Good Neighbor Insurance (dev.gninsurance.com and www.gninsurance.com) is continuing to update our clients on the new health insurance laws. There are six major coverage options for those in the US and even though some of the rules and regulations are similar for all many differences are there and it all depends on how old you are and for whom you work. Many critical details of this new insurance law will be clarified in the months and years to come.
These six major coverage options are:
(1) Individual or family coverage (private health care plans)
(2) Employee/employer group option for small businesses (typically under 50 employees)
(3) Employee/employer group option for large businesses (typically larger than 50 employees)
(4) Exchange options through the state you are residing in (fully integrated 1-1-2014 and are quasi-government and private insurance coverage combined)
(5) Medicare (which include Parts A, B, C, and D) for those 65 years onwards
(6) Full government health plans like Medicaid, CHIP, TRICARE, VA and other coverage plans as may be designated by the Department of Health and Human Services based mostly on financial criteria and/or military service.
Health Care Flexible Spending Account (FSA) – Group
Health Reimbursement Arrangement (HRA) – Group
Health Savings Account (HSA) – Group and Individual/Family
Retiree Reimbursement Account (RRA) – Group
Fund products, such as Health Care FSA, HRA, HSA and RRA products, are impacted by provisions of the health care reform bill. We understand that it can be difficult to interpret what these new provisions mean for you. So we’ve created the following to help you understand how you may be impacted.
■ Over-the-counter (OTC) medications
■ FSA contributions
■ Dependent age definition
■ HSA withdrawal penalty
OTC medications / Impacted Fund products: FSA, HSA, RRA
Q: When do the restrictions on the purchase of OTC medicines take effect?
A: These restrictions will take effect for taxable years commencing on or after January 1, 2011, regardless of the effective date of an employer’s plan year.
Q: How does the new restriction on OTC purchases affect plan sponsors and members enrolled in plan years with effective dates which occur during the calendar year 2010 and not on January 1, 2011 (“non-calendar year plans”)?
A: Employees under non-calendar year plans will be able to submit claims for reimbursement for OTC medications for expenses they have incurred through December 31, 2010. Expenses incurred after January 1, 2011 will be subject to the new rules.
Employees should be advised at the time of their open enrollment to consider the change in rules when making elections about the amount of funds they wish to contribute, particularly to FSA accounts.
Q: Does this mean that prescription medicines will be the only items that can be purchased with FSA or Health Saving Accounts dollars?
A: No. Flexible spending account funds may still be used for other qualified medical expenses, including payment of copays or deductibles where permitted. Other items not affected by the legislation include such things as medical equipment, eyeglasses, hearing aids, etc. Also, the purchase of insulin is not affected by the new law.
The list of items whose purchase will be restricted by the new law is still being developed. The current draft includes items such as allergy and sinus products, pain relief, cough, cold & flu, motion sickness, certain ointments and creams, and sleep aids.
Q: What kind of doctor’s authorization will be acceptable to support a reimbursement against a FSA or HSA account? Will members need to give a prescription at the drug store when they purchase their items?
A: Members will need to provide a prescription with their request for reimbursement of an OTC medicine, along with a copy of their receipt for the purchase. The prescription must state the name of the patient and the name of the OTC medicine, and must
be signed and dated by a licensed health care professional. The prescription does not need to be given to the pharmacist, but should be sent to Aetna for reimbursement.
Q: Will members still be able to use debit cards for their qualified medical expenses, other than OTC medications?
A: Members may still use debit cards for qualified medical expenses other than OTC medicines. However, use of debit cards will not be permitted for OTC medicines. Members will need to submit a copy of their purchase receipt, along with the prescription, in order to be reimbursed.
Dependent age definition / Impacted fund products: FSA, HRA, HSA
Q: What is the new age limit for dependent children?
A: Health plans that provide coverage for dependents of employees will be required to offer that coverage to adult dependents until they reach age 26.
Q: When does this rule go into effect?
A: The new coverage rules take effect on the first date of the new plan year following September 23, 2010. Employers are also permitted, but not required, to offer this coverage to the children of employees as of March 30, 2010. Accordingly, there is no mid-plan-year impact that is imposed by the law.
Q: Can employees submit FSA and HRA reimbursement requests for 2010 medical expenses of adult dependents?
A: Generally, yes. As soon as an employer has given notice of its intention to extend coverage to adult children, qualified medical expenses with respect to those children may be reimbursed from FSA and HRA accounts — even in 2010.
Q: Do the children need to be the employee’s tax dependents to qualify for FSA and HRA expense reimbursement?
A: No. The law does not condition coverage of adult children on financial dependency or other conditions such as student status, residency with the parent, or other similar conditions. The child may even be married and still covered by the parent. The identification of the child as a “dependent” for this purpose will be based solely on the child’s relationship with the parent.
Q: Can an employee use his or her Health Savings Accounts for the adult dependent’s medical expenses?
A: Only if the adult dependent is also considered a dependent for tax purposes. HSAs are treated differently than FSAs, and HRAs for this purpose.
Q: Can an adult dependent open his or her own HSA?
A: Yes. An adult dependent who is covered under the parent’s high-deductible health plan and has no other medical coverage may establish his or her own HSA. The adult dependent may make Health Savings Account contributions up to the allowable amount
($6,150 for 2010 and 2011). The parent may also contribute to their own HSA up to the allowable family maximum amount.
FSA contributions Impacted fund product: FSA
Q: How are the FSA contribution rules impacted?
A: Tax advantaged contributions to FSA accounts will be limited to $2,500, effective January 1, 2013.
Q: How will the January 2013 limitation on contributions to flexible spending accounts affect plan sponsors and members with non-calendar plan years?
A: Contributions for employees and plan sponsors with non-calendar plan years will be still be subject to the reduced limit on contributions which will be effective for the tax year 2013. In other words, employees may be allowed to make a contribution greater than $2,500 for the tax year 2012, if permitted by the terms of their plan. This may present some administrative issues for employers which will hopefully be clarified in future regulatory releases.
HSA withdrawal penalty Impacted fund product: HSA
Q: How has Health Care Reform changed the rules for withdrawing money from an HSA for unqualified expenses?
A: The tax penalty for an unqualified withdrawal from an HSA account has been increased effective January 1, 2011, from the current level of 10% to 20%.
Q: Does the increased tax on non-qualified withdrawals from HSAs also affect plan sponsors and members with non-calendar year plans?
A: Yes. Employers should make plans to notify their employees of this increased tax penalty which would take effect commencing January 1, 2011. Note that this penalty only applies to withdrawals for nonqualified medical expenses.
Doug Gulleson totally adores scuba diving and travels overseas throughout the year with his underwater camera in one hand and a cup of coffee in the other. Visit Good Neighbor Insurance at dev.gninsurance.com / www.gnhealthplan.com/ and www.onlineglobalhealthinsurance.com/trip-cancellation/ for Arizona and international travel insurance coverage.