April 13, 2020

IRS Allows HDHPs to Pay for COVID-19 Testing, Treatment Pre-Deductible

The IRS has issued new emergency guidance that allows insurers to waive the cost of coronavirus testing and treatment for individuals who are enrolled in high-deductible health plans (HDHPs).

Major health insurers report they’ve been concerned that if they can make the change to their high-deductible plans without breaching IRS regulations regarding such plans. 

Specifically, the new guidance states that HDHPs will not lose their plan status if they provide medical care services and items related to coronavirus testing or treatment even before an enrollee has met their deductible.

While the regulation does not require HDHPs to cover the testing and treatment without any out-of-pocket expenses by the enrollee, the plans can do so ― and without breaching the rules regarding these plans.

The new rule could also pave the way for non-HDHPs like PPOs and HMOs to also provide coronavirus testing without out-of-pocket costs for their participants. While there is no rule preventing them from doing so now, many of the country’s large PPOs and HMOs have been reluctant to start offering free testing until they know how HSA plans would be affected.

Typically, enrollees in HDHPs with an attached HSA are required to pay all of their medicinal costs up to their deductible before the insurer will pay. The Trump administration earlier issued another rule that allows HDHPs to foot the bill for certain preventative health services, such as vaccines and screenings for specific conditions like diabetes and high blood pressure before the deductible is met.

In notice 2020-15, the IRS says that “Due to the unprecedented public health emergency posed by COVID-19, and the need to eliminate potential administrative and financial barriers to testing for and treatment of COVID-19, a health plan that otherwise satisfies the requirements to be an HDHP under section 223(c)(2)(A) will not fail to be an HDHP merely because the health plan provides medical care services and items purchased related to testing for and treatment of COVID-19 prior to the satisfaction of the applicable minimum deductible.”

The notice only applies to coronavirus and does not void any other requirements governing HDHPs and HSAs. It states that “Individuals participating in HDHPs or any other type of health plan should consult their particular health plan regarding the health benefits for testing and treatment of COVID-19 provided by the plan, including the potential application of any deductible or cost-sharing.”

July 30, 2019

New Health Savings Account, HDHP limits for 2020

The IRS has announced new health savings account contribution maximums for the 2020 health insurance plan year.

Employees who have an HSA linked to a high-deductible health plan (HDHP) will be able to contribute to their HSA up to a certain level to help pay for health care and pharmaceutical expenses.

Funds going into your employees’ HSA accounts are deducted before taxes during each paycheck and the balance can be carried over from year to year.

Many HSAs also allow employees to invest the funds like they would with a 401(k). Because of this, HSAs have become a savings vehicle of sorts for people who are saving for health care expenses they are expecting in retirement.

HSAs can only be offered with an attached HDHP.

If you as an employer also contribute or partially match your employees’ contributions, they benefit even more, especially when compounding investment returns build up in the long term.

The IRS adjusts contribution limits for HSAs yearly based on inflation. For 2020, those limits will be:

  • $3,550 for individual coverage under an attached HDHP (up $50 from 2019).
  • $7,100 for family coverage (up $100 from 2019).

Also, remember that individuals who are 55 or older can make an additional $1,000 in catch-up contributions.

Besides the contribution maximum increasing, the deductible requirement for an attached HDHP will also climb for 2020:

  • For individual HDHPs, the deductible amount must be between $1,400 and $6,900. That’s compared with $1,350 and $6,750 in 2019.
  • For families, the range is $2,800 to $13,800. That’s up from $2,700 and $13,600 in 2019.

Long-term benefits

One of the best benefits from an HSA is the long-term advantage of being able to carry over balances year after year and let it build up for medical expenses in retirement. But, one of the key points that your employees should know is that if they use the funds in their HSAs for purposes other than qualified medical expenses, they have to pay a 20% penalty.

The website Investopedia recommends that your employees:

  • Max out their HSA contribution each year. If they do so, the amount they can save over the long term only grows through compounding.
  • Hold off on spending contributions now, and try to not use HSA funds for current medical expenses.
  • Make sure they only use the money for qualified medical expenses, so they don’t have to pay penalties of 20% plus regular income tax on their withdrawals.
  • Invest contributions for the long run. For example, if you’re currently invested in a mix of 80% stocks and 20% bonds, you should probably invest your HSA that way, too.
  • Use the account once they’re 65 or older. An added benefit to waiting until you’re at least 65 to spend your HSA balance is that the 20% penalty for withdrawing funds for purposes other than qualified medical expenses doesn’t apply. But, you will have to pay income tax if you don’t use the funds for qualified medical expenses.
April 17, 2019

HDHP Enrollees More Likely to Consider Costs and Quality

A new study has found that people enrolled in high-deductible health plans (HDHPs) actually are more likely to consider costs and quality when considering non-emergency care.

The 14th annual “Consumer Engagement in Health Care” study by the Employee Benefits Research Institute and market research firm Greenwald & Associates surveyed 2,100 adults, most of whom receive health coverage via their employers.

The survey found that people enrolled in health plans with a deductible of at least $1,350 for self only, and $2,700 for families, were more likely to take costs into account when making health care decisions.

Evidence of cost-conscious behavior:

  • 55% of HDHP enrollees said they checked whether their health plan would cover their care or medication prior to purchase, compared to 41% in traditional health plans.
  • 41% of HDHP enrollees said they checked the quality rating of a doctor or hospital before receiving care, compared to 33% of those in traditional plans.
  • 41% of HDHP enrollees asked for a generic drug instead of a brand name drug, compared to 32% of traditional plan enrollees.
  • 40% of HDHP enrollees talked to their doctor about prescription options and costs, compared to 29% of traditional plan participants.
  • 25% of HDHP enrollees used online cost-tracking tools provided by their health plans to manage their health expenses, compared to 14% of people in traditional plans.
  • HDHP enrollees also were more likely to take preventive measures to preserve health, including enrolling in wellness programs.

That said, the study did find some negative behavior among HDHP enrollees as well, including that 30% of HDHP enrollees said they had delayed health care in the past year because of costs, compared to 18% of traditional plan participants.

What you can do

In order to help HDHP enrollees get the most out of their plans, it’s recommended that their employers also offer health savings accounts.

This can help them pay for services that are not covered until they meet their deductible. Employers can help by matching (fully or in part) employees’ HSA contributions. This encourages them to participate.

Employers should also push preventative care. The Affordable Care Act requires all plans to cover a set of preventative care services outside of the plan deductible. Unfortunately, many people don’t know that these services must be covered by insurance with no out-of-pocket expenses for the enrollees.

Some employee benefits experts are recommending that employers tie the amount of premiums employees are required to contribute to how well they comply with preventative guidelines.

Non-enrollment in HSAs

These are the reasons employees cite for not enrolling in their company’s HSA:

  • Do not see any advantages: 57%
  • Do not have enough money to contribute to the account: 24%
  • Their employer doesn’t contribute to the account: 10%
  • Did not take the time to enroll: 8%
  • Do not understand what the HSA is for: 6%

The key to getting your staff to take advantage of the tax-savings feature of HSAs is education. You should make sure all of your eligible staff understand how they work.

And if you are not currently contributing some funds to their HSAs, now might be the time to consider doing that.

April 9, 2019

Helping Your Staff Get the Most from Their HSA Plans

As more employers adopt high-deductible health plans, which leave their employees with more “skin in the game,” it’s important that you educate them on how to get the most out of the attached health savings accounts.

Unfortunately, your employees may not be using the funds in their HSAs as efficiently as they should, and they could be leaving money on the table. One of the most common ways that happens is spending those funds on inappropriate care or misdiagnosed afflictions. It’s estimated that up to $1 trillion a year is spent on this type of erroneous care.

The nice thing about HSAs is that they have a threefold tax benefit:

  • Money goes into the accounts pre-tax,
  • The funds in the HSA grow tax-free, and
  • Funds are withdrawn tax-free if used for qualified medical expenses.

Also, funds in an HSA remain in the account. There is no use-it-or-lose-it provision and workers retain ownership of the account even if they switch employers. They also can be kept until retirement and, like an IRA, your staff can roll over or combine HSAs if they have more than one.

But it behooves your employees to learn how they may be squandering the funds they have put into their HSAs.

Examples of unnecessary care

  • Duplicate tests, because doctors don’t have access to a patient’s full medical records when they go to two or more treatment centers.
  • Overtreatment for common conditions such as back and joint pain, some types of cancer, and stable heart disease.
  • False positives from tests, leading to follow-up tests.
  • Replacement of less costly gold-standard medications and treatments with new and more expensive alternatives that may not yield better results.
  • Care that was delivered on the insistence of a patient when it was not needed or medically appropriate.

Tools for corraling health spending

Fortunately, there are means available to help your employees better decide how to spend their HSA funds.

First and foremost, the majority of medical expenses, like office visits, are reimbursable and the employee should tap the HSA whenever they incur a copay, deductible or outlays for medicine.

Shopping around – If they are told they need a procedure, they can take matters into their own hands and shop around for the procedure among the available treatment facilities in the group network. Doing this can save thousands of dollars.

Second opinions – Getting a second opinion is important, particularly after:

  • Receiving a diagnosis of a serious or complex health problem,
  • A doctor recommends elective surgery, or
  • If the diagnosis is not clear.

Fortunately, many group plans have second-opinion programs as stand-alone services or included as part of an advisory or vendor management program, and through medical centers of excellence.

Objective, evidence-based research – Supplying employees with evidence-based information on treatment options, presented in plain English, can help them understand their options, make more informed decisions, and avoid inappropriate testing and treatment.

It’s also helpful if this resource includes the option to speak with someone via phone or web chat who can answer questions about the information and suggest additional resources.

Referrals to experienced health care providers– Accurate diagnosis begins with connecting employees with the right physicians. The ability to connect workers with physicians who have proven experience and expertise in treating the condition that they’ve been diagnosed with can lower the risk of misdiagnosis and inappropriate treatment.

March 20, 2019

HDHPs Can Hamper Employee Health Without an Attached HSA

In recent years, employers and self-employed Americans have been migrating to high-deductible health plans (HDHPs) but, if they are not attached to a health savings account (HSA), they can end up costing the plan participant more than they can afford and create health problems for them down the road.

HDHPs typically have reduced premiums in exchange for the employee taking on a higher deductible for health care expenditures. The average person enrolled in an HDHP saves 42% in annual premiums, compared to those enrolled in preferred provider organization plans, according to research from BenefitFocus.

But in order to afford paying those deductibles, an attached HSA can help them sock away funds pre-tax to ease the burden.

That’s because HDHPs may leave families facing at least $2,700 in potential deductibles, and up to $13,500 in out-of-pocket medical expenses per year. In 2018, the average HDHP deductible was $4,133 per year for family coverage and $2,166 for single coverage.

For some people, this can pose a problem because:

  • 60% of Americans don’t have $1,000 in emergency savings.
  • 44% would have trouble meeting an unexpected $400 expense.

As a result, many HDHP beneficiaries find themselves putting off care, rationing their medications, or going without altogether. But this often leads to even greater expenses down the road, lost work, productivity losses – and even disability and death. Besides the toll it takes on the employee, their work for you can also suffer.

You can do your part to help your workers avoid this situation by providing an attached HSA, which can be crucial in helping them meet their medical bills.

How HSAs work

HSAs are one of the most tax-efficient savings vehicles in the tax code, and a potent tool for both insurance planning and retirement planning.

These tax-advantaged savings accounts are specifically designed to help people pay their health insurance deductible.

  • Contributions are tax-deductible. What’s more, if you offer the benefit via a Section 125 cafeteria plan, HSA contributions aren’t subject to Social Security and Medicare payroll taxes.
  • Balances accrue tax-deferred. And if participants don’t need to tap their HSA money for health care expenses, once they turn age 65, they can withdraw that money for any reason, penalty-free. All they pay is income tax.
  • Withdrawals to cover qualified medical expenses are tax-free.

What to do

Employers and plan sponsors should work to bridge the gap between deductibles and what employees can actually afford. Otherwise, the short-term saving is likely to be overwhelmed by absenteeism, presenteeism and future medical costs. You should:

  • Consider contributing to or matching employee contributions to health savings accounts.
  • Beef up flexible spending account benefits to help workers with current health issues, and to fund preventative care such as eye exams – which can help detect diabetes.
  • Offer critical illness insurance.
  • Implement or expand workplace wellness programs. A study from Health Affairs found that well-executed wellness programs generate a return of $3.27 per dollar invested.
  • Invest in worksite vaccination and screening programs.
  • Speak with your health insurance carrier or us about using wellness dollars designed to help employees reduce long-term medical costs.
February 19, 2019

HDHP Enrollees More Likely to Consider Costs and Quality

A new study has found that people enrolled in high-deductible health plans (HDHPs) actually are more likely to consider costs and quality when considering non-emergency care.

The 14th annual “Consumer Engagement in Health Care” study by the Employee Benefits Research Institute and market research firm Greenwald & Associates surveyed 2,100 adults, most of whom receive health coverage via their employers.

The survey found that people enrolled in health plans with a deductible of at least $1,350 for self only, and $2,700 for families, were more likely to take costs into account when making health care decisions.

Evidence of cost-conscious behavior:

  • 55% of HDHP enrollees said they checked whether their health plan would cover their care or medication prior to purchase, compared to 41% in traditional health plans.
  • 41% of HDHP enrollees said they checked the quality rating of a doctor or hospital before receiving care, compared to 33% of those in traditional plans.
  • 41% of HDHP enrollees asked for a generic drug instead of a brand name drug, compared to 32% of traditional plan enrollees.
  • 40% of HDHP enrollees talked to their doctor about prescription options and costs, compared to 29% of traditional plan participants.
  • 25% of HDHP enrollees used online cost-tracking tools provided by their health plans to manage their health expenses, compared to 14% of people in traditional plans.
  • HDHP enrollees also were more likely to take preventive measures to preserve health, including enrolling in wellness programs.

That said, the study did find some negative behavior among HDHP enrollees as well, including that 30% of HDHP enrollees said they had delayed health care in the past year because of costs, compared to 18% of traditional plan participants.

What you can do

In order to help HDHP enrollees get the most out of their plans, it’s recommended that their employers also offer health savings accounts.

This can help them pay for services that are not covered until they meet their deductible. Employers can help by matching (fully or in part) employees’ HSA contributions. This encourages them to participate.

Employers should also push preventative care. The Affordable Care Act requires all plans to cover a set of preventative care services outside of the plan deductible. Unfortunately, many people don’t know that these services must be covered by insurance with no out-of-pocket expenses for the enrollees.

Some employee benefits experts are recommending that employers tie the amount of premiums employees are required to contribute to how well they comply with preventative guidelines.

Non-enrollment in HSAs

These are the reasons employees cite for not enrolling in their company’s HSA:

  • Do not see any advantages: 57%
  • Do not have enough money to contribute to the account: 24%
  • Their employer doesn’t contribute to the account: 10%
  • Did not take the time to enroll: 8%
  • Do not understand what the HSA is for: 6%

The key to getting your staff to take advantage of the tax-savings feature of HSAs is education. You should make sure all of your eligible staff understand how they work.

And if you are not currently contributing some funds to their HSAs, now might be the time to consider doing that.