Health Care Reform &
Health Savings Accounts
There are numerous changes that have already taken place, and will continue to take place over the coming few years that will affect all Americans, and HSA owners in particular.
In 2010, domestic and same-sex partners are eligible for HSA reimbursements. This means that anyone with money in a Health Savings Account can use funds from that account tax-free to pay for their partner’s medical or dental expenses.
On September 23rd of 2010, the following provisions came into affect for all plans in effect since the law was enacted on March 23rd (but do not apply to grandfathered plans already in force prior to March 23rd, 2010).
- Policies no longer have lifetime limits (now typically $1 - $5 Million)
- Children with pre-existing conditions are no longer denied coverage.
- Young adults are able to stay on their parents’ policies until age 26.
- Preventive services are covered 100%, with no copay or deductible. The law references guidelines of the U.S. Preventive Services Task Force. (Click on a service on their page – those rated A or B on their list will likely be covered, though details still need to be approved by the Secretary of Health and Human Services.)
There are a couple of provisions affecting HSA owners that started January 1 of 2011.
- You are no longer able to pay for over-the-counter medicine from your HSA. At this time, only prescribed pharmaceuticals can be paid for from an HSA.
- The penalty for withdrawals from your HSA for non-medical expenses increases from 10% to 20%.
- A long-term care insurance program will be available via voluntary payroll deductions. (However, private coverage is likely to provide a much better value).
Most of the major changes in the health insurance market officially take place starting in 2014. HSA out-of-pocket limits in 2014 when the new health exchanges kick in will be $6,645 for individuals and $13,290 for a family.
- Mandated health insurance coverage: Everyone will be required to purchase a specific minimum level of health insurance, with a maximum out-of-pocket limit of $6,645 for individuals and $13,290 for family plans. This will limit the types of plans available compared to today. Everyone will be required to carry maternity coverage and other mandated benefits. A penalty of $95 or 1% of income will be charged by the IRS to anyone who does not carry qualified coverage, rising to $325 in 2015, and $695 or up to 2.5% of income by 2016.
- Catastrophic plans only available to young: People under age 30 will be allowed to purchase lower-cost catastrophic plans that cover only 3 primary care visits until cost sharing equaling the maximum deductible is reached
- Minimum actuarial value: Everyone over age 30 will be required to carry coverage that covers at least 60 percent of the actuarial value of the benefits offered (that being the average medical expenses incurred by a typical person in a year). It is not clear if the contribution to a health savings account will be counted when calculating the actuarial value. If not, the maximum deductible that is available will go down a good bit
- Maximum deductibles: Maximum deductibles for HSA-qualified plans in 2014 will be $6,645 for individuals and $13,290 for families. However, it is not clear if plans with deductibles this high will actually qualify, due to the minimum actuarial value requirement (see above)
- Guaranteed Issue: Underwriting will be eliminated, so people with pre-existing conditions will qualify for coverage.
- Cost shifting: Younger people will be required to pay no less than one third what the oldest segment (age 60-64) pay, in order to subsidize the premiums for older Americans. Males will also be required to subsidize female premiums, so that premiums are equal for both sexes.
- Subsidized premiums: Subsidies will be available to individuals earning up to $29,327, and a family of four earning up to $88,200.
- Out of Pocket
Limits: These will be reduced for those with incomes up to
400 percent of the Federal Poverty Limit (FPL), based on the following schedule:
- 100 - 200% FPL: One third of HSA contribution limits: $1,983 per individual and $3,967 per family.
- 200 - 300% FPL: One half of HSA contribution limits: $2,975 per individual and $5,950 per family.
- 300 - 400% FPL: Two thirds of HSA contribution limits: $3,987 per individual and $7,973 per family.
- Small employer deductible requirements: Deductibles on plans offered by small employers can be no higher than $2000 for individuals and $4000 for families, unless a flexible spending arrangement (FSA) is also included to reimburse the difference between the higher deductible and $2000 or $4000.
- Small employer individual coverage option: Many small employers will likely be dropping group coverage and letting their employees get individual coverage, because of the federal subsidies that some employees would qualify for. For employers with over 50 employees, there is a $3000 fee per employee receiving the subsidy, up to a maximum of $2000 per year for all employees. For businesses with less than 50 employees, there is no fee.
We believe that high deductible HSA-compatible health insurance plans are absolutely necessary if this new law has a chance of working. We are also recommending that people get the highest deductible plan that they can now, while they are still available If you would like any assistance in choosing a plan or getting signed up, just give us a call.
information above is provided for general information purposes. Much
of it is subject to further clarification from the Secretary of Health and
Human Services. There are also numerous legal challenges, including
several issues that will probably result in Supreme Court review.
If you need tax advice, contact your professional advisor or let us know
and we'll give you a referral.