Obama to Veto FSA/HSA Legislation

WASHINGTON—President Barack Obama will veto legislation that would ease a 28-year-old Internal Revenue Service rule that requires forfeiture of unused flexible spending account balances and eliminates restrictions on using FSAs and health savings accounts to pay for over-the-counter medications, the administration said Wednesday.


Under the measure headed for a vote this week on the House floor, employers could amend their FSAs to allow employees to withdraw as taxable cash up to $500 in unused balances remaining at the end of the plan year or at the end of an FSA grace period, if an employer has that feature. If passed, the measure would be considered by the Senate.

OTC medications

In addition, H.R. 436 would overturn a health care reform law provision that allows FSA reimbursement of OTC medications without a prescription and imposes a 20% federal tax on HSA distributions for OTC medications obtained without a prescription. Those provisions are part of a broader bill, H.R 436, that would repeal a provision from the Patient Protection and Affordable Care Act that imposes new federal excise taxes on medical devices and boosts repayments of federal premium subsidies provided to low-income and middle-class uninsured individuals in situations in which the subsidies turn out to be higher than the individuals were entitled.It is those provisions that the administration opposes.“This excise tax is one of several designed so that industries that gain from the coverage expansion will help offset the cost of that expansion,” the Office of Management and Budget said in a statement.“In sum, H.R. 436 would fund tax breaks for industry by raising taxes on middle-class and low-income families. Instead of working together to reduce health care costs, H.R. 436 chooses to refight old political battles over health care. If the president were presented with H.R. 436, his senior advisers would recommend that he veto the bill,” OBM said.

To view the original article click here



--------------------------------------------------------------------------------

Flexible Spending Accounts: Clarifying all the Recent Buzz and Legislation

Recently there has been quite a bit of buzz out of Washington regarding Flexible Spending Accounts (FSA). Two different things have recently taken place: 




#1 - The Internal Revenue Service on Wednesday provided regulatory relief for health care flexible spending account participants and also said it is reconsidering its longtime use-it-or-lose-it rule for FSAs.



Under that relief, the IRS said participants in noncalendar-year plans can still make the maximum contributions to their FSAs during the first year that a mandated FSA contribution cutback goes into effect under the health care reform law.


The issue involves a provision in the Patient Protection and Affordable Care Act, which goes into effect on Jan. 1, 2013. Under that provision, the maximum annual contribution employees can make to their FSAs will be $2,500. Under current law, there is no annual limit, though employers typically limit annual contributions to $4,000 to $5,000


To read a full article about this guidance click here

-----------------------------------------------------------------




# 2 The House Ways and Means Committtee voted on three separate changes to the FSA/HSA legislation that will be explained below. The key things to remember regarding these items is that they haven't yet been heard by the whole House, so they have not been voted into law as of this post.



Use-it-or-lose-it


A decades-old Internal Revenue Service rule that requires forfeiture of unused flexible spending account balances would be eased, and health care reform law-imposed restrictions on using FSAs and health savings accounts to pay for over-the-counter medications would be eliminated, under separate bills approved Thursday by a panel of the U.S. House of Representatives.


Under the Medical FSA Improvement Act of 2011, H.R. 1004, cleared by the House Ways and Means Committee on a 23-6 vote, employers could amend their FSAs to allow employees to withdraw as taxable cash up to $500 in unused balances remaining at the end of the plan year or at the end of an FSA grace period, if an employer has that feature.


The distribution would have to be made no later than seven months after the close of the plan year.
The committee action coincides with an IRS announcement this week that it will consider modifying the 1984 use-it-or-lose-it rule that requires forfeitures of unused FSA balances at the end of a plan year or grace period.


Over-the-counter medications


The other bill—the Restoring Access to Medication Act, H.R. 5842—which the committee approved on a 24-9 vote, would overturn an unpopular provision in the health care reform law that restricts the use of flexible spending accounts and health savings accounts to reimburse employees for OTC medications.
Under that provision, FSA reimbursement is permitted only if the employee obtains a prescription for the medication, while in the case of HSAs, OTC reimbursement is permitted without a prescription but a 20% federal tax is imposed on the distribution.


The bill approved by the House panel would eliminate those OTC restrictions in the health care reform law.

Retiree HSA distributions


A third bill, H.R. 5858, approved by a 21-7 margin, would allow retired employees who are at least age 55 but not yet eligible for Medicare to withdraw funds tax-free from their health savings accounts to pay premiums in early retiree health care plans offered by their former employers.


The three bills are expected to be considered by the full House next week.

House to Rule on OTC Restrcitions

WASHINGTON—The House Ways and Means Committee is expected to vote on and pass legislation that would overturn an unpopular provision in the health care reform law that restricts the use of flexible spending accounts and health savings accounts to reimburse employees for over-the-counter medications.


Under that provision, FSA reimbursement is permitted only if the employee obtains a prescription for the medication, while in the case of HSAs, OTC reimbursement is permitted without a prescription, but a 20% federal tax is imposed on the distribution.

The bill, H.R. 5842, to be considered Thursday by the committee, would eliminate the OTC restrictions in the Patient Protection and Affordable Care Act of 2010.

The restrictions are very unpopular among employers. Sixty-two percent of employers responding to a Midwest Business Group on Health survey said they favored repeal of the provision, which made it the second most unpopular health care reform law provision among respondents. The most unpopular was the provision, effective in 2013, that will place a $2,500 annual cap on FSA contributions.

To view the original artcile click here

Regulators Provide Additional Guidance on SBC's

Adding additional certainty to previous guidance, federal regulators made clear that they will not impose financial penalties on employers that do not fully comply with health care reform law requirements that will require them to distribute to employees a new summary of benefits and coverage statement.


In February, the Obama administration delayed by six months the requirement to distribute to employees the new summary of benefits and coverage statement.The requirement will go into effect for plan years that begin on or after Sept. 23, 2012. For example, if a plan year begins on Jan. 1, 2013, and the employer's open enrollment period is from Oct. 1 to Nov. 1, the new SBC would have to be available by Oct. 1, 2012.At the time, regulators said they did not “intend” to impose penalties during the first year the requirement is in effect so long as employers are working in “good faith” to comply.In the latest guidance, released as part of frequently asked questions and answers, regulators said during the first year the requirement is in effect agencies “will not impose penalties on plans and issuers that are working diligently and in good faith to comply.”Benefit experts welcome the latest clarification. 

To view the FAQ's click here and here

To view the sample template of the SBC click here



 

HSA Limits Announced for 2013

The IRS has issued the cost of living contribtuion and coverage adjustments for 2013. They are as follows:

2013 Individual Deductible: $3250

2013 Family Deductible:     $6450

2013 Catch Up Contrib:     $1000

2013 Maximum Out-of-Pocket Amounts:  $6250 (ind) / $12,500 (fam)

2013 Minimum Deductible Amounts:         $1250 (ind) / $2500 (fam)

To view the IRS release click here 

IRS Proposed Rule on Comparative Effectivness Fee

Proposed Internal Revenue Service regulations would resolve numerous questions employers and others have raised about a fee that is to be imposed on health care plans issued by insurers and self-funded employers.

That fee—mandated by the health care reform law to fund research on medical outcomes—will be $1 per plan participant for the first plan year ending after Sept. 30, 2012, and $2 per participant in succeeding years. For plan years starting after Sept. 30, 2014, the fee would be indexed to reflect the percentage increase in national medical expenditures as published by the Department of Health and Human Services.The fee is to be paid annually by July 31 of the next plan year. Many questions have been raised about the fees and to which type of health plans they would apply. “This has been on employers' 2012 health care reform radar screen,” said Andy Anderson, a partner with Morgan, Lewis & Bockius L.L.P. in Chicago.

For example, the proposed regulations that the IRS issued Thursday make clear that the fee would be imposed on retiree-only health care plans, even though such plans are largely exempt from the health care reform law.In addition under the proposed rules, an employer with a health reimbursement arrangement linked to a self-funded high-deductible health care plan would be liable for the fee only for participants in its plan. It would not pay a second fee for participants in the HRA. On the other hand, the fee would be imposed on HRAs if the arrangement were linked to an insured health care plan. In that situation, the employer would be liable for the fee covering participants in the HRA, while the insurer would be liable for the fee on the insured plan.In short, “there will be two fees to be paid,” said Rich Stover, a principal with Buck Consultants L.L.C. in Secaucus, N.J.The proposed regulations also give examples of methodologies that health plan sponsors could use to determine the number of participants in their health care plans for calculating the amount of the fee they would owe.

To view the full article click here

Express Scripts Closes Medco Acquisition .

Expess Scripts Inc. said it completed its $29.1 billion acquisition of Medco Health Solutions Inc. after the Federal Trade Commission determined that the combination of the two largest pharmacy-benefits management companies in the U.S. wouldn't stunt competition in the sector.

The FTC in a majority vote of 3-1 decided that the deal wouldn't change dynamics in the PBM market, ending an eight-month investigation. In a statement the panel said its probe found a "competitive market for PBM services characterized by numerous, vigorous competitors who are expanding and winning business from traditional market leaders."

The probe also showed that Express Scripts and Medco "are not particularly close competitors, the market today is not conducive to coordinated interaction, and there is little risk of the merged company exercising monopoly power," the FTC said.

In a dissenting opinion, FTC Commissioner Julie Brill called the merger "a game changer" and stated, "I have reason to believe that this merger is, in fact, a merger to duopoly with few efficiencies in a market with high entry barriers--something no court has ever approved."
Ms. Brill called on the commission to conduct a retrospective study on the merger in three years' time.

To view the entire article click here.