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At Open Enrollment, one of the most daunting tasks can be deciding on the best health insurance plan option that meets your needs and the needs of your covered dependents. There are often many choices, and the language used although intended to be very clear, can actually be quite confusing.
Before choosing a health insurance plan, be sure to ask questions, pre-determine your health expenses and health care needs for the year ahead and research all of the variables of the plan options available to you. A good place to start is the Summary of Benefits and Coverage, which should be provided to you prior to your open enrollment election and can provide the basic information you need to make the most informed choice possible.
While the variables of each plan offered can differ greatly, the basis of the plan designs are consistent. To help you prepare for the difficulties in choosing a health plan that makes the most sense for you, here are some of the basics for the various types of employer sponsored health plans that are offered. Note that this list does not include individually purchased health plan options or options available through the exchange.
Commonly offered employer-sponsored health plan choices:
- Preferred Provider Organization Plans (PPOs): PPOs allow individuals to use any of the plan's preferred providers within their extended network, including specialists, without the need for a referral. PPOs can vary in terms of out-of-pocket expenses, but they typically will require a co-pay for certain types of expenses and many may even require you to meet a deductible up front.
- Health Maintenance Organization Plans (HMOs): HMOs allow covered individuals to use any provider within an extended network but require that individuals first choose a Primary Care Physician who will coordinate all of their extended care. Once a Primary Care Physician has been chosen, covered individuals must see their PCP for referrals to certain specialists. Deductibles and co-pays may apply and will vary by plan design.
- Exclusive Provider Organization Plans (EPOs): EPOs allow covered individuals to see any of the physicians within the assigned EPO network, typically without the need to assign a preferred provider or to obtain referrals. Often times EPOs will not provide any coverage for services rendered outside of the EPO network, so individuals must be certain to check the network of approved EPO providers before choosing this type of plan. Deductibles and co-pays may apply and will vary by plan design.
- Point of Service (POS) Plans : POS plans are a combination of the traditional HMO and PPO plan. You are typically free to see any provider within a large covered network and may be required to assign a Primary Care Physician for regular office exams and wellness visits. With POS plans, you are usually free to also use providers which may be out of the plan's network, and will often pay higher amounts for these services. Deductibles and co-pays may apply and will vary by plan design.
- High Deductible Health Plans (HDHPs): HDHPs can come in many forms, including PPOs, EPOs and HMOs. HDHPs are designed to incentivize covered individuals to make better choices in regard to their care. By requiring individuals to meet a set dollar amount up front before their health insurance plans will cover certain expenses or all expenses, similar to the way in which you would meet a deductible with car insurance, HDHPs are intended to force the consumer to think about their medical needs and choices before receiving treatment, perhaps even shopping around for a better price. By having more “skin in the game", HDHPs are intended to create a more informed consumer. Qualified HDHPs can also be offered with Health Savings Accounts (HSAs). In order for an HDHP to be HSA-qualified, the deductible requirement may be no less than $1,300 in 2017 for self-only coverage and $2,600 in 2017 for family coverage. To be HSA qualified, the maximum annual out-of-pocket costs cannot exceed $6,550 for self-only coverage and $13,100 for family coverage in 2017. Limits are increased for inflation each year.
- Employer Sponsored Plans: When making your choices for the best health insurance plan to meet your needs, consider all options available to you. Many of the aforementioned plans will be offered with various types of employers sponsored plans, including Flexible Spending Accounts (FSAs), Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs). When making the choice that most closely meets your needs, don't forget to consider all options available to you.
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- Can I make mid-year changes to my FSA?
Invisalign Braces are eligible for reimbursement with a flexible spending account (FSA), health savings account (HSA), health reimbursement arrangement (HRA) and a limited care flexible spending account (LCFSA).
Unlike an FSA where money is forfeited at year end if not used, HSA money rolls over from year to year. The money in your HSA is yours to keep and use as you wish. Even if you no longer have HSA-eligible HDHP coverage, you may still continue to keep and spend down your HSA.
Open Enrollment is your opportunity to make changes to your employee benefits elections and choose health coverage that will protect you and your loved ones for the year ahead. However, if your employer offers some type of healthcare or childcare savings/spending account, you may be missing out on hundreds, if not thousands, in tax savings for expenses that you will incur over the course of the coming year.
Luckily, FSAstore.com/HSAstore.com is here to help you navigate the alphabet soup of consumer-directed spending/savings accounts to find the plan that works for your needs. Here are 4 of the most common offerings:
|Flexible Spending Account (FSA) (also known as general medical FSA)|
|Yearly Contribution Limits||$2,700 per FSA (2019). If both spouses have an FSA through their respective employers, they could each elect the maximum for $5,400 per household.|
|Plan Year||Most often 1 year. In limited circumstances, there may be a short plan year.|
|Eligibility to Contribute||FSA plans can only be sponsored by employers and eligibility rules are set by each plan. Employees who work for employers who offer FSA plans may contribute up to the allowed maximum per year. Self-employed individuals and owners of certain types of corporations are not eligible for an FSA.|
|Account Ownership||An FSA account is owned and set up by the employer.|
|Access to Money||An employee's yearly FSA allocation is available in full on the first day of the plan year, regardless of contributions to date.|
|Change Contributions?||FSA users can only change their contributions during their Open Enrollment periods. Some plans also allow changes to contributions to be made if the account holder experiences a Qualifying Life Event, such as marriage, divorce, or birth of child.|
|Special Rules/Eligibility Exceptions||Employers can choose one of two (or none) options to provide relief for FSA users who would otherwise have to forfeit leftover funds: the $500 rollover and the 2.5 month grace period. The $500 rollover allows FSA users to move up to $500 of the previous plan year's contribution into next year's allocation (without counting against the overall contribution limit) to avoid forfeiting money to their employers at year end.|
The second is the FSA Grace Period, which gives users 2.5 months after the last day of their plan years to spend down their remaining FSA funds.
For more information about what an FSA can cover, visit the FSA Eligibility List.
|Health Savings Account (HSA)|
|Yearly Contribution Limits||$3,550 Individual, $7,100 Family (2020). Employee and employer contributions both count towards the limit.|
|Plan Year||There is no plan year with an HSA, funds rollover continuously each year and do not expire.|
|Eligibility to Contribute||An HSA can only be opened by a person enrolled in a qualified high-deductible health plan (HDHP) with a deductible of at least $1,400 (self-only coverage) or $2,800 (family-only coverage). The individual must not have other first dollar health insurance coverage, including an FSA. For calendar year 2020, a "high deductible health plan" is defined under § 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,400 for self-only coverage or $2,800 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,900 for self-only coverage or $13,800 for family coverage.|
|Account Ownership||An HSA is owned by the account holder and is a bank account set up in the owner's name. Account beneficiaries can be assigned.|
|Access to Money||Remaining HSA account funds can be accessed at any time regardless of whether or not the person is actively contributing to the HSA.|
|Change Contributions?||HSA users can change their contribution amount at any time, as long as it does not exceed the yearly allocation limit. It is up to the HSA account holder to track contributions and ensure they do not exceed the annual limit.|
|Special Rules/Eligibility Exceptions||Unlike FSAs, HSAs can cover the cost of certain premiums, but otherwise follow nearly identical eligibility requirements. For more information about what an HSA can cover, visit the HSA Eligibility List.|
|Limited Care Flexible Spending Account (LCFSA) (also known as Limited Purpose FSAs)|
|Yearly Contribution Limits||$2,700 per FSA (2019). If both spouses have an FSA through their respective employers, they could each elect the maximum for $5,400 per household.|
|Plan Year||Most often 1 year. In limited circumstances there may be a short plan year.|
|Eligibility to Contribute||LCFSA plans can only be sponsored by employers and eligibility rules are set by each plan. Eligible employees may contribute up to the allowed maximum per year. Self-employed individuals and owners of certain types of corporations are not eligible for an LCFSA.. However, unlike general medical FSAs, LCFSAs will usually only cover qualifying dental and vision expenses.|
|Account Ownership||An LCFSA account is owned and set up by the employer.|
|Access to Money||An employee's yearly LCFSA allocation is available in full on the first day of the plan year.|
|Change Contributions?||LCFSA users can only change their contributions during their Open Enrollment periods, or if the plan allows, if they experience a Qualifying Life Event (marriage, divorce, birth of child, etc.)|
|Special Rules/Eligibility Exceptions||An LCFSA typically does not qualify as "first-dollar" coverage, and therefore an account holder can open up both an LCFSA and an HSA if they so choose. Participating in both plans allows employee to maximize their savings and tax benefits.|
|Dependent Care Flexible Spending Account (DCFSA)|
|Yearly Contribution Limits||$2,500 individuals, $5,000 if filing taxes jointly. (2019)|
|Plan Year||Most often 1 year. In limited circumstances there may be a short plan year.|
|Eligibility to Contribute||DCFSA plans can only be sponsored by employers. Employees can open an DCFSA regardless health plan enrollment. DCFSAs let you use tax-free money to cover child care for qualifying children or adult dependent care for qualifying adults and relatives. You or your spouse must be working, searching for work, or attending school full-time in order to qualify for the DCFSA.|
|Account Ownership||A DCFSA account is owned and set up by the employer.|
|Access to Money||DCFSA funds are available as they accumulate within the account. Only expenses for services already incurred will qualify for reimbursement.|
|Change Contributions?||DCFSA users can only change their contributions during their Open Enrollment periods, or if they experience a Qualifying Life Event (marriage, divorce, birth of child, etc.)|
|Special Rules/Eligibility Exceptions||An DCFSA does not qualify as "first-dollar" coverage, and therefore an account holder can open up both an DCFSA and an HSA if they so choose. Participating in both plans allows employee to maximize their savings and tax benefits.|
To qualify as employment-related expenses, care must be for a qualifying individual. A “qualifying individual" means:
· A dependent under age 13.
· The taxpayer's spouse. If the spouse is physically or mentally incapable of caring for himself or herself, and has the same residence as the taxpayer for more than half of the year.
· A dependent of the taxpayer (i.e., a qualifying child or qualifying relative could be an older relative) must be physically or mentally incapable of caring for himself or herself, and have the same residence as the taxpayer for more than half of the year.
Which expenses are covered?
· Before- and after-school care.
· Adult care of a relative who spends at least eight hours a day at your home.
· Child care at a day camp, nursery school, or by a private sitter (or by a non-tax dependent relative). Babysitters cannot also be claimed as dependents (an older relative must be at least 18 years old).
· Adult day care center.
· Transportation by caregivers.
· Expenses for a housekeeper who also handles dependent care.
· Day camps.
· Late pick-up fees.
Expenses not covered:
Any care that is not work-related will not be covered under your DCFSA.
· Overnight camps
· Long term care (nursing home)
· School tuition or education fees, meals or food.
For more information about what your DCFSA covers, visit our Eligibility List.
- Internal Revenue Bulletin: 2019-22
- 2020 HSA Limits Rise Modestly, IRS Says
- 2019 FSA Contribution Limits Announced by IRS
- Pre-Tax to the Max: IRS Increases FSA Contribution Limit for 2019
More Open Enrollment articles
Flexible spending accounts (FSAs) and health savings accounts (HSAs) are the most popular tax-free healthcare accounts -- also referred to as “consumer-directed" -- in the U.S. today. The term “consumer-directed" refers to insurance plans that pay for common medical expenses like checkups and emergency care, but also contain a separate account to help you further reduce your out-of-pocket healthcare costs.
So why would anyone pay for their own healthcare expenses when insurance can do it instead? In short, the tax savings! In the case of FSAs and HSAs, you can elect to set aside your money through deductions from your paycheck before that money gets taxed. Because the money is set aside before taxes (“pre-tax"), it ultimately lowers your overall taxable income. This means you pay less in taxes while also being able to use the funds pay for eligible healthcare services like copays or products like band-aids, that you would normally pay for out of your own pockets.
Consumer-directed healthcare is an idea that first emerged during the mid-20th century and has evolved over the last 50 years. To help you understand the power of these accounts, let's explore how these healthcare options came to be over the past several decades:
1960s – Employer-Driven Health Coverage Begins
As is the case today, in the 1960s, healthcare benefits were paid for by employers. But, in the latter part of the decade, rising inflation caused a spike in the price of health benefits and employers started to look for ways to reduce their costs. They ultimately found an answer in two ways: the first was through introducing many of the features of modern health insurance plans like deductibles and co-insurance, which exist so employees remain responsible for a portion of their own health care costs and offset the burden to the employer. The second way was to scale back on the benefits the plans offered which reduced coverage and the quality of employee health plans inevitably suffered. These leaner health plans had smaller physician networks, as well as less coverage for medical specialists and specific treatments. Without the same level of comprehensive coverage to rely on, some employees were forced to go out of their physician networks to get the care they required. And they had to pay for their health care costs out of their own pockets, with money they had already been taxed.
1970s – Health Reimbursement Accounts Are Informally Developed to Offset Rising Healthcare Costs
One of the earliest forms of consumer-directed healthcare is the health reimbursement arrangement (HRA), also known as a health reimbursement account, which attempted to work around these rising costs. HRAs were conceived as a grand bargain between employers and employees to offset the growing cost of health coverage. HRAs are set up by the employer, and the employer contributes a specified amount to each participant's HRA. Employees can use these funds for qualifying products and services. HRA plan structure was largely left up to the employer, but they would typically cover deductibles, co-payments and co-insurance payments to provide financial relief for employees.
Reimbursement payments through an HRA for medical expenses was a step in the right direction -- employers got additional tax relief and employees had more money to spend on qualified health expenses. But the tax relief was significantly greater for employers.
1978 – Tax reform Creates Flexible Spending Accounts (FSAs)
The Revenue Act of 1978 was a major piece of tax reform that also created the flexible spending account (FSA) as one of its key features. FSAs were created to combat some of the common issues of the HRA, namely that employers would reap the majority of the tax benefits, and employees were not able to contribute, which was a major problem if they had more advanced health issues to cover. As such, FSAs were created to put power back in the hands of consumers, who could make more efficient use of pre-tax healthcare dollars to match their unique needs. These accounts were designed to function on a year-to-year basis, and were subject to a "use-it-or-lose-it" rule. This meant that money set aside through regular payroll deductions must be used by the end of each plan year or the remainder would be forfeited to one's employer (enter: the major incentive to employers to cover the cost of an FSA program). FSAs were the first accounts to put buying power directly in the hands of account holders, as they could choose how much to contribute each year to cover medical expenses and save on their taxes, as well as choosing what products and services to spend it on.
1996 – Program Created as Trial Run for Health Savings Accounts (HSAs)
In the early '90s, predominantly Republican lawmakers wished to put more power in the hands of consumers so they could make their own choices regarding healthcare expenses. As longtime advocates of "personal responsibility" and more choice in healthcare, GOP legislators pushed for the development of a personal savings account that could set aside funds pre-tax to cover eligible medical products and services. With many Americans unhappy about the cost of their health plans and the lack of freedom in employer-sponsored offerings, Republicans developed the idea of the medical savings account (MSA). The MSA, also known as the Archer MSA named after its creator Congressman Bill Archer (R, TX), was envisioned as an experiment to determine whether the infusion of free market principles into healthcare could create healthier, more cost-conscious consumers. Most importantly, these accounts would not be subject to employer regulations and money in these accounts would be the employee's own to manage.
In 1996, The Health Insurance Portability and Accountability Act (HIPAA) introduced protections to personal health data and medical information, and Republicans recognized this major health reform bill as a prime opportunity to test the viability of the Archer MSA program. The provision was voted on and approved with a trial period of 10 years to test the popularity and utility of these accounts. Much like FSAs, MSAs could help employees save on taxes and lower insurance costs, but they were unique in that they could only be set up at a bank or financial institution, earnings and interest would grow tax-free and unused funds could be saved for the future to fund retirement expenses.
2002 – Health Reimbursement Accounts (HRAs) Become Formalized
After existing for decades on an informal basis, HRAs are formally established by the Internal Revenue Service (IRS) through guidance established in sections 105 and 106 of the tax code. This defined the criteria under which HRAs could be used and ruled that HRAs could only be funded by an employer, could only be used for substantiated medical expenses such as personal health insurance premiums, provided the ability to reimburse former employee/retirees and allowed the carryover of unused HRA funds to later plan years.
In the past, HRA limits were left up to the employer, as well as the medical products and services they covered. Today, there are no yearly limits on employer contributions, and expenses covered are largely determined by the type of plan that the employee is enrolled in. There are three primary HRA types that employers can now offer: integrated HRAs that are paired with a high-deductible health plan (HDHP), retiree HRAs that cover post-retirement medical expenses and Stand-Alone HRAs that are not paired to insurance plans and are used to cover individual insurance premiums and out-of-pocket expenses.
2003 – Health Savings Accounts (HSAs) Are Created
With the expiration of the MSA program approaching in 2007, Congress opted to expand this benefit to more Americans by establishing the health savings accounts (HSAs) in 2003 as part of the Medicare Prescription Drug, Improvement and Modernization Act. These accounts were linked to high-deductible health plans (HDHPs), which are insurance plans that require the account holder to exhaust his/her deductible before the insurance company begins covering qualified expenses. HSAs follow nearly identical product/service eligibility requirements as FSAs, as qualified expenses must be used to treat or prevent a legitimate medical condition. However, HSAs were envisioned as both a short-term method to cover medical expenses, as well as a long-term savings vehicle. Unused funds roll over from year-to-year, HSA funds can be invested and HSA dollars can be used on non-medical expenses without a tax penalty when a user reaches Medicare age at 65.
2005 – Consumer Advocates Win Extension for FSA Spending Deadline
The "use-it-or-lose-it" rule has long been an inconvenience for FSA users, as any unspent funds at the end of each plan year would be forfeited to their employers. This rule was put into place to give employers an incentive to start an FSA program by covering some of the cost. FSAs were certainly beneficial, but in those early days, they required a conscientious, patient consumer to avoid losing money. Consider that it was a new plan that lacked educational resources, had poor deadline communication and employees had to file claims entirely with paper! As such, benefits experts lobbied the IRS for years to help make these accounts more manageable. In 2005, the IRS responded by creating the FSA grace period. This gave account holders 2.5 months after the last day of their plan year to spend their remaining FSA funds and submit claims for qualifying expenses like doctor visits, medical procedures and everyday health products.
2013 – Rollover Introduced to Help Consumers Reduce Forfeiture
Even with FSA grace period in place, employees were still forfeiting funds at the end of their plan years, so the IRS gave employees a second option to choose from called the $500 rollover rule. This gives FSA users the ability to roll over up to $500 of last year's funds into next year's plan year allocation (this amount would not count against the yearly contribution limit). Each year, FSA users can set aside up to $2,600 (2017) of their own money in their FSAs. This number is set by the IRS each year, which takes into account currency inflation and cost-of-living increases to ensure that FSA allocations keep up with rising healthcare costs.
Today there are more than 35 million people with FSAs and more than 20 million people with HSAs now in use with those numbers growing each year! After a long and winding development process, consumer-directed healthcare accounts are no-brainers for those who want to save on healthcare costs, and put money back into their pockets each year they would normally spend in taxes!
Still have Open Enrollment Questions?
As the time of year when you can elect benefits, make changes to existing plans and take advantage of new offerings, Open Enrollment is a crucial task for any employee. Depending on your plan year structure, your Open Enrollment period may be weeks or months away, but it's never too early to start thinking about your health coverage for the coming year.
When your Open Enrollment period approaches, these 5 tips can help you get a head start on your benefits election!
- Calculate Your Yearly Medical Expenses
While medical expenses can be unpredictable, in many cases you may already know how much you and your family members are going to spend over the course of a year. As you calculate your expenses, think about:
- How often you visit doctors/specialists (and your dependents as well)
- How much you pay yearly for prescription drugs
- Will you be taking on any new dependents in the coming year? (birth of a child, caretaking adult dependent)
- How much a health plan will cost over a year
- Evaluate Your Plan Provider Network
Even over the course of a year, your company's provider network could have changed drastically. Doctors groups could join together and hospitals and health systems could re-contract with insurers which could change your benefit options. Your employer and health administrator have a number of tools and resource that can help you assess the cost impact of your health plan choices and the overall quality of these plans when making your health plan choices.
- Vision/Dental Insurance
In addition to health coverage, vision and dental plans are an important facet of the open enrollment process. Some health plans may already include this, others may act as standalone benefits. Most companies will offer vision benefits plans or vision discount plans. A vision benefits plan operates like traditional insurance where a premium is paid in exchange for eye care coverage and some coverage for qualifying vision correction aids like frames and lenses. Additionally, a vision discount plan, typically offers lower premiums, but will only provide a percentage off qualifying vision expenses and products.
In regards to dental coverage, this is usually much simpler and should be based on your overall health needs. If you only anticipate regular cleanings and checkups, a low-priced dental plan would be best. However, if you anticipate major dental expenses such as root canals, oral surgery or orthodontic expenses in the coming year, a more comprehensive dental plan could be better for your bottom line.
- Is a CDHP right for you?
Consumer-directed healthcare plans like flexible spending accounts (FSAs), health savings accounts (HSAs) and more are funded through the employee's own pre-tax funds and can be used on qualifying health expenses. This offers the benefit of paying less in taxes each year through monthly payroll deductions, and they can even be funded by employers as well. Individuals or families can open these accounts, and they can provide a major boost for those who maximize their benefits. Learn more in our outline of the most common CDHPs. (will hyperlink)
- Take Advantage of Health & Wellness Programs
Health and wellness programs have become increasingly popular amongst employers who encourage their employees to get and stay healthy - which can save both the company and the employee plenty in the long run! Some common programs include health assessments, weight loss programs and health coaching, which could help you better understand your health status and make more informed health plan choices in the future. Some companies also provide financial incentives to those who participate in programs and meet specific goals, so this is a benefit that you definitely don't want to miss out on!
Still have Open Enrollment Questions?
After the legislative fireworks that followed the last attempt to repeal and replace the Affordable Care Act (ACA) in late July, the political landscape surrounding healthcare has been largely quiet throughout the summer. While wholesale changes to the American healthcare system may have been put on hold for the time being, there is still continued support for expansion of HSAs on both sides of the aisle.
HSAs remain popular among the GOP and Democrats
According to the Washington Examiner and Larry Levitt, senior VP of the nonpartisan Kaiser Family Foundation, "Allowing health savings accounts to be used to pay premiums, an idea advocated by conservatives, could provide premium relief to middle-class consumers and help to shore up the market."
According to a new study conducted by Devenir Research, HSA assets grew 23 percent to $42.7 billion over the trailing 12 months ending on June 30, and the number of accounts grew 16 percent to 21 million (http://www.plansponsor.com/HSA-Assets-Have-Grown-23-Percent-Over-the-Past-Year/">PlanSponsor). With such a marked rise in enrollment and interest in HSAs, this appears to be the one area where the two parties could find consensus to expand the utility of these accounts for a wider slate of Americans.
Bipartisan health reform on the horizon?
Despite the gridlocked nature that much of the Senate and House of Representatives processed in recent years, there is renewed hope for a bipartisan solution to correct some of the issues surrounding the Affordable Care Act. Several Democrats and Republicans have spoken out about their plans to work together on a bipartisan measure, and it appears they're staying true to their statements, reports CNN. Senator John McCain (R), who voted against the “Skinny Repeal" bill, has repeatedly said that the Senate should “hold hearings, receive input from both sides of the aisle, heed the recommendations of the nation's governors, and produce a bill that finally delivers affordable health care for the American people."
And they're moving forward in doing just that. Earlier this August, leaders of the Senate Health Committee said they would start in early September with bipartisan committee meetings aimed at stabilizing Obamacare's individual insurance market. Just this week, Senate leaders indicated that they will invite state governors and insurance commissioners for bipartisan meetings set to begin in early September.
Ohio Governor John Kasich (R) and Colorado Governor John Hickenlooper (D) have even announced that they have a proposal to stabilize Obamacare that could be unveiled in the next few weeks, according to The Hill. Their goal is to present the plan to the Senate Health Committee for consideration.The President recently agreed to continue healthcare subsidy payments for the time being, but the future is still unclear and Congress will need to move quickly on any bipartisan action. Insurers are still faced with the possibility of increasing premiums significantly in fear of what may happen with promised cost-sharing payments that could be withheld at any time.
If any new developments happen in the coming weeks and months, FSAstore.com will be here to cover it! Check back often for updates pertaining to consumer-directed healthcare so you can understand any major changes as they happen.
Flexible spending account (FSA) and health savings accounts (HSA) will see a number of important changes from the regulations set forth in the bill. These include:
- Repeal of the OTC Rx requirements for FSAs/HSAs:
The OTC Rx provision was originally included in the Affordable Care Act (ACA), and the Better Care Reconciliation Act will fully remove the provision for FSA and HSA users to obtain a prescription for OTC drugs. The proposed effective date is for expenses incurred after December 31, 2016.
- Repeal of the FSA maximum contribution:
As of 2017, FSA users could set aside up to $2,600 as single individuals and $5,400 for families to cover qualifying medical products and services during their current plan years. The Better Care Reconciliation Act would allow the plan sponsor to set whatever maximum they wish. The proposed effective date would be for plan years beginning after December 31, 2017.
- HSA yearly maximum contributions would increase:
HSA contribution limits have grown steadily in the past decade adjusted for inflation, growing from $3,050 for single individuals in 2010 to $3,400 for single individuals in 2017. The Better Care Reconciliation Act will almost double these limits for HSA users to $6,550 for single individuals and $13,100 for families. The effective date for qualified HSA contributions after December 31, 2017.
- HSA catch-up contributions expanded
When an HSA user reaches middle age, he/she is able to make a catch-up contribution (up to $1,000) to save in excess of the yearly contribution limit on an annual basis. The proposed legislation would keep these HSA catch-up contributions in place, but they would now be allowed for both spouses age 55 and up, as opposed to restricting contributions to the HSA holder alone.
- HSA tax penalties reduced
The Better Care Reconciliation Act also revamps the tax penalty for use of HSA funds on non-qualified expenses. Today, if an HSA user before the age of 65 withdraws HSA funds to cover non-qualifying expenses, he/she would be charged a 20 percent penalty on that amount. The Better Care Reconciliation Act would restore this tax to non-qualified HSA distributions to the pre-Affordable Care Act amount of 10%. Special rules that would allow some expenses incurred prior to the establishment of the HSA to be qualified as well.
- Further extension of the Cadillac Tax:
The Cadillac Tax is a 40% excise tax on the value of coverage exceeding set thresholds that was set to begin in 2020, which currently includes contributions to FSAs/HSAs. The tax was designed to be levied on only the most expensive employer-sponsored health insurance plans—the so-called Cadillacs of health coverage. This regulation was one of the more controversial aspects of the ACA, as while it is a tax on insurance companies, it was feared that these increased costs would be passed off onto employers, and eventually the employees themselves (IB Times, 2015). The Better Care Reconciliation Act would further delay implementation of the tax to taxable years after December 31, 2015.
The Senate is expected to fast track The Better Care Reconciliation Act for a vote before the July 4th holiday. The Congressional Budget Office (CBO), that rates proposed legislation to include potential cost and impact, has promised a score on the new bill early next week.The bill is expected to face challenges with four Senate Republicans currently voicing concern with the bill. In order for the bill to pass, no more than two Senate Republicans can vote against it, and Vice President Mike Pence would be the tie-breaking vote in the Senate if no majority prevails.
U.S. Capitol Building in Washington, D.C., USA
In a stunning turn of events for what has been an on-going topic of interest to many, on May 4th, 2017, the majority of the U.S. House of Representatives voted in favor of the American Health Care Act (AHCA) with a vote of 217 to 213. This officially advances it to the Senate for consideration. It is predicted to face an uphill battle in the Senate, where Republicans are hoping to get it passed through the budget reconciliation process.
The reconciliation process allows for a simple 51-vote majority to pass the Senate without the option of a Democratic filibuster. To get it passed under reconciliation however, according to the Committee for a Responsible Budget's explanation of the reconciliation process and what is known as the Byrd Rule, Republicans will need to prove that each aspect of the bill has a direct impact on the federal budget (among other requirements), which will be a difficult task.
Does the AHCA impact my FSA or HSA?
As the bill moves forward in the Senate, it is expected that it will face significant changes. However, in its current form, the AHCA features many provisions that would have impact to FSAs and HSAs, the biggest being:
- Repeal of the OTC Rx requirements for FSAs/HSAs that requires users to submit a prescription for over-the-counter products with a medical ingredient.
- Repeal of the FSA maximum contribution limit ($2,600 in 2017)
- HSA maximum contributions would increase to $6,550 for self only and $13,100 for family
- HSA catch-up contributions of $1,000 would be allowed for both spouses ages 55 and up. It is currently only allowed for the account-holder.
- Further delay of the Cadillac Tax to 2025 (it is currently set to begin in 2020)
What happens next?
The process to pass a healthcare bill is a long and tenuous one, as we saw withthe Affordable Care Act. President Obama first met with lawmakers and healthcare professionals to lay the groundwork for the bill in March 2009 and it wasn't until March 2010 that the ACA was finally signed into law. According to Politico, there are already rumblings that the Senate could produce its own version of the bill that would then be sent before the House of Representatives again, so there is likely a long road of committees and debate before a final piece of legislation reaches President Trump's desk.
At FSAstore.com/HSAstore.com, we will stay on top of any new developments so be sure to visit our blog often for the latest news on healthcare reform!
Let's see which "candidate" - an FSA or HSA - is best for you this election season:
Flexible Spending Accounts (FSA): FSAs let employees set aside pre-tax money from their paychecks to spend on out-of-pocket healthcare expenses, including co-pays, deductibles and qualifying products/services with a medical purpose.
- Money that goes into an FSA is pre-tax, which can save as much as 40 percent of each dollar spent on qualified health costs.
- Employees can withdraw funds from the FSA to pay for qualified medical expenses from day one of the plan year
- FSAs can help individuals/families budget more effectively by covering co-payments, over-the-counter medications, and more.
Things to keep in mind:
- FSA allocations are increasing to$2,600 for individuals and $5,200, if you and your spouse have separate FSAs.
- FSA holders should be mindful of their deadlines and plan restrictions. Employers have the option of offering a 2.5 month grace period or an optional $500 rollover. FSA users must be mindful of these restrictions to avoid losing money.
Health Savings Accounts (HSA): HSAs allow qualified individuals to set aside pre-tax money to pay for qualified medical expenses. Money contributed to an HSA is exempt from federal income tax, FICA and state income taxes (for most states). Money in an HSA acts similar to a savings account; it stays there until you use it, and most accounts even earn interest on the savings.
- HSAs do not have deadlines that users have to adhere to, as they roll over from year to year.
- Contributions can be made pre-tax through payroll deposits, as well as tax-deductible allocations by contributing money that has already been taxed.
- HSAs are portable from job to job
- HSA funds will remain available for future qualified medical expenses even if you change health insurance plans or retire.
Things to Keep in Mind
- Choosing a high-deductible health plan is necessary to enroll in an HSA. This may not be an option for some, as it costs more to meet the deductible.
- HSAs carry significant tax penalties if funds are withdrawn before the account holder turns 65. If funds are withdrawn for non-qualified expenses before the age of 65, users will have to pay taxes on this amount in addition to a 20 percent tax penalty.
Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs) are a great benefit, but many are unsure about FSAs vs HSAs. Learn about both!
The landscape of the American healthcare system has changed dramatically over the past decade, as the passage of the Patient Protection and Affordable Care Act (PPACA) has given Americans more options than ever to cover their healthcare costs.
Let's weigh the pros and cons of FSAs vs HSAs, to help you make an informed choice.
Flexible Spending Accounts (FSAs)
-Through the use of regular payroll deductions, FSA account holders can set aside tax-free money that they can use on FSA eligible medical services and products. This can reduce the amount that a worker pays in taxes during each pay cycle.
-Over-the-counter (OTC) medicines can be purchased with an FSA after obtaining a prescription from a doctor.
-Employers can offer either an extended grace period (2.5 months) at the end of an employee's FSA year or the option to carry over up to $500 into the next year.
-There are no reporting requirements for FSAs on federal income tax returns.
-Each year, employees cancontribute up to $2,550 into their FSAs. You and your spouse could collectively contribute up to $5,100with separate accounts. Keep in mind spending deadlines, to make sure you use the plan for expenses throughout the year.
-FSA account holders can itemize their deductions, but they cannot apply their FSA expenses when itemizing. This is considered “double dipping" by the IRS and is prohibited.
-Medical expenses like healthcare premiums, long-term care expenses and amounts covered under another health plan are not applicable with an FSA.
Healthcare Savings Accounts (HSAs)
-HSAs function similarly topersonal savings accounts but instead used for healthcare expenses.
- Individuals can contribute up to $3,350 annually, while married couples filing jointly can contribute $6,750 each year.
-Contributions into an HSA areconsidered tax-free money.
-Employers can contribute to an HSA.
- Employees have direct control over spending and the funds will remain theirs even after switching jobs.
-Any unused money at the end of the year will be accessible during the next calendar year.
-Only individuals with a qualifying High-Deductible Health Plan (HDHP) and no other first-dollar coverage are eligible for an HSA.
-An account holder will be taxed and given a 20% penalty if he/she uses the HSA for something that's not qualified as eligible. Note: Money will be available for personal use without penalties once the account holderreaches 65 years of age.
-Account holders who want to invest in their HSA funds must meet a minimum HSA balance of $2,000. This isbefore putting money in a separate, non-insured HSA investment account.
Ultimately, your decision between FSAs and HSAs will come down to what exactly your employer can offer you in terms of benefits, what sorts of health plans are feasible for your financial bottom line and how much you expect to spend on qualifying healthcare expenses and products over the course of a year.
If you have any questions about your consumer-directed healthcare account, feel free to submit a question in our FSA Learning Center, or explore the spending potential of your account with our FSA Eligibility List.
Shop for products with your FSA at FSAstore.com!
Shop for products with your HSA at HSAstore.com!
Health Savings Accounts (HSAs) maximum contributions will increase by $50 for individuals with an HSA in 2017. Read more about HSA Maximum Contributions.
Similar to FSAs in that they're also tax-free plans, HSAs allow you to set aside pre-tax money to cover qualified medical expenses. That money is exempt from federal income tax, FICA and state income taxes (most states). The money stays in your account similar to a savings account and you even interest on the savings. HSAs can be used for qualified medical costs and out-of-pocket medical expenses, ranging from co-pays to over-the-counter medical items and more.In order to getan HSA, you must be enrolled in a qualified High-Deductible Health Plan and have no other first dollar coverage - this can include a general purpose FSA.
Here's theBreakdown of Expenses andInformation About HSA Maximum Contributions for 2017:
- HSA contributions for individuals (self-only coverage) thatcan be made in 2017 will go up by $50 to $3,400 from $3,350.
- Maximum contributions for anyone with family coverage will remain the same at $6,750.
- According to the IRS for 2017, a high deductible health plan is defined as "ahealth plan with an annual deductible that is not less than $1,300 for self-only coverage or $2,600 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,550 for self-only coverage or $13,100 for family coverage."
To read more about the IRS announcement, go tohttps://www.irs.gov/pub/irs-drop/rp-16-28.pdf
Do you have a Health Savings Account? Did you know you can buy everyday health items like eyeglasses, contact lens care, hot or cold packs, breast pumps and more with an HSA?
Shop for everyday health products with your HSA at HSAstore.com
FSAstore.com/HSAstore.com Partners with WageWorks to Give Consumers a Convenient Way to Shop with a Flexible Spending Account or Health Savings Account
WageWorks to Make it Easy for its Participants to Spend FSA and HSA Dollars on Websites Solely Dedicated to Eligible Products and Services
NEW YORK, NY (PRWEB) SEPTEMBER 16, 2015
FSAstore.com and HSAstore.com, the only e-commerce sites stocked exclusively with eligible products for Flexible Spending Account (FSA) and Health Savings Account (HSA) members, today announced a partnership with WageWorks (NYSE:WAGE), a leader in administering Consumer-Directed Benefits (CDBs), such as Health Savings Accounts (HSAs), health and dependent care Flexible Spending Accounts (FSAs), Health Reimbursement Arrangements (HRAs), as well as Commuter Benefit Services, including transit and parking programs, wellness programs, COBRA, and other employee benefits. The partnership with WageWorks will provide millions of employees who participate in HSAs and FSAs access to healthcare products and educational resources.
"We are thrilled to add WageWorks to our partner network, which now reaches more than 11 million FSA and HSA holders," said Jeremy Miller, CEO and Founder. "At a time when consumers are taking more control over their health, we are delighted to be a source of information and convenience for WageWorks participants.”
"FSAstore.com and HSAstore.com increase the ease of use and convenience for our FSA and HSA participants," said Joe Jackson, CEO of WageWorks. "These sites allow them to shop with confidence, since everything on them represents an eligible out-of-pocket expense."
FSAstore.com and HSAstore.com accept all healthcare account cards and major credit cards. The companies also offer 24/7 customer service, one-to-two-day turnaround on orders, and free shipping on orders of $50 or more.
WageWorks is a leader in administering Consumer-Directed Benefits (CDBs), which empower employees to save money on taxes while also providing corporate tax advantages for employers. WageWorks is solely dedicated to administering CDBs, including pre-tax spending accounts, such as Health Savings Accounts (HSAs), health and dependent care Flexible Spending Accounts (FSAs), Health Reimbursement Accounts (HRAs), as well as Commuter Benefit Services, including transit and parking programs, wellness programs, COBRA, and other employee benefits. WageWorks makes it easier to understand and take advantage of Consumer-Directed Benefits for more than 45,000 employers and over 4 million people. WageWorks is headquartered in San Mateo, California, with offices in major locations throughout the United States. For more information, visit http://www.wageworks.com.
FSAstore.com and HSAstore.com are the only e-commerce sites exclusively stocked with FSA- and HSA-eligible products and services to eliminate the guesswork that can come with using a spending account. In addition to more than 4,000 eligible products, the site offers a national provider database of FSA- and HSA- eligible services and an FSA/HSA Learning Center. FSAstore.com and HSAstore.com accept all account debit and major credit cards, offers 24/7 customer service, one-to-two-day turnaround, and free shipping on orders $50 or more. Consumers enjoy the added benefit of not needing to submit receipts when shopping online with their debit card.
In May 2015, the IRS issued Revenue Procedure 2015-30, announcing the inflation-adjusted HSA contribution limits and minimum deductibles for HDHPs for 2016.
UPDATE: To find out the 2019 HSA contribution limits, click here.
This update was created by FSAstore.com Compliance Director, Rachel Rouleau.
In May, the IRS issued Revenue Procedure 2015-30, announcing the inflation-adjustedlimits for Health Savings Accounts (HSAs) and minimum deductibles for qualified High-Deductible Health Plans (HDHPs).
The limits for 2016 are as follows:
- HDHP Minimum Deductible: Remains unchanged from 2015 at $1,300 for self-only coverage and $2,600 for family coverage.
- HSA Maximum Contribution Amounts: $3,350 for self-only coverage(unchanged from 2015) and $6,750 for family coverage (up from $6,650 for 2015).
- HDHP Out-of-pocket Maximum: $6,550 for self-only coverage (up from $6,450 in2015) and $13,100 for family coverage (up from $12,900 in 2015).
- Catch-up Contribution (Age 55 or older): Remains unchanged at $1,000 for self-only or family coverage.