement arrangements (HRAs)
- Third-party administrator (TPA) may assist with calculation, but plan sponsor must file
- If multiple employers participate in the plan, each must file separately unless the plan document designates one as the plan sponsor
- The fee is based on covered lives (i.e., employees, retirees and dependent spouses and children)
- May exclude employees/dependents residing outside U.S.
- May exclude dependents, and only count the employee/retiree, when counting for an HRA
- For the first year, the fee is $1 per covered life during the plan/policy year
- For the second year, the fee is $2 per covered life during the year
- For the third through seventh years, the fee is $2, adjusted for medical inflation, per covered life during the year
- Applies to private, government, not-for-profit and church employers
- Applies to grandfathered plans
- "Group health coverage" includes:
- Medical plans
- Retiree only plans
- HRAs
- "Group health coverage" does not include:
- Stand-alone dental and vision (stand-alone means these benefits are elected separately from medical and have discrete premiums)
- Life insurance
- Short- and long-term disability and accident insurance
- Long-term care
- Health flexible spending accounts to which only employee contributions are made
- Health savings accounts
- Hospital indemnity or specified illness coverage
- Employee assistance programs and wellness programs that do not provide significant medical care or treatment
- Stop loss coverage
- Several options have been proposed for calculating the fee:
- Actual count method -- count the covered lives on each day of the year, and average the result
- Snapshot method -- determine the number of covered lives on the same day of each quarter or month, and average the result
- Could multiply the employee/retiree count by 2.35 to approximate the number of covered dependents rather than actually counting them
- 5500 method - determine the number of participants at the beginning and end of year as reported on the 5500
- If dependents are covered, add the participant count for the start and the end of the plan year
- If dependents are not covered, add the participant count for the start and the end of the plan year and average the result (this method cannot be used by insurers)
- If there are multiple self-funded plans (e.g., self-funded medical and HRA) with the same plan year, only one fee would apply to a covered life
- If there are both fully insured and self-funded plans (e.g. insured medical and a self-funded HRA), a fee would apply to each plan -- the insurer would pay the fee on the insured coverage and the plan sponsor would pay the fee on the HRA
- Plan sponsor reporting and paying the fee would be done electronically on IRS Form 720 each July 31
- This would be an annual filing, even though form 720 is generally filed quarterly
Action Steps:
- Insured plans may want to:
- Ask their carrier if/when this fee will be reflected in rates
- Include the anticipated fee in their budget
- Self-funded plans may want to:
- Include the anticipated fee in their budget
- Review the likely calculation methods, determine which is best for their situation and close any data gaps
- Verify there is a named plan sponsor if more than one employer participates in the plan, and if a plan sponsor has not been named, amend the plan to name a plan sponsor before the first fee is due
Note: PPACA created a private, non-profit corporation called the Patient-Centered Outcomes Research Institute. The Institute's job is to research the comparative effectiveness of different types of treatment for certain diseases, and to share its findings with the public and the medical community. The goal is to improve quality of treatment and reduce unnecessary spending. This fee is to support this research.
Reminder: These highlights describe the rules based on proposed regulations. Some of this may change.