Health Savings Accounts (HSAs)

As many of you may be aware, the implementation of the Community Living Assistance Services and Supports Program (CLASS) has been suspended, but not the law itself, due to a lack of sustainability This is the controversial Long Term Care Insurance Program created by the Affordable Care Act (ACA), which was intended to provide financing alternatives for long-term services and supports for community living.

Working adults were to have been automatically enrolled, unless electing to opt-out, with premiums being placed in a “Life Independence Account” and managed by the Department of Health and Human Services (HHS) as a new insurance program. To qualify, individuals must be 18 years old and have contributed monthly premiums to the Program for at least 5 years with a benefit eligibility after proof of 90 days of continuous functional limitation (therefore, no benefits for the first 5 years + 90 days!).

The Cash Benefit is assigned by the Secretary (HHS) based upon the degree of disability or impairment averaging no less than $50 per day. CLASS benefits could be used to offset the costs to Medicaid when eligible for both programs. Unused amounts may roll month to month, but NOT year to year and once benefits cease due to improved circumstances or death, any balances remaining will not be payable.

The majority of individuals with long term care needs (over 85%) live in a community environment. The typical company or individual health insurance program will not cover these costs and the only government plan that will provide benefits (some) is Medicare, however, only those who are designated as poor, or become poor, qualify. Additionally, Medicare is very limited in providing long-term services, covering only short-term skilled nursing and home health care.

As the average life expectancy continues to expand, the annual costs of Long Term Care Programs can be expected to inflate as well. It is for this very reason that several of the larger carriers have either recently decided to leave the market, while continuing to maintain their current book of business, while others have requested and received decidedly large premium increases, in excess of 20%, that have been passed along to the dismay and even horror of their policyholders. Many of whom are on fixed incomes.

One of the only preventive ways to be assured of the prospective affordability of future premiums is to consider a limited pay period, such as a plan with premiums that are only paid to Age 65 or perhaps 10 Years. While the premiums may increase during this period, you are assured that you will no longer have any premiums upon the completion of the chosen time agreement.

With over 10 million Americans in need of long-term services and the average nursing home costs nationally exceeding $70,000 per year, for those who are concerned, I would strongly advocate that you consider looking into a Long Term Care Program, sooner rather than latter, if for no reason other than pricing. Such a plan would go along way to removing the Indignities of both the suspended CLASS Program, as well as the realities of the circumstances.

Finally, for those who are owners or employees of a “C Corporation”, your premiums can be 100% tax deductible, making the limited payment arrangement even more attractive. While those participants of Health Savings Accounts (HSA) would be eligible to utilize any of their accumulated HSA Account resources to pay for their Long Term Care premiums.

As you go to print on November 14th, the Supreme Court of the United States has agreed to rule on the Health Care Law, which is expected to be next June.

With the plethora of unending new legislation arriving daily, coding and electronic reporting issues becoming an impediment to your reimbursements, as well as your practice/business, we now have yet another issue to present, Employer Certification.

The carriers have always reserved the right to request an annual certification, which is a detailed census of “all employees”, regardless of hours worked, in an effort to be assured that not only are you including all eligible employees, but to be certain that you are meeting the requisite 75% participation test.

Prior to this year, this request has been sporadic but the screws are now tightening and most all of the carriers are not only requesting but scrutinizing your Employer Certification and here’s what you will need to provide:

• Complete Census consisting of name, position, dob, salary, hire date and hours
• WR-30-used to substantiate your census
• Completed/Signed Waivers for all those not accepting coverage
  Note: A valid waiver would be spousal coverage, not, “I can’t afford it”.
• 75% Participation is required, which would include the aforementioned categories
• Employer must pay at least 10% of the Single rate
• New for 2011-Only 1 carrier (Ex: Horizon, Aetna etc.) per group

Due to the more intense scrutiny by the carriers, we have expanded our services to include the review of our clients Employee Benefit structure, wherein, we are now analyzing several key areas where we have found our clients to be lacking and/or vulnerable:

• POP (Premium Only Plan) – Payroll Deduction is the method of choice and allows your Employees to pay for their share of monthly premiums on a “Pre-Tax” basis, saving them at least 20% on their tax bill, while equally providing for about a 10%-14% tax savings to the Employer.

  However:
  1. You will be required to have a properly completed Section 125 document in order to take advantage of this tax break, as well as a,
  2. Signed acknowledgement of consent by your employee/participant

  Note: If HSA contributions are being made through payroll deduction, your document will be required to have additional qualifying language to permit this deduction.

• FSA (Flexible Spending Accounts) is another popular method to allow your employees to take advantage of Pre-Tax” payment of excess and/or non-covered medical, dental or vision expenses.

  These plans require annual testing and you should maintain a copy of both the respective documents and test results in your office in the even to an audit and to confirm that they are up-to-date.

  Please check the current rules of eligibility pertaining to owners/stockholders or contact our office and we will provide you with a free office audit if you indicate your membership with the Morris County Medical Society.

In the nearly 40 years that our practice has been serving the medical community, we have not experienced the kind of rate increases we have just seen through this last year and, regrettably, there doesn’t appear to be any abatement in site.

While we are to believe that we will enjoy better benefits at a decreased cost, we have already witnessed the exact opposite, Carriers have made drastic changes to their plans, particularly as it pertains to Out-of-Network coverage, forcing the consumer to essentially pay for an Out-of-Network PPO, Direct Access or POS plan that is tantamount to an HMO, due to the extraordinary expense associated with the new higher deductibles and co-insurances being imposed.

Additionally, the State of NJ has now passed further restrictions by no longer allowing the use of multiple carriers by mandating that employers maintain at least 75% participation with one carrier. Another valued freedom removed and competition reduced, resulting in obviously reduced selection and undoubtedly resulting in higher costs.

As if your practice wasn’t already overburdened with all of the rules we still haven’t learned, now comes:

PPACA (HR3590)—Patient Protection and Affordability Health Care Act which, among other things, requires several health notices to be provided to plan participants having COBRA implications. Here are just a few, along with some updates:

• Notice Regarding Adult Children 9/23/10-employers are now responsible to provide coverage for dependents up to Age 26, whether married or unmarried, no longer living with the parents, not a dependent on the parents tax return and/or no longer a student. However, NOT for the dependents spouse or children.
• Notice Material Plan Changes-regrettably, most all of the carriers have begun a systematic change of many of their current plans by offering “mapped” plans that supposedly mimic their now outdated plans. So much for, “if you like your current plan, you can keep it”.
• Notice Grandfathered Status-plans in effect prior to 3/23/10, are generally considered “grandfathered” for purposes of PPACA, Section 1251, but as mentioned above, the carriers have pre-empted many of their plans by “mapping” (closing many of their current plans). If your plan qualifies for “grandfathered” status, it is your obligation to provide notification by describing the benefits and provide contact information for questions and complaints.
• Small Business Health Care Tax Credit 1/1/10 35% to 50% in 2014-to help cover the cost of health, dental and/or vision insurance premiums for small businesses paying at least 50% of the premiums, with less than 25 full-time employees earning below a certain average wage level. Note: Non-Profits are eligible for a 25% credit in 2010, increasing to 35% in 2014.
• HIRE Act-provides for a New Hire, 6.2% Payroll Tax Credit, refer to Form W-11 for details.
• New Provisions-Ban on: existing conditions for children, rescission, annual and lifetime limits, discrimination based upon salary and the addition of coverage for preventative services.
• HRA’s-Health Reimbursement Arrangement-can now be used for dependents under age 26.
• FSA-Flex Savings Account Limitations 1/1/13-will limit employee salary reductions to $2,500.
• HSA Penalties-increased from 10% to 20% for distributions unrelated to qualified expenses.
• HSA Contributions-remain the same for 2011, Single $3,050, all other $6,150 with an additional $1,000 age 55+ catch-up and another $1,000 for an age 55 Spousal Account.
  Note: 2010 Contributions still available until the taxpayers filing date, typically Corporations 3/15, others 4/15.
• HRA’s, HSA’s and FSA’s-can no longer be used to purchase OTC Rx without a prescription.

If you have any questions, or need further assistance, we would be privileged to assist, as we represent all of the carriers in the State of New Jersey.

September 23, 2010 will be a significant date for all of us who provide Group Health Insurance plans for ourselves and/or our employees, as the following important provisions take effect:

• The use of multiple carriers will no longer be an option, as newly enacted legislation requires that the selected carrier will require 75% of all eligible’s to be insured with that particular carrier. Multiple plans will be permitted but we anticipate limits (number of plans) based upon the size of the group.
• No Lifetime Limits on Individual and/or Group Plans for “essential” benefits.

Note: NJ the carriers currently provide for Unlimited Benefits for “In Network” services but only Horizon provides for Unlimited Benefits for “Out–of–Network services, as the other carriers vary between $2 million and $5 million.

PA the typical Out–of–Network coverage ranges from $500,000 to $1 million

• No Annual Limits on Individual and/or Group Plans for “essential” benefits are currently permitted but are intended to be restricted and ultimately prohibited in 2014.
• Dependent Children coverage up to age 26 (through age 25), unless their employer offers a health plan. NJ and NY allow up to age 30.
• No pre–existing condition exclusions for children under 19.
• *Families USA found, One in Five Americans under 65 have conditions that could result in denial of coverage.
• For groups of 200+ fulltime employees, automatic enrollment into the employer Health plan AND presumably, the employer will be able to automatically charge the employees paycheck,
• unless the employee elects out.
• *USPSTF List of Preventive Services will no longer have cost sharing.

HSA’s – Health Saving Accounts reaches 10,000,000 covered Americans.
*AHIP showed a 25% (33% large groups, 50+ and 22% small groups) increase from last year, according to a new census recently released, bringing the total to nearly 10 million Americans.

Defensive Medicine adding to the cost of services.
*Jackson Healthcare reports that in addition to driving up the costs of healthcare, physicians reported that defensive medicine limits access to certain patients, drives over–and under–treatment, delays adoption of medical innovations and negatively impacts the supply and satisfaction of physicians.

*Links to these articles or reports can be viewed on the Resources page of our website.