American Benefits Group (ABG) Navigating the Road to Consumer Directed Healthcare 2.0
The rapid adoption of consumer-directed health plans and accounts is a megatrend. In 2021 over 80 percent of U.S. employers offer a High Deductible Health Plan (HDHP) with a pre-tax consumer spending account or an HSA. According to Employee Benefit Research Institute (EBRI), the average industry-wide Health Savings Account (HSA) balance is about $2,100, while an average couple will require more than $285,000 in savings at retirement age to cover their likely out-of-pocket healthcare costs. Moreover, only 30 percent of health savings account holders fall in the ‘saver’ category, carrying account balances from year to year. These statistics highlight the need for better education, tools, and resources to help consumers better manage the financial responsibility for their current and future healthcare costs.
American Benefits Group (ABG) Upping the Benefits Administration Game
In recent years, the US’ employee benefits landscape has rapidly evolved owing to factors such as escalating healthcare costs, changes in employment and benefits laws, and new initiatives and options in healthcare benefits. As employers continue to explore various ways to manage the costs and strategic design of their health benefits programs, integrated consumer-driven accounts such as Healthcare FSA, Health Savings Accounts (HSAs), and Health Reimbursement Arrangements (HRAs) play an instrumental role to empower participants with the tools they need to manage their health care spending and out of pocket costs. Delivering comprehensive tools and guidance to manage these accounts in one place with access real time healthcare cost and quality assessment tools and data is a responsibility that Massachusetts-based American Benefits Group (ABG) take very seriously.
On Dec. 7, 2016, the US Congress passed HR 34, called the “21st Century Cures Act” (Cures Act). The Cures Act legislation will permit small employers (those with fewer than 50 full-time employees during a calendar year who are not subject to the employer mandate) who do not offer a group health plan to provide a qualified small employer health reimbursement arrangement (QSEHRA).
When Bob Cummings started out in benefits administration, health-insurance co-pays were $3, premiums were well under $100 a month, his office ran on MS-DOS, and it issued paper statements. Much has changed since then, obviously, but not his company’s success formula, based on personalization, creativity, knowledge of a complex and ever-changing subject, and what American Benefits Group prefers to call ‘enabling technology.’
On Sept. 22, 2014, the IRS released two sets of FAQs discussing the informational reporting requirements under Internal Revenue Code Sections 6055 and 6056. Section 6055 requires employers that sponsor self-insured plans to report specific information to the IRS and to plan participants which will assist the IRS in administering and enforcing the individual mandate.
On Sept. 18, 2014, the IRS published Notice 2014-56, setting the applicable dollar amount for plan years that end on or after Oct. 1, 2014, and before Oct. 1, 2015. As a reminder, the PCOR fee is calculated using the average number of lives covered under the plan and the applicable dollar amount for that plan year. The applicable dollar amount is $2 for plan years ending after Oct. 1, 2013, and before Oct. 1, 2014. Notice 2014-56 announces that the applicable dollar amount for plan years that end on or after Oct. 1, 2014, and before Oct. 1, 2015, is $2.08. For plan years ending on or after Oct. 1, 2015, the adjusted applicable dollar amount will be published in future Internal Revenue Bulletin guidance.
With respect to payment responsibility, if a plan is fully insured, then the insurance carrier is responsible for paying the fee. If a plan is self-insured, the plan sponsor is responsible for the fee. For this purpose, “plan sponsor” is defined as the employer for a single employer plan.
Under health care reform (PPACA), a new nonprofit corporation was established, the Patient Centered Outcomes Research Institute (PCOR). This corporation will be funded in part by PCOR/CER (comparative effectiveness research) fees paid by certain health insurance issuers or plan sponsors of applicable self-insured health plans. Please note that Health reimbursement Arrangements (HRA) are categorized as a self-insured health plans unless, in rare occasions, it is determined to be an excepted benefit (i.e. for vision and dental expenses only) and are therefore subject to this fee.
On Friday, September 13, 2013 Treasury published Notice 2013-54 (Notice) which preserves all Health Reimbursement Arrangements (HRAs) that are integrated with an underlying group health plan but eliminates an employer's ability to use a stand-alone or other tax-favored arrangements, including Premium Reimbursement Arrangements or cafeteria plans, to help employees pay for individual health policies on a tax-free basis. In addition, the Notice addresses a number of specific topics related to flexible spending accounts (FSAs) and HRAs. As such, this Alert is the first of two covering Notice 2013-54 which spells out requirements for HRAs offered starting January 1, 2014. Treasury and IRS Notice 2013-54
