How to maximize employee participation in HSA plans
According to the Employee Benefit Research Institute (EBRI), 96 percent of HSA account holders do not invest any portion of their contributions. Health Savings Accounts (HSAs) offer account holders the option to invest and investments are not subject to taxation. Read this blog post to learn more about maximizing employee participation in HSA plans.
High-deductible health plans (HDHPs) not only offer employees the opportunity to save on their premium contributions, they also provide access to what are commonly touted as triple-tax-advantaged health savings accounts (HSAs).
HSA users can put away money tax-free, and account distributions for eligible healthcare costs aren’t subject to federal income tax. Plus, these accounts offer users the option to invest and any investment returns aren’t subject to taxation. Not even the storied 401(k) promises this much bang for the proverbial buck. In fact, HSAs offer the best of pre-tax 401(k) and Roth contributions.
But, no matter how sweet a tax deal this is, for most of the over 25 million account holders, investing takes a back seat to current healthcare needs. According to EBRI, 96% of account holders don’t invest any portion of their balance, which leaves just 4% taking advantage of all three tax-advantaged components of the HSA. Instead, HSA users fall into two distinct categories: spenders and savers, with spenders representing over three-quarters of account holders.
In 2017, the average deductible for employee-only coverage was $2,447 and almost a quarter of employees covered under one of these plans had a deductible of $3,000 or more.
Let’s imagine it’s 2017, and our sample employee — let’s call her Emily — has a $2,500 deductible. Emily funded her HSA to the 2017 maximum of $3,400. If Emily had healthcare costs that totally eroded her deductible and she used her HSA dollars to fund them, at the end of the year Emily would have $900 left in her account ($3,400 maximum minus $2,500 to cover her deductible). That assumes no additional cost-sharing or eligible expenses.
However, Emily is in the minority. Only 13% of employees are fully funding their accounts, rendering an investment threshold potentially out of reach for most people, especially when they are using their HSA dollars for out-of-pocket healthcare costs.
With such a small percentage of HSA owners taking advantage of investment opportunities, finding effective ways to support the spending or saving habits of the majority of users seems to be tantamount. So is helping them address their concerns about deductible risk. As employers help people become smarter consumers, they may be able to build their accounts over time and ultimately pull the investment lever.
So, how can employers support these spenders and savers?
Encourage people to contribute, or to contribute more. EBRI found that only half of account holders put anything in their HSA in 2017, and just under 40% of accounts received no contributions — including employer dollars. Employer contributions can help overcome employees’ reluctance to enroll in an HDHP, but the way they are designed matters. Matching contributions act as a strong incentive for employees to save while also protecting the most vulnerable employees from having to shoulder the entire burden of out-of-pocket healthcare costs.
Another technique to help address employees’ anxiety around a high deductible is to pre-fund out-of-pocket costs by allowing employees to borrow from future contributions. If the employee incurs costs but doesn’t have enough HSA dollars to cover them, they can use future contributions as an advance against current out-of-pocket expenses. The employer provides the funds up front and the employee pays back those funds through payroll deductions. This acts as a safety net for new account holders or those without substantive balances.
Drive people toward the maximum contribution. With fewer than 20% of employees fully funding their HSA, there’s certainly room to move the needle. While additional contributions may not be possible for all employees, reinforcing the tax advantages and the portability of the HSA may help people divert more dollars to insulate themselves against healthcare costs.
Highlight ways to save on healthcare costs. When employees are funding their care before meeting a high deductible, help them spend those HSA dollars wisely. Promote telehealth if you offer it and remind employees about the most appropriate places to get care (for example, urgent care versus the emergency room). Reinforce the preventive aspects of your healthcare plan, including physicals, screenings and routine immunizations. If you have a wellness program that includes bloodwork and biometric testing, make sure you tie this into your healthcare consumerism messaging. There’s generally a lot of care employees can get at no cost, and it helps when you remind them.
Don’t lose contributors to an over-emphasis on investing. The tax advantages of investing in an HSA are undeniable, but most people are just not there yet. When we describe HSAs as a long-term retirement savings vehicle, we may inadvertently be messaging to non-participants that these accounts aren’t for them. Speak to the majority with messaging around funding near-term healthcare costs on a tax-advantaged basis and the flexibility to use HSA dollars for a wide variety of expenses beyond just doctor and pharmacy costs. Investing information should be included, but it shouldn’t be the primary focus.
HSAs are gaining in popularity, and the majority of account holders are using them to self-fund their healthcare, which is a good thing. A small but growing number are taking advantage of their plans’ investment options. Employees eventually may become investors as their accounts grow and they better understand the opportunity to grow their assets and save for the longer term. For now, however, the educational and engagement focus for HSA plan sponsors should primarily be around participation, maximizing contributions and spending HSA dollars wisely.
SOURCE: Cosgray, B. (6 December 2019) "How to maximize employee participation in HSA plans" (Web Blog Post). Retrieved from https://www.benefitnews.com/opinion/how-to-maximize-employee-participation-in-hsa-plans
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
5 critical elements to consider when choosing an HSA administrator
The Employee Benefit Research Institute recently reported that 83 percent of today’s workforce said health insurance was very or extremely important in deciding whether they would change jobs or not. Read on to learn more.
If anyone needed any reminding, health insurance is still an urgent matter to today’s employees. According to Employee Benefit Research Institute’s 2017 Health and Workplace Benefits Survey, 83% of the workforce said that health insurance was very or extremely important in deciding whether to stay in or change jobs. Yet research has uncovered that employees tend to delay or disengage from retirement and healthcare decisions, which they view as difficult and complex.
Fortunately, with consumer-driven healthcare plans and health savings accounts on the rise, benefits managers have a real opportunity to turn this frustrating situation into a positive one for their workforce. A critical step in doing so is choosing the right health savings administrator.
Employers should consider the following five elements when choosing a health savings administrator, or for evaluating the one with which you’re currently working.
1. Minimize risk by ensuring business alignment. Look for a health savings administrator that aligns with your company’s mission and business goals. Lack of business alignment can create real risks to your organization and employees and can damage your company brand and employee experience. For example, if your account administrator nickels-and-dimes you and your employees with added fees, you’ll experience higher costs and reduced employee satisfaction.
2. Service, support are key to employee satisfaction. It’s a fact: Employees will have HSA-related questions — probably a lot of them. Their questions may range from pharmacy networks and claims to the details of IRS rules. That’s why account management and customer service support from your health savings administrator are vital. Having first-class customer service means that employees will be better educated on their savings accounts, which can result in HSA adoption and use to their fullest potential.
3. Education, communication drive adoption. Educating employees about health savings accounts using various methods is critical, especially in the first year of adoption. This ensures your employees understand the true benefits and how to maximize their account. As CDHPs require more “skin in the game,” consumers show a higher likelihood to investigate costs, look for care alternatives, use virtual care options, and negotiate payments with providers. These are all positive outcomes of HSA adoption, and an HSA administrator oftentimes can offer shopping, price and quality transparency tools to enable your employees to make these healthcare decisions.
4. Understand the HSA admin’s technology. Because most spending and savings account transactions are conducted electronically, it’s critical that your administrator’s technology platform be configured to deliver a positive user experience that aligns with your expectations. It should allow for flexibility to add or adjust offerings and enable personalization and differentiation appropriate for your brand.
Be aware that some vendors have separate technology platforms, each running separate products (i.e., HSAs versus FSAs) and only integrate through simple programming interfaces. Because the accounts are not truly integrated, consumers may need to play a bigger role in choosing which accounts their dollars come from and how they’re paid, leading to consumer frustration and an increase in customer service call volume. With a fully integrated platform, claims flow seamlessly between accounts over multiple plan years, products and payment rules.
5. Evaluate your financial investment. Transparent pricing and fees from your health savings administrator is important. Administrators can provide value in a variety of ways including tiered product offerings, no traditional banking fees or hidden costs, and dedicated customer service. It’s important to know what these costs are up front.
Evaluate your financial investment by knowing whether or not your health savings administrator charges for program upgrades, multiple debit cards, unique data integration requirements, ad-hoc reports and more. These fees can add up and result in a final investment for which your company didn’t plan. And, it’s best to know in advance if your account holders will be charged any additional fees. Not communicating these potential fees at adoption can lead to dissatisfaction, which can then hurt your employee satisfaction ratings and complete adoption of the savings account products.
Choosing a health savings administer is a critical decision that affects not only employee satisfaction but the entire company. With eight in 10 employees ranking their benefits satisfaction as extremely or very important in terms of job satisfaction, according to EBRI, taking the time to fully vet your health savings administrator will pay dividends.
SOURCE: Santino, S. (5 November 2018) "5 critical elements to consider when choosing an HSA administrator" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/opinion/what-to-consider-when-choosing-an-hsa-administrator
How to Explain HSAs to Employees Who Don’t Understand Them
HSAs can be a very effective tool for employees looking to save for their healthcare and retirement. But many employees are not knowledgeable enough to fully utilize their HSAs. Here is an interesting column by Eric Brewer from Employee Benefit News on what you can do to help educate your employees on the impartance of HSAs.
High-deductible health plans with health savings accounts are becoming more popular as benefits consumerism increases throughout the country. Enrolling your employees in HDHPs is one way to educate them on the true cost of healthcare. And if they use an HSA correctly, it can help them better manage their healthcare costs, and yours.
But understanding how an HDHP works and ensuring your employees will get the most out of an HSA can be tricky. In fact, a recent survey by employee communication software company Jellyvision found that half of employees don’t understand their insurance benefits. And choosing a benefits plan is stressful for employees because it’s a decision that will impact them for a long time. This is further complicated by the trend toward rising employee contributions and the issue of escalating healthcare costs. Employees are taking on more cost share — and that means plan sponsors have a greater responsibility to do a better job of educating them to make the best decision at open enrollment.
HSAs benefit the employee in a number of ways:
· Just like a retirement plan, HSAs can be funded with pre-tax money.
· Employees can choose how much they want to contribute each pay period and it’s automatically deducted.
· Employers can contribute funds to an HSA until the limit is met.
These are important facts to tell employees. But there’s more to it than that. Here are some tips on how to best explain HSAs to your workforce.
The devil is in the details: discuss tax-time changes
Employees using HSAs will see an extra number or two on their W-2s and receive additional tax forms. Here’s what to know:
· The amount deposited into the HSA will appear in Box 12 of the W-2.
· Employees may also receive form 5498-SA if they deposited funds in addition to what has been deducted via payroll.
· Employees must submit form 8889 before deducting contributions to an HSA. On the form they’ll have to include their deductible contributions, calculate the deduction, note what you’ve spend on medical expenses, and figure the tax on non-medical expenses you may have also paid for using the HSA.
· Employees will receive a 1099SA that includes distributions from the HSA.
Importantly, most tax software walks employees through these steps.
Dispel myths
A lot of confusion surrounds HSAs because they’re yet another acronym that employees have to remember when dealing with their insurance (more on that later). Here are a few myths you should work to dispel.
· Funds are “use it or lose it.” Unlike a flexible spending account, funds in an HSA never go away. In fact, they belong to an employee. So even if they go to another job, they can still use the HSA to pay for medical expenses tax-free.
· HDHPs with HSAs are risky. There are benefits to choosing an HDHP with an HSA for both healthy people and those with chronic illnesses. Healthy people benefit from low HDHP premiums and can contribute to an HSA at a level they’re comfortable with. On the other hand, people with chronic illnesses will likely hit their deductible each year; after that time, medical expenses are covered in most cases.
Help employees understand they’re in control
High-deductible plans with an HSA might seem intimidating, but they put employees firmly in control of their healthcare. This is increasingly important in today’s insurance landscape. When employees choose an HSA, healthcare becomes more transparent. They can shop around for services and find the best deal for services before they make a decision.
HSAs also give you control and flexibility over how and when employees spend the funds. Users can cover medical costs as they happen or collect receipts and get reimbursed later. Finally, employees don’t have to worry about sending in receipts to be reviewed. This means they must be responsible for using the funds the right way, or face tax penalties.
Resist ‘insurance speak’
As an HR professional, you may not realize how much benefits jargon you use every day. After all, you deal with benefits all the time, so using industry terms is second nature. But jargon, especially the alphabet soup of insurance acronyms that I mentioned earlier, is confusing to employees.
One tip is to spell out acronyms on the first reference. Second, simplify the explanation by shortening sentences so that anyone can understand it.
Here’s an example of a way to introduce an HSA:
A health savings account, also called an HSA, is a tax-free savings account. An HSA helps you cover healthcare expenses. You can use the money in your HSA to pay medical, dental and vision costs for yourself, spouse and dependents who are covered by your health plan. You can use HSA funds to pay for non-medical expenses, but you will have to pay taxes on them…
You get the idea.
As responsibility continues to shift to employees, they may need more education in small chunks over time to reinforce their knowledge. As the employer, it’s in your best interest to help employees choose the best plan and use it the right way.
See the original article Here.
Source:
Brewer E. (2017 August 4). How to explain HSAs to employees who don't understand them [Web blog post]. Retrieved from address https://www.benefitnews.com/opinion/how-to-explain-hsas-to-employees-who-dont-understand-them?feed=00000152-18a5-d58e-ad5a-99fd665c0000
Employers Spend $742 per Employee for Wellness Program Incentives
Are you looking for new incentives to help your employees participate in your wellness program? Check out this interesting article by Brookie Madison from Employee Benefit Advisor on how employers are offering financial incentives in order to increase participation in their wellness programs.
Wellness programs are popular with employers but employees continue to need motivation to participate. Seventy percent of employers are investing in wellness programs, while 73% of employees say they are interested in wellness programs, but 64% of employees undervalue the financial incentives to join the wellness programs, according to UnitedHealthcare’s Consumer Sentiment Survey entitled “Wellness Check Up.”
Only 7% of employees understand the four basic terms of health care —premium, deductible, copayment and coinsurance — which is why UHC didn’t find it surprising that workers underestimate their financial incentives in wellness programs, says Rebecca Madsen, chief consumer officer for UnitedHealthcare.
Despite this disconnect between what employers are offering to help ensure their employees’ health and what employees are willing to do to maintain a healthy well-being, the most appealing incentives to employees for wellness programs are health insurance premium reductions (77%), grocery vouchers (64%) and health savings accounts (62%).
Employees find the financial incentives of the wellness programs appealing, yet only 24% of employees are willing to give up one to three hours of their time per week to exercise, attend wellness coaching sessions or research healthier recipes to eat.
“Unwilling to engage is part of the problem why a third of the country is obese and another third is overweight. We have a real problem in terms of keeping people healthy and that’s what we want to help address,” says Madsen.
Madsen recommends that employers promote their wellness programs and incentives multiple times throughout the year. Gift cards, reduction of premiums and contributing to health savings accounts are leading ways to reward employees. “Incentives on an ongoing basis get people engaged and motivated to participate for a long period of time,” says Madsen.
Wellness programs also provide a way for employers to adjust their benefit packages to be customized and be more than a ‘one size fits all’ approach. “Look at your insurance claims, work with insurance providers and identify common health challenges. See where you have prevalent healthcare needs and who your high risk populations are to develop programs that target those results,” suggests Madsen.
Wellness programs need endless support from advisers, insurance providers, consultants, consumers, friends, family members and employers in order to encourage employees to live healthy lifestyles, according to UnitedHealthcare.
Madsen suggests that employers have onsite biometric screenings. “Helping people know their numbers will help them understand where they have an opportunity to improve their health, which would make them motivated to engage more,” says Madsen.
New trends of wellness programs incorporate the use of activity trackers. Twenty-five percent of employees use an activity tracker and 62% would like to use one as part of a wellness program.
See the original article Here.
Source:
Madison B. (2017 June 28). Employers spend $742 per employee for wellness program incentives [Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/news/employers-spend-742-per-employee-for-wellness-program-incentives
HSAs and 401(k)s are Becoming More Closely Linked
As HSAs continue to grow, more employers are starting to work HSAs into their retirement programs. Take a look at this great article by Brian M. Kalish from Employee Benefit News and see how employers are using HSAs as a tool to help their employee plan for their healthcare cost in retirement.
There has been progress among leading-edge advisers and employers to more closely link HSAs and 401(k)s in order to allow employees to use a health savings account to save for healthcare expenses post-retirement.
Eighty percent of Americans have a high concern about healthcare costs in retirement, according to Merrill Lynch, and healthcare is the largest threat to retirement savings and the most important part of a retirement income plan, according to Fidelity, which is why there has been a recent push to more closely link HSAs and 401(k)s, or health and wealth.
HSAs are triple tax-free, Brian Graff, CEO of the American Retirement Association, an Arlington, Va.-based trade group said at a recent event hosted by AFS 401(k) Retirement Services
The fact of linking health and wealth “is a big idea and there is some continued focus on it moving forward,” says Alex Assaley, managing principal of Bethesda, Md.-based financial services advisory company AFS 401(k).
“There is a lot more interest in HSAs by pretty much everybody,” explains Nevin Adams, chief of marketing and communications at the American Retirement Association.
According to the Employee Benefit Research Institute, nearly 30% of employers offered an HSA-eligible health plan in 2015 and that percentage is expected to increase in the future both as a health plan option and as the only health plan option. Most of the growth has been recent as more than four-in-five HSAs have been opened since the beginning on 2011, according to EBRI.
At an event hosted by Assaley’s firm in 2016, he said there was not a lot of traction around the idea of using HSAs to save for healthcare expenses post-retirement. But, now, there is a bigger push.
As HSAs continue to grow, employers, employees and advisers are “understanding there is an ability to accumulate money in the HSA and use that for healthcare or something [employees] want to set aside because they are not sure what their healthcare cost situation in the future is going to be,” Adams explains.
Assaley adds that there has “definitely been a good deal of refinement and evolution in the HSA marketplace [recently], whereby … you are now seeing more companies offering HSAs as a part of their medical and retirement strategy. You are also seeing more employees thinking about HSAs as part of their overall holistic fin wellness program.”
In one-on-one coaching sessions with employees, conversations are becoming more prominent, as advisers help employees, “understand how all employee benefits tie together to make wise financial decisions today, tomorrow and for their retirement,” Assaley says.
“With certainty, there has been a great deal of growth in the marketplace and evolution in how HSAs and 401(k)s are starting to interlock together,” he adds.
Saving for the future
Looking down the road, Assaley expects the linking to continue, especially if proposals to alter the maximum accounts that can be contributed pre-tax to an HSA is tweaked, as has been proposed by legislators on Capitol Hill. Some proposals shared amongst the industry, Assaley says, propose doubling the pre-tax amount.
“If that happens or there is any sort of meaningful increase, then I think you will see an exponential growth in the numbers of HSAs,” he says.
For advisers, the work is not done as they need to help employees better understand how a HSA works and from there help employees understand the benefits of a HSA and the different ways to structure one, Assaley explains.
“Even today, there is a large knowledge gap on what an HSA is, how it works and how someone can use one as part of health and retiree healthcare needs,” he says.
See the original article Here.
Source:
Kalish B. (2017 July 5). HSAs and 401(k)s are becoming more closely linked [Web blog post]. Retrieved from address https://www.benefitnews.com/news/hsas-and-401-k-s-are-becoming-more-closely-linked?feed=00000152-18a4-d58e-ad5a-99fc032b0000
How Rising Healthcare Costs are Changing the Retirement Landscape
Has rising the rising cost of healthcare impacted your plans for retirement? Here is a great article by Paula Aven Gladych from Employee Benefit News on how healthcare is reshaping the way people are planning their retirement.
It’s hard enough getting employees to save for their retirement. It’s even harder to get them to think about how much they need to save for medical expenses in retirement.
“Most Americans don’t think about what the medical component will be for them,” says Robert Grubka, president of employee benefits at New York-based Voya Financial. “They often think that Medicare and government-provided healthcare is enough and what people quickly find out is, it is helpful but it doesn’t mean it’s enough.” When people think about their retirement plan, the medical piece is “one of the most surprising aspects of it,” he says.
But talking about managing healthcare costs during post-work years is now a vital element of retirement planning. And it’s one employers need to consider, especially as new statistics shed light on the seriousness of the issue.
As a person’s retirement savings shrinks in retirement, their medical expenses continue to increase, according to Voya Financial’s report “Playing the long game – Understanding how healthcare costs can impact your retirement readiness.” Healthcare costs rose 6.5% in 2017, but inflation only went up 2.4%, Voya found.
“The rapid rise of healthcare costs could have a large impact on quality of life in retirement,” according to the report. Forty-two percent of pre- and post-retirees say that healthcare is their biggest concern, especially since nearly half of retirees or their spouses experience a serious or chronic health problem.
Meanwhile, Medicare data finds that those in their 70s spend about $7,566 per person in healthcare costs annually. That figure more than doubles to $16,145 by the time a person reaches age 96. According to Voya, Medicare will only cover about 60% of all retirement healthcare costs, which means people need to figure out a way to cover that other 40%.
The Employee Benefit Research Institute estimates that the average couple will need $259,000 to cover their out-of-pocket medical expenses in retirement. That figure includes premiums and costs related to all Medicare plans and the cost of supplemental insurance. When asked how much they should stock away for medical expenses, 69% of baby boomers and 66% of retirees thought they needed less than $100,000.
As the retirement industry has shifted away from defined benefit pension plans to defined contribution plans, employers have tried to compensate for some of the missing perks of having a pension plan. That includes offering options like life insurance, disability insurance, accident insurance, critical illness insurance or a hospital confinement indemnity.
A 2014 report by the Council for Disability Awareness found that more than 214,000 employers were offering long-term disability insurance plans to their employees in 2013, a slight increase from the previous year.
The other component that is relatively new is the high-deductible health plan that usually comes with a health savings account. The money saved in an HSA can be used for medical expenses in retirement if a person doesn’t use up their balance every year. Any extra funds are invested, just like they would be in a typical retirement plan.
High-deductible health plans make the plan participant more responsible for how those health care dollars are spent. It also has “sped up the recognition of the healthcare issue,” Grubka says.
According to the 2016 Employer Health Benefits Survey by the Kaiser Family Foundation, 29% of covered workers are enrolled in a high-deductible plan with a savings option. Over the past two years, enrollment in these high-deductible plans increased 8 percentage points as enrollment in PPOs dropped 10 percentage points, the report found.
Many times, individuals must pay out most or all of their deductible at once, which could be $2,500 for an individual or $5,000 for a family. That’s when people start taking loans from their retirement plan to help cover costs.
That’s why some of these ancillary products, like critical illness or disability insurance, are so important.
“It is so people can get through the chunky expenses and not get to the point where they have to tap their savings or their retirement plan,” Grubka says.
It’s critical that employees try and determine what all of their expenses will be in retirement. Individuals must try and determine how long they will live, by looking at their family history and making an educated guess. Then they should calculate their projected monthly Social Security payment by setting up an account with the Social Security Administration. They should then add up their expected monthly living expenses like rent/mortgage, groceries and utilities and any healthcare expenses that are not covered by Medicare to come up with a target number.
They should base how much they set aside for retirement on that figure.
See the original article Here.
Source:
Gladyech P. (2017 July 4). How rising healthcare costs are changing the retirement landscape [Web blog post]. Retrieved from address https://www.benefitnews.com/news/how-rising-healthcare-costs-are-impacting-retirement-planning
Revised GOP Healthcare Bill Still Good for Employers
Has the uncertainty surrounding the BCRA left you worried about your company's healthcare plan? Here is an interesting article by Victoria Finkle from Employee Benefit News illustrating all the positives the BCRA will bring to employers and their company's healthcare program.
The latest version of the Senate Republican healthcare bill contains some significant changes, but provisions impacting employer-sponsored plans remained largely untouched.
The plan, unveiled on Thursday, retains a number of important changes for employers that were included in an earlier draft of the legislation made public last month. GOP lawmakers have been working for months on an effort to undo large swaths of the Affordable Care Act.
“Generally, the changes that were applied didn’t significantly change the dynamics of the Senate bill as it relates to large employers,” says Michael Thompson, president and chief executive of the National Alliance of Healthcare Purchaser Coalitions, a nonprofit network of business health coalitions.
Employer groups have been supportive of several major provisions highlighted in the earlier version of the Better Care Reconciliation Act that remain in the new proposal. Those include measures to remove the penalties associated with the employer mandate and a delay to the Cadillac tax for high-cost plans.
The latest Senate bill also retains important changes to health savings accounts that, for example, allow employees to allocate more funds into the accounts and that permit the money to be used on over-the-counter medications. It also reduces the penalty associated with redrawing funds from the account for non-qualified medical spending.
Providing more flexibility around the use of HSAs — tax-advantaged accounts that accompany high-deductible health plans — benefits employers and employees alike, says Chatrane Birbal, senior adviser for government relations at the Society for Human Resource Management.
“As healthcare costs arise, more employers are embracing high-deductible plans and this is a good way for employees to plan ahead for their medical expenses,” she says.
There is one small fix related to health savings accounts that made it into the revised draft, explains James Gelfand, senior vice president of health policy for the ERISA Industry Committee.
The updated language now permits out-of-pocket medical expenses for adult children up to 26-years-old who remain on a parent’s health plan to be paid for out of the primary account holder’s HSA. There were previously limitations on use of those funds for those over 18 who remained on a parent’s plan, based on Internal Revenue Service guidelines.
“One of the little tweaks they’ve put in to improve the bill is changing the IRS code to say, actually, yes, an adult dependent still counts and can use an HSA to help save on their healthcare costs,” he says.
Experts note, however, that a key change in the new bill related to HSAs — the ability to use the pre-tax money to pay insurance premiums — does not appear to apply to employer-based plans.
There are several other provisions in the revised legislation that are likely to be debated by the Senate in coming weeks, but that do not directly impact employers.
One controversial measure, developed by Republican Sens. Ted Cruz of Texas and Mike Lee of Utah, would allow insurers to offer lower priced, non-ACA-qualified plans in the individual market in addition to plans that meet Obamacare requirements. The latest bill also would provide more funding for the opioid epidemic.
Sen. Lindsey Graham, R-S.C. and Sen. Bill Cassidy, R-La., meanwhile, announced this week that they are developing an alternative proposal to the one unveiled by Republican leaders. Initial details for the alternative proposal were released on Thursday. The legislation is centered on a strategy to send more federal funding directly to the states through block grants.
“Instead of having a one-size-fits-all solution from Washington, we should return dollars back to the states to address each individual state’s healthcare needs,” Graham said in a statement on Thursday.
Those representing employer-based plans said they have reservations about the Graham and Cassidy proposal.
Gelfand notes that the alternative plan is expected to keep in place many of the taxes stemming from the ACA, such as the Cadillac tax and a tax on branded prescription drugs, and is unlikely to contain some of the BCRA revisions around the use of HSAs.
“It basically provides none of the relief that the BCRA would provide,” he says.
See the original article Here.
Source:
Finkle V. (2017 July 16). Revised GOP healthcare bill still good for employers [Web blog post]. Retrieved from address https://www.benefitnews.com/news/revised-gop-healthcare-bill-still-good-for-employers?tag=00000151-16d0-def7-a1db-97f024b50000
How the Senate Better Care Reconciliation Act (BCRA) Could Affect Coverage and Premiums for Older Adults
The Senate is on the verge of voting for the Better Care Reconciliation Act (BCRA) a new replacement to the ACA. Find out how the passing of the BCRA will impact older Americans and their healthcare in this informative article by Kaiser Family Foundation.
Prior to the Affordable Care Act (ACA), adults in their 50s and early 60s were arguably most at risk in the private health insurance market. They were more likely than younger adults to be diagnosed with certain conditions, like cancer and diabetes, for which insurers denied coverage. They were also more likely to face unaffordable premiums because insurers had broad latitude (in nearly all states) to set high premiums for older and sicker enrollees.
The ACA included several provisions that aimed to address problems older adults faced in finding more affordable health insurance coverage, including guaranteed access to insurance, limits on age rating, and a prohibition on premium surcharges for people with pre-existing conditions. Following passage of a bill to repeal and replace the ACA in the House of Representatives on May 4, 2017, the Senate has released a discussion draft of its proposal, called the Better Care Reconciliation Act of 2017 (BCRA) on June 26, 2017, that follows a somewhat different approach.
The Senate BCRA discussion draft would make a number of changes to current law that would result in an increase of four million 50-64-year-olds without health insurance in 2026, according to CBO’s analysis.
The Senate proposal would disproportionately affect low-income older adults with incomes below 200% of the federal poverty level (FPL): three of the four million 50-64-year-olds projected to lose health insurance in 2026 would be low-income. CBO projects the uninsured rate for low-income older adults would rise from 11% under current law to 26% under the BCRA by 2026.
The increase in the number and share of uninsured older adults would be due to several changes made by the BCRA to private health insurance market rules and subsidies, as well as changes to the Medicaid program.
CHANGES AFFECTING PRIVATE HEALTH INSURANCE
Age Bands. Under current law, insurers are prohibited from charging older adults more than 3-times the premium amount for younger adults. The Senate bill would allow insurers to charge older adults five-times more than younger adults, beginning in 2019. States would have flexibility to establish different age bands (broader or narrower). CBO estimates that age rating would increase premiums significantly for plans at all metal levels for older adults. The impact of age rating would be such that, for a 64-year-old, the national average premium for an unsubsidized bronze plan in 2026 would increase from $12,900 (current law) to $16,000 (BCRA). The wider age bands permitted under the BCRA would result in higher premiums for an unsubsidized bronze plan than the premium for an unsubsidized silver plan under the current law age-rating standard.
Tax Credits. The Senate’s BCRA makes three key changes affecting premium tax credits for people in the non-group insurance market. First, it changes the income eligibility for tax credits, extending eligibility to people with income below the FPL but capping eligibility at income of 350% FPL. Under current law, income eligibility for tax credits is 100%-400% FPL. This change has the effect of reducing premiums for people with incomes below poverty in the marketplace who are not otherwise eligible for Medicaid (discussed further below) while increasing premiums for people with incomes between 350%-400% FPL.
Second, BCRA changes the level of subsidy for people based on age. Under both current law and the BCRA, individuals must pay a required contribution amount, based on income, toward the cost of a benchmark plan; the premium tax credit equals the difference between the cost of the benchmark plan and the required individual contribution. Under current law, the required contribution rate is the same for all people at the same income level regardless of age. However, under the BCRA, the required contribution amount would increase with age for people with an income above 150% FPL. For example, under current law, at 350% FPL, individuals are required to contribute the same percentage of income toward the benchmark plan, regardless of age (9.69% in 2017). Under the BCRA, starting in 2020, a 24-year-old would contribute about 6.4% of income, while a 60-year-old would have to contribute 16.2% of income.1
Third, the Senate proposal reduces the value of the benchmark plan used to determine premium tax credits from a more generous silver-level plan (under current law) to the equivalent of a bronze plan (under BCRA). Deductibles under bronze plans are much higher than under silver plans (in 2017, on average, $6,105 for bronze plans vs. $3,609 for silver plans). Under current law, silver plan deductibles are further reduced by cost-sharing subsidies for eligible individuals with incomes below 250% FPL (on average to $255, $809, or $2,904, depending on income). The BCRA eliminates cost-sharing subsidies starting in 2020. As a result, people using tax credits to buy a “benchmark” bronze plan would face significantly higher deductibles under the Senate proposal than under current law.
For older adults with income above the poverty level, the combined impact of these changes would be to increase the out-of-pocket cost for premiums at all income levels. For example, a 64-year old with an income of $26,500 would see premiums increase by $4,800 on average for a silver plan in 2026; a 64-year old with an income of $56,800 could see premiums increase of $13,700 in 2026, according to CBO.
Premium tax credits under the BCRA would continue to be based on the cost of a local benchmark policy, so results would vary geographically. Older adults living in higher cost areas could see greater dollar increases, while people living in lower cost areas could see lower increases.
For a bronze plan, the national average premium expense for a 64-year old could increase by $2,000 for an individual with an income of $26,500 in 2026 and by as much as $11,600 for an older adult with $56,800 in income.
Under current law, people with income below 100% FPL generally are not eligible for premium tax credits. The ACA extended Medicaid eligibility to adults below 138% FPL, but the Supreme Court subsequently ruled the expansion is a state option. To date 19 states have not elected the Medicaid expansion, leaving 2.6 millionuninsured low-income adults in this coverage gap.
For older adults with income below 100% FPL who are not eligible for Medicaid, CBO estimates the extension of premium tax credit eligibility will significantly reduce the net premium expense for a 64-year-old in 2026 relative to current law (e.g., by more than $12,000 for an individual at 75% FPL).
However, CBO estimates that few low-income people would purchase any plan. Even with relatively low premiums, older adults with very low incomes may choose to go without coverage due to relatively high, unaffordable deductibles. For example, an individual with an income of $11,400 (75% FPL) who is not eligible for Medicaid, would pay $300 in premiums in 2026 under BCRA but face a deductible in excess of $6,000 – which amounts to more than half of his or her income that year.
On average, 55-64 year-olds would pay 115% higher premiums for a silver plan in 2020 under the BCRA after taking tax credits into account. Low-income 55-64-year-olds would pay 294% higher premiums relative to current law.
CHANGES TO MEDICAID
Changes to Medicaid proposed in the Senate bill also contribute to the increase in the projected increase in the number of uninsured older adults nationwide. The BCRA would limit federal funds for states that have elected to expand coverage under Medicaid for low-income adults, phasing down the higher federal match for these expansion states over three years (2021-2023). This provision, coupled with a new cap on the growth in federal Medicaid funding over time on a per capita basis, would result in an estimated 15 million people losing Medicaid coverage by 2026 according to CBO, some of whom are counted among the four million older adults projected to lose health insurance under the BCRA, shown in Figure 1. In 2013, about 6.5 million 50-64-year-olds relied on Medicaid for their health insurance coverage, a number that has likely increased due to the Medicaid expansion.2 Since 2013, Medicaid enrollment overall has grown by nearly 30%.
IMPACT ON OLDER ADULTS ON MEDICARE
The loss of coverage for adults in their 50s and early 60s could have ripple effects for Medicare, a possibility that has received little attention. If the BCRA results in a loss of health insurance for a meaningful number of people in their late 50s and early 60s, as CBO projects, there is good reason to believe that people who lose insurance will delay care, if they can, until they turn 65 and become eligible for Medicare, and then use more services once on Medicare. This could cause Medicare spending to increase, which would lead to increases in Medicare premiums and cost-sharing requirements.3
The proposed BCRA changes to Medicaid are also expected to affect benefits and coverage for older, low-income adults on Medicare. Today, 11 million low-income people on Medicare have supplemental coverage under Medicaid that helps cover the cost of Medicare’s premiums and cost-sharing requirements, and the cost of services not covered by Medicare, such as nursing home and home- and community-based long-term services and supports. The BCRA reduces the trajectory of Medicaid spending, with new caps on the growth of benefit spending per person; these constraints are expected to put new fiscal pressure on states to control costs that could ultimately affect coverage and benefits available to low-income people on Medicare. Under the BCRA, the growth in Medicaid per capita spending for elderly and disabled beneficiaries is dialed down to a slower growth rate, from CPI-M+1 to CPI-U beginning in 2025, below currently projected growth rates, just as the first of the Boomer generation reaches their 80s and is more likely to need Medicaid-funded long-term services and supports.
DISCUSSION
The Senate bill to repeal and replace the ACA, known as the Better Care Reconciliation Act of 2017 (BCRA), if enacted, would be expected to result in an increase of four million uninsured 50-64-year olds in 2026, relative to current law. The increase is due to a number of factors, including higher premiums at virtually all income levels for older adults, potentially unaffordable deductibles for older adults with very low incomes, , and reductions in coverage under Medicaid. Reductions in coverage could have unanticipated spillover effects for Medicare in the form of higher premiums and cost sharing, if pre-65 adults need more services when they age on to Medicare as a result of being uninsured beforehand. The BCRA would also impose new, permanent caps on Medicaid spending which could affect coverage and costs for low-income people on Medicare.
Other changes in BCRA will affect Medicare directly. The BCRA would repeal the Medicare payroll tax imposed on high earners included in the ACA. This provision, according to CMS, will accelerate the insolvency of the Medicare Hospital Insurance Trust Fund and put the financing of future Medicare benefits at greater risk for current and future generations of older adults – another factor to consider as this debate moves forward.
See the original article Here.
Source:
Nueman T., Pollitz K., Levitt L. (2017 June 29). How the senate better care reconciliation act (BCRA) could affect coverage and premiums for older adults [Web blog post]. Retrieved from address https://www.kff.org/health-reform/issue-brief/how-the-senate-better-care-reconciliation-act-bcra-could-affect-coverage-and-premiums-for-older-adults/
6 Favorable Changes to HSAs Under GOP Health Bill
With the passing of the AHCA, Health Savings Accounts (HSAs) are on the verge of expansion. Check out this article by Emily Zulz of Benefits Pro and see how this new legislation will impact HSA's.
Current legislature sitting in Congress -- including the American Health Care Act -- indicates favorable changes for health savings accounts.
Since the new Congress began in January, there have been more than 20 bills proposed that impact consumer-directed health care, and more specifically HSAs. In May, the House of Representatives narrowly passed the American Health Care Act.
A new report from HSA Bank provides insight into specific impacts on HSAs and consumer-directed health care outlined in the American Health Care Act, as well as examines the other proposed legislation.
“Whether they get passed or not, I don’t expect that to have a negative impact on HSAs,” Chad Wilkins, executive vice president and head of HSA Bank, told ThinkAdvisor. “We’ll continue to see that kind of growth going forward. And if they do get passed, we’ll see more wind at the back of high-deductible health plans and HSAs.”
HSAs, which can be as much a retirement savings vehicle as a health care financing plan, have grown in popularity recently.
The number of people enrolled in HSAs continues to grow, although more slowly than in previous years. According to America's Health Insurance Plan report, 20.2 million U.S. residents were covered through HSA-compatible, individual, small-group or large-group plans in 2016.
A Fidelity analysis shows a surge in health savings account in the third quarter of last year.
Wilkins, who co-authored the report with Kevin Robertson, senior vice president and chief revenue officer, attributes the growth in HSAs to both the cost standpoint for employers offering plans, as well as the cost savings for individuals both today and in retirement.
And he predicts this growth and popularity will continue to expand -- despite what happens in Congress.
“There’s been a lot of changes in legislators over the past 10 years and HSAs have stayed relatively stable in that world,” Wilkens said.
The report provides insight into the six specific impacts on HSAs and CDH plans outlined in AHCA, as passed by the House, with a focus on how they will positively impact individuals' ability to own their health.
The top-ranking Democrat on the Senate side of the Joint Economic Committee, though, has said expanding the health savings account program would do little to help ordinary Americans cope with cuts in Affordable Care Act coverage expansion programs.
According to Robertson, these impacts “focus on expanding access to health savings accounts and CDH plans for Americans.”
1. Raises HSA contribution limits to the high-deductible health plan (HDHP) out-of-pocket maximum.
The current 2017 HSA contribution limits are $3,400 for a single plan and $6,750 for a family plan. The proposed 2018 contribution limits would increase that to $6,550 for a single plan and $13,100 for a family plan.
2. Repeals the ACA contribution limit on flexible spending accounts (FSAs) (currently $2,600 for 2017)
Approximately 20 percent of Americans covered by private insurance are able to contribute to an HSA since they are enrolled in a qualified HDHP, according to the report. For those not covered by an HDHP, this change effectively allows for significantly higher contributions to help cover large out-of-pocket expenses.
3. Allows spouses to make catch-up contributions to the same HSA
“The most significant obstacle to maximizing spousal contributions has been the aggravation of having to open a second account,” the report says.
This change will make it easier for seniors to maximize their savings for retirement years, both in terms of lower administration costs, and simplification of the contribution process.
4. Repeals the prescription requirement for over-the-counter medications as qualified medical expense distributions from HSAs, FSAs, and health reimbursement arrangements (HRAs)
The ACA raised the prices for anyone purchasing over-the-counter medications, and with this repeal, it will immediately lower healthcare costs for people using HSAs, FSAs, and HRAs to purchase these products, according to the report.
5. Lowers the penalty for non-qualified HSA distributions made prior to age 65 from 20 percent to 10 percent
This penalty exists to ensure that HSAs are used as health care savings tools and not tax shelters for assets. The report says a lower penalty would make HSAs more attractive since “the fear of a 20 percent penalty may have been a detractor in individuals using HSAs as a savings account.”
6. Allows for qualified distributions to reimburse medical expenses incurred within 60 days of HDHP coverage but before HSA account is established
“Even though an individual may be covered by an HSA-qualified health plan, they are not allowed to claim their medical expenses as qualified distributions until they have met the legal requirements of establishing their HSA,” according to the report.
This provision would give individuals a 60-day window to cover these instances.
See the original article Here.
Source:
Emily Zulz (2017 June 16). 6 favorable changes to HSAs under GOP health bill [Web blog post]. Retrieved from address https://www.benefitspro.com/2017/06/16/6-favorable-changes-to-hsas-under-gop-health-bill?ref=hp-news&page_all=1