Month: February 2014

  Don’t forget open enrollment for individual health insurance ends on March 31st.  It can be confusing to sift through all the overwhelming options, especially with the complicated new changes the Affordable Care Act brings to the table. Our account executive Elena Cowan will be glad to assist you with finding the best individual coverage … Continued

By Josie Martinez
Senior Partner and Legal Counsel 
EBS Capstone, A UBA Partner Firm

Lately, it seems we have been getting the same compliance questions over and over again from our clients.  Below are some of our most frequently asked questions.

1)    Can employers offer a Flexible Spending Account (FSA) to employees that are not eligible for the employer’s medical plan?

As you may recall, in September 2013, the U.S. Department of the Treasury published Notice 2013-54 addressing health reimbursement arrangements (HRAs).  This ruling made clear that a health FSA must qualify as an excepted benefit to be exempt from the Patient Protection and Affordable Care Act (PPACA) market reforms. The guidance clarified that in order to be excepted, a health FSA must satisfy two conditions: (1) the maximum benefit payable cannot exceed two times the salary reduction, or, if greater, the amount of the salary reduction for the FSA plus $500, and (2) other non-excepted group health plan coverage must be made available to employees.

Consequently, employers with health FSAs must also sponsor a group medical plan and only individuals eligible for the employer-sponsored medical plan may be offered the health FSA.  So an unintended consequence of PPACA is if an employee is not eligible for the health plan coverage, then that employee may no longer be eligible to enroll in the health FSA either.   

2)    Must our medical insurance plan provide eligibility for a former spouse? 

Most health plans limit eligibility to the legal spouse and the spouse loses eligibility upon divorce unless the former spouse is eligible for, and elects, COBRA. However, some states, including Massachusetts, have insurance laws that require insurers to offer continued eligibility to a covered spouse following divorce. In such states, more often than not, the issue of former spousal coverage is addressed in the divorce decree and it is usually stipulated that the spouse who provided coverage to the family will continue to do so, particularly if the other spouse did not have access to an employer-sponsored medical plan. In Massachusetts, for example, fully insured health plans are generally required to provide that a divorced spouse must be allowed to remain eligible for coverage, without additional premium, as if no divorce had occurred, until the remarriage of either the employee or former spouse, unless the divorce judgment says otherwise.  The former spouse’s eligibility generally follows the eligibility of the employee and, even after the employee remarries, the former spouse may continue on the health plan on a separate individual contract (at additional cost).  In situations like this, it is very important for employers to be aware of the interaction between COBRA and the state’s divorce continuation law.

3)    Can an employer contribute to the Health Savings Account (HSA) of an employee enrolled in Medicare? 

Contributions cannot be made to an individual’s HSA if the individual has other disqualifying health coverage or is eligible for Medicare. The HSA regulations specify that the contributions must be zero for any month in which the individual is entitled to benefits under Medicare.  Therefore, if an employee has an HSA and will soon be eligible for Medicare, planning ahead is imperative because contributions made by an employer to an employee’s HSA are included in the gross income of the employee to the extent that they exceed the individual’s maximum contribution amount or are made on behalf of an employee who is not an eligible individual.  All such amounts are considered “excess contributions.”

In order to continue to contribute to an HSA, some employees may choose not to enroll in Medicare Part A when they reach age 65. These individuals may continue to contribute to the HSA. However, enrollment in Medicare is automatic for individuals 65 or older who are receiving Social Security retirement benefits, triggering a possible unintended loss of eligibility to contribute to an HSA. Inadvertent loss of eligibility to contribute to an HSA could also occur with respect to individuals that have already reached full retirement age because these individuals may receive retroactive Social Security and Medicare benefits for up to six months in the past. Employees may be surprised to learn that up to six months of contributions to the HSA need to be reversed.  If contributions are not stopped in time, or reversed before the next tax deadline, a tax penalty may ensue.   An excise tax of 6% for each taxable year is imposed on the HSA holder for all excess contributions (whether the amounts were contributed by the account holder or by his or her employer). Thus, although IRS guidance limits the employer’s responsibility for determining whether contributions to employees’ accounts are excludable, it’s a good practice to adopt procedures that will help employees avoid non-qualifying contributions.

For more detailed PPACA compliance information, download a complimentary copy of UBA’s white paper, “The Employer’s Guide to Play or Pay.” http://bit.ly/1chiLEQ.

By Dave Woodruff
The A.I. Group, Inc.

Most of us have heard of “concierge medicine” and it’s gaining popularity, especially among executives.  As more people enroll, more questions are popping up that we haven’t heard before.  One of the most frequent questions we’ve heard is, “Can I fund the cost of the concierge with my health savings account (HSA) or flexible spending account (FSA)?”

The answer is an absolute “maybe!”

Why, the squishy answer?  It’s because not all medical concierge services operate alike and the portion of the expenses that are qualified aren’t always in a particular model.

Here’s a brief description of the four prevalent models of concierge services and what is qualified for reimbursement:

1. Fees for Care.  In this model, the participant subscribes to a medical concierge to have access to care.  At the time services are rendered, additional fees are charged that are directly related to the medical care given.  The subscription portion of the fee is not eligible, but generally the amount related to actual care provided would be considered as an eligible medical expense under the HSA guidelines. 
2. Annual Physical. Here a fee is charged for an annual physical, usually more comprehensive than covered under the Patient Protection and Affordable Care Act (PPACA) requirements, and the model includes no additional non-medical services or “amenities.”  The physical is considered to be medical care and would also generally be considered an eligible medical expense under the HSA guidelines.  If the fee is payable up front, it would only be reimbursable once the physical has actually been performed.
3. Annual Physical Plus Amenities. Here a fee is charged for an annual physical and with it some additional non-medical services (amenities) are added. The physical is considered to be medical care and would generally be considered an eligible medical expense under the HSA guidelines, assuming the billing outlines the service(s) and their associated cost(s).The amenities (e.g., retainer fess, access fees, or expedited appointment access to a physician, etc.) are not eligible medical expenses under the HSA guidelines even if the bill has a line item for the access or amenities portion. If the medical provider only furnishes a global bill with no itemization for specific services, it may be difficult to substantiate the service was an eligible expense.
4. Amenities Only. Here the fees are exclusively for access to the medical concierge.  These fees pay for the amenities like retainer fees, access fees, or expedited appointment access. These are not qualified medical expenses and, therefore, are generally not eligible for reimbursement through the participants HSA or FSA.  

A quick rule of thumb is if the bill is directly related to a qualified medical service or expense, it is reimbursable.  If it is only for access to, or the right to “get in the door,” then it is not a qualified medical expense for HSA/FSA reimbursement purposes.  As with everything, there are exceptions and qualifications and only the participant’s qualified tax consultant can properly advise. 

Finally, the participant can reimburse him/herself from his/her HSA or send payment to the medical concierge directly from his/her HSA regardless of the qualification of the expense.  If the expense is non-qualified, they simply have to declare non-qualified disbursals on their Federal Income Tax and pay both the appropriate ordinary income tax as well as the excise penalty of 20% of the disbursement.