Health Savings Account Q & A Tip #3
May 4th, 2012 | 
Author: When opening a Health Savings Bank account that accompanies a qualified Health Savings medical plan, we are often asked to clarify how and when deposits can be made to the account.
People who enroll into Health Savings medical plans often assume that the insurance carrier will request money or that their bank will bill them for these deposits, but that is not true. You hold the bank account on your own and are responsible for the deposits you choose to make, or not make.
Questions we hear often about the hows and whens of making HSA deposits are:
- Can I make contributions to my HSA in one lump sum or intermittently, or do I have to send regular payments in on a schedule like making may car payment?
- Can I send any amount at any time or do I have to commit to a fixed amount like I used to with my Flexible Spending Account?
Operating an HSA bank account is VERY flexible and the best feature of it is that you are in complete control over the how, when and how much.
Most importantly, you are not bound by an annual election, as with a Flexible Spending Arrangement. That also means that the funds do not have a “use it or lose it” status. Funds will roll over from year to year if you don’t use the money you’ve deposited.
In fact, because HSA eligibility is determined on a month-to-month basis, you can set up a payroll deduction if you are eligible for a Section 125 plan and your company offers one or you can contribute personal funds at any time during the year.
The deadline for making a contribution for a particular calendar year is the due date (without extensions) to file personal income taxes for that year, which is gernally April 15th or ther closest business days following April 15th. If you file a tax return extension, that extension does not carry over to your Health Savings Account, you still must file your deposits as if you were submitting your tax return on time.
As long as you meet HSA eligibility requirements (are not Medicare eligible, are still enrolled in a Health Savings qualified medical plan, etc.), this flexibility allows you to front-load your contributions, change your contributions during the year as needed or back-load their contributions (e.g., if the accountholder is not HSA eligible for the period represented by the front-loaded contribution, such front-loading can result in contributions in excess of the applicable HSA limit).
As always, we recommend that you and your client review these issues with legal counsel or your accountant if you have gray areas that come into question.
More information: IRS Notice 2004-2, Q&A 21.
IRS Notice 2004-2
Q-21. When may HSA contributions be made? Is there a deadline for contributions to an HSA for a taxable year?
A-21. Contributions for the taxable year can be made in one or more payments, at the convenience of the individual or the employer, at any time prior to the time prescribed by law (without extensions) for filing the eligible individual’s federal income tax return for that year, but not before the beginning of that year. For calendar year taxpayers, the deadline for contributions to an HSA is generally April 15 following the year for which the contributions are made. Although the annual contribution is determined monthly, the maximum contribution may be made on the first day of the year.
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Health Savings Account Q & A Tip #2
As you get closer to retirement age, using Health Savings medical plans to their maximum potential can actually help boost your retirement savings.
From age 55 and on, you are permitted to make extra deposits into a Health Savings Account bank account if you own a qualified high deductible health plan. These catch-up contributions are an often overlooked benefit to HSA plans for older people shopping for insurance and looking to reduce their monthly out of pocket premiums.
So a question from one of our clients recently was:
“How do catch-up contributions work and what can I do since my birthday was in October? Do I have to wait until next year?”
The short answer to her question was NO and here’s why.
If you are going to be 55 or older by the end of any tax year, and have not yet enrolled in Medicare, then you are permitted to make an additional $1,000 annual catch-up contribution to your Health Savings Bank account as long as you are enrolled in a qualified Health Savings medical plan.
Best of all, no matter if your birthday is in January, December or anywhere in between, as long as you have been enrolled in a Health Savings qualified medical plan for the entire calendar year, you are eligible for the full $1,000 catch up because the IRS does not force your contribution to be pro-rated based upon when your birthday falls.
However, special rules apply to spouses.
Account holders eligible to make catch-up contributions must deposit the contributions into their own HSA bank account, not the account held in the name of a spouse.
That might be a bit unclear so here a good example of that scenario:
A couple are both eligible to make a catch-up contributions. The Husband is the account holder of the bank account and he has used the funds to reimburse both of their medical expenses. In order for his wife to also make a catch up contribution, she will have to open her own bank account in her name. They can continue to reimburse their eligible medical expenses out of each other’s accounts, but in order for each of them to reap the additional $1000 of tax-free deposits, they must maintain separate bank accounts.
As always, the health insurance professionals at Small Business Benefit Solutions are not accountants, tax preparers or attorneys so we always encourage you to talk with the appropriate professional to make sure that your circumstances are appropriate.
For more detailed information, you can review IRS Notice 2004-2, Q&A 14 and IRS Notice 2005-59, Q&A 22, as well as Internal Revenue Code Sect. 223(b)(3).
Health Savings Account Q & A Tip #1
Health Savings Accounts (HSAs) and the high deductible medical plans that go with them have seen rapid growth inthe last 2 years, and that growth had led to a lot of questions as carriers do a poor job preparing HSA plan members for the ins and outs of the plans.
An HSA is a consumer-owned, tax-advantaged bank savings account, created to pay medical expenses. It must be combined with a high deductible medical insurance plan. The benefit of HSAs is in the consumer incentive to better plan and use health care resources – it’s their money after all.
HSAs allow:
- Tax-free contributions by employer and/or employee
- Tax-free growth of interest or investment earnings
- Tax-free disbursements of principal and interest to pay for qualified medical expenses
- Accumulation of unused funds and portability between employers
- Flexible use – consumers choose whether or when to use the account for health expenses, now or after employment
So there are abundant questions around how to use HSAs and how to get the most out of them while not breaking IRS rules.
From time to time, we’ll be sharing common questions that our clients have asked us at Small Business Benefit Solutions, LLC about how to use their HSA plan most effectively.
This week, a client wanted to know if his HSA bank money could be used to help pay for his son’s medical expenses. His son lives elsewhere with his mother who carriers the medical insurance for him and he had surgery recently. The mother’s plan has a high deductible for hospital services so the bills are starting to pile up.
So the core question is can an HSA account holder pay for qualified medical expenses incurred by other family members who are not enrolled on his health plan?
The answer is YES! A spouse and dependents do not have to be enrolled on the account holder’s health plan for the account holder to reimburse their qualified medical expenses tax-free. Their qualified medical expenses are eligible for tax-free reimbursement from an HSA based on their having a qualifying legal relationship to the account holder, independent of their health coverage or whether the individuals themselves are HSA eligible. If you are unsure about whether your relationship would be considered qualifying, you should speak to your accountant or legal counsel.
The catch here is that if you spend down your account on these other expenses, you may not have the funds for yourself later and the IRS only permits a certain amount to be deposited on a tax-free basis each year. In 2012, that maximum is $3100 for a single person and $6050 for a person enrolling any other dependents on the plan.
So the bottom line is that if you have a group health insurance plan, or individual medical insurance, that offers a Health Savings Account, you can use the finds to pay for dependent expenses without penalty from the IRS as long as you have a legal relationship.
Think and HSA plan might be right for you? Call us at Small Business Benefit Solutions, LLC. We’ll evaluate the plan you already have and the way you use to plan to make sure a change is the right decision for your circumstances.
It Pays To Comparison Shop – Especially For Medical Care
USA Today reports that costs of many preventive medical exams vary as much as 700%
When you go shopping for a television or clothing, it’s not uncommon to keep the price in mind and choose your store based on what you want or hope to pay –do you go to the local bargain dollar store, big box department store or high end retailer. But in health care, people presume costs will be the same and that’s absolutely not true.
In a recent study, costs for preventive services are vastly different and patients rarely know it because they don’t consider how much a procedure costs unless they have to pay for it out of pocket.
Because Health Care Reform made preventive care “free” to people seeking it, there has been a marked increase in demand for those procedures resulting in an increase in premiums to as employees go about getting these procedures with no regard for their costs.
Since September of 2010, health plans began bearing the full weight of the costs of wellness exams such as routine check-ups, mammograms, immunizations, pap smears and colonoscopies. Health Care Reform law required they do so without charging any deductible or co-payment.
But according to a survey by Change Healthcare, a company that sells the ideas of medical cost transparency to employers and medical insurers, they found cost differences for the same tests equaling hundreds of dollars. Their best example is the colonoscopy exam which varied by more than $1000, ranging from a low price of $786 to the highest price of $1,819 – for the same exact exam.
Other examples discovered in the study included:
- The cost of a glucose test ranged between $51 and $437
- Mammograms cost between $169 and $403
- Pap smears: from $131 to and $476
- Cholesterol tests: from $117 to $374
The U.S. Department of Health and Human Services predicted a very meager 1.5% increase in premiums because of the new exam requirements, but with this level of cost variation, that estimate was grossly understated.
A slight variation in costs is to be expected as there are multiple factors that effect price such as whether a provider is in a rural or urban area; whether the service is performed at a hospital, a doctor’s office or an ambulatory clinic; and whether a clinic specializes in a certain procedure.In fact, consumers are already feeling the bite of these additional expenses as many health plans have forced double digit increases on their members and employer groups since Health Care Reform took effect.
But patients also make, or don’t make, decisions that effect the cost of any given procedure.
For example, many patients choose general anesthesia during colonoscopies, which can affect the cost significantly. This also can mean that a doctor goes ahead with a second procedure, such as an endoscopy or removing a polyp, while the patient is under; a potential convenience that ends up adding hundreds or thousands of dollars to the price tag.
You have a role to plan in determining the rate of these price increases
Consumer have been left out of the loop when it comes to health care costs for so long because of managed care and HMO procedures that leave them feeling that they have no or minimal financial responsibility. “Toss the doctor a co-pay and walk away” is no longer “what the doctor ordered”.
More than 90% of Americans have no idea what their medical care would cost if they had to pay for it completely out of pocket, and when they learn about the costs, they are shocked. But they have few resources to get the details they need. Small Business Benefit Solutions team has routinely asked doctors about the costs for the services they are providing and they have no idea.
The Change Healthcare company seeks to change that lobbying for doctors and hospitals to make the cost information available and encouraging their employer clients to provide an incentive for employees to seek less-costly care for equal- or better-quality services.
Insurance providers have taken steps to help with this issue. In fact, many insurance carriers offer on-line tools for customers to compare costs. Some states have developed similar tools to help consumers understand their medical spending.
Other carriers offer lower out of pocket expenses for using certain providers whom they have determined are fair and reasonable in their pricing, or whom have set up transparent pricing structures that patient can easily access and understand.
Like getting estimates for auto repairs, or home improvement projects, if people did the same for non-emergent medical care, competitive markets would occur naturally and ultimately drive medical costs down.
If you’re seeking small business medical coverage and are concerned about how medical costs are effecting your rates, call Small Business Benefit Solutions, LLC to discuss your plan.
About the PCP – Why Is it Important To You
A Primary Care Provider (PCP) is a health care provider that is your principal doctor in non-emergency situations. Your insurance carrier may limit the providers you can choose from, or in some cases, allow you to choose from any provider with higher out of pocket expenses. (Check with your insurance agent or insurance carrier to obtain a list or verify a specific provider is participating. Also verify if you must list your provider with the carrier before accessing care to avoid extra out of pocket costs. Most times this can be done online or by filling out a simple change form.)
PCP Roles Include
- Providing your preventive care
- Diagnosing and treating common medical conditions
- Assessing the urgency of your medical condition, then directing you to the appropriate facility for care in urgent or emergent situations
- Making referrals to medical specialists, when necessary
- Keeping a copy of your entire medical records together, including notes on visits to specialists, emergency rooms, etc.
Types of PCP’s
- Family practitioners – doctors who have completed a family practice residency and are board certified, or board eligible. Family practitioners are just that, a provider that can treat all your family members in the same office regardless of age.
- Pediatricians – doctors who have completed a pediatric residency and are board certified, or board eligible. Usually treats your child from newborn to age 18.
- Internists – doctors who have completed a residency in internal medicine and are board certified, or board eligible. They can treat adults of all ages.
- Obstetricians/gynecologists – doctors who have completed a residency and are board certified, or board eligible. Many women choose a provider of this specialty as there PCP. Some carriers will also allow women to list both a Family Practice provider or Internist AND an OB/GYN.
- Nurse practitioners (NP) and physician assistants (PA) – practitioners who go through a different training and certification process than doctors. Your providers office may utilize these types of providers as your main contact and consult with your primary doctor, but most carriers will not allow this kind of provider to be listed as your PCP.
Are you choosing your PCP the way you choose a plumber, mechanic, etc.?
We hope not. Many people do and a large number of patients do not like the service they are provided by their doctor, but continue to visit the office for their medical care. You would not take your car back to a garage that does not address all the situations you have or call a plumber that did not fix a leak after repeat visits. Are you questioning issues you feel are not being addressed? Do you feel comfortable speaking with your PCP? Do you feel “rushed” out of an appointment? Do you leave the office feeling that the provider is not as concerned with your health as you and your family are? These are signs you may need to locate a new provider.
Consider the following when visiting/talking with your PCP
- Do you feel the office staff is friendly? Do you feel confident when you call with questions that they will speak with the doctor and get back to you the same day?
- How easy is it to reach the provider? Is there a voice mail system or are you greeted by a nurse or knowledgeable office staff when calling.
- Is the provider compatible with your personality?
- Does the provider have a conservative or aggressive approach to treatment?
- Does the provider refer to specialists when appropriate?
- What do other patients say about the provider?
- Does the provider keep you involved in your care? Does the provider take the time to explain treatments, preventive options, etc.
Finding a PCP
- Referrals from friends, family, colleagues that use a specific provider and are happy with the care they are receiving
- Your insurance carrier websites – look for their preferred provider lists
- Referrals from providers you have used in the past. If you have to choose a new provider due to a change in insurance, networks etc. don’t be afraid to ask your doctor for a referral to a new provider that does participate with your new plan
Remember, in the end it comes down to your money and the health and peace of mind of you and your family. Don’t feel you have to settle for a provider who doesn’t make you feel like 100% every time you leave his or her office.
If you need assistance in finding a new PCP or changing the PCP you already have for your medical insurance plan and you aren’t sure what to do, feel free to contact Small Business Benefit Solutions, LLC at 877-490-SBBS (7227).
Employers Report Health Expenses Rising Thanks to Health Care Reform
Survey finds that health care reform law driving employers’ group health costs up
According to a survey released yesterday, employers are estimating that compliance with Health Care Reform has driven their group health costs up by more than 5% and these increases are in addition to premium costs of the plans themselves, which have risen by more than 10% in each of the 2 years since PPACA implementation.
The Willis Group Holdings survey admits that most employers have yet to figure the actual financial impact of compliance with the Patient Protection and Affordable Care Act, more than 55% of employers surveyed said their total health care costs had risen at least 2% as a direct result of the reforms. More than 15% of those employers said their costs have risen in excess of 5% since 2010.
The survey indicated that only 27% of responding employers have been able to put a number on the cost their company has borne in order to comply with the health care reform law in the two years since its implementation.
So what are the reasons for these increased costs?
- More than half of the employers surveyed said the cost increases had been driven primarily by a provision of the health care reform law requiring employers to offer coverage to employees’ adult children up to age 26
- Nearly 37% said the rule eliminating annual and lifetime coverage limits for “essential health benefits” was responsible for their increases
- In addition to these additional coverage provisions, the law also requires employers to make notifications of plan changes so the administrative burden of the law has meant added working hours to read the rules and make sure they comply
So how do employers plan to offset these inclreased costs?
- 62% of responding employers said they expect employers will have to raise employee contributions for health care coverage
- 56% said they expect to increase their plans’ deductibles and co-payments in order to reduce premiums
- 51% said they will shift more of the cost burden for dependent coverage to their employees with children or spouses covered under their policy
“Now that the health care reform act has entered the implementation phase, the costs and benefits associated with the act are coming into greater focus for employers,” Jay Kirschbaum, practice leader for Willis Group, said in a statement released Thursday. “The survey suggests employers realize that costs of providing medical benefits will increase and that they will likely have to pass those costs on to their employees.”
As a small employer, you have already seen the impact of the these increases on your bottom line, but if youhaven’t fully explored all of your coverage options or spoken with a health insurance expert liek those at Small Business Benefot Solutions, LLC, you could be paying more than you should for coverage yo may not be taking fuill advantage of.
Contact SBBS and let us review your present plan. If we determine that you are getting all you can get from your plan, then we will not advise you to make a change for change’s sake. We will do a thorough review of your plan and your expectations and make sure you have the right plan or help you design the right plan for your company.
Insurers Settle and Promise Better Online Provider Directories in NY
Several health insurance companies agreed to improve the accuracy of the provider directories they post on their websites, according to the New York attorney generals office including:
- Empire Blue Cross & Blue Shield
- HIP of New York
- United HealthCare
- Oxford Health Plans
- Vytra Health Plans
As part of the settlement, the health insurers agreed to remove providers who no longer participate with the plans and correct listing errors for providers who are in the plans as part of a settlement over allegations that their online directories were inaccurate.
Attorney General Eric T. Schneiderman said the settlements also require insurers to implement new business practices for updating their online provider directories in a timely manner going forward, and to pay restitution to consumers who paid more than they should have because they went to providers their insurers erroneously listed as in-network.
This settlement follows an investigation that found inaccurate listings that wasted consumers’ time and delayed access to medical care by forcing consumers to find another physician after discovering — through a phone call or sometimes upon arriving at an appointment — that their physician was no longer participating in the plan.
Consumers also experienced delays in accessing medical care when participating doctors were listed with incorrect contact information, or when their doctors referred them to providers on the list who were no longer participating in the plan.
The insurers also agreed to pay a total of $60,000 to cover the cost of the attorney general’s investigation.
A similar agreement was reached with Aetna, CIGNA, GHI, and with Magnacare and Multiplan, in December 2010.
If you aren’t sure whether your doctor is participating in your health plan, or in a plan you are considering, please call Small Business Benefit Solutions, LLC. We can not only search for your doctor’s availability, but also suggest they best way to use your medical plan when accessing that doctor.
NY Regulators Will Make Insurers Crack Open Their Books During Surprise Audits
Thanks to a grant provided by the Obama Administration, the NY Department fo Financial Services will be analyzing the administration systems of insurance companies and health maintenance organizations for cost efficiency.
The department said it will conduct on-site audits of health insurers and HMOs selling health insurance plans regulated by the state reviewing selected rate requests that have already been filed.
The DFS will be looking specifically at:
- claims
- insurer administrative expenses
- premiums
- claims reserves
Insurers will not know beforehand whether they will be the subject of this audit.
“At a time when spiraling health insurance costs are an incredible burden for working people, it is essential that we ensure that rate requests are based on fair, accurate information that has not been manipulated,” said Benjamin M. Lawsky, superintendent of the DFS, in a statement. “These in-depth audits will allow us to drill down underneath the numbers to make sure they are accurate. For example, we can look at whether insurers are accurately allocating administrative costs and broker commissions.”
The audits are funded by a $4.4 million grant awarded by the U.S. Department of Health and Human Services (HHS) in September 2011 and funded by provisions of ObamaCare , issued specifically to enhance premium rate review, improve public access and lend more transparency to the processes used to establish health insurance premiums.
Under a new law, health insurers must submit their proposals to increase their premiums to the insurance department to be approved, reduced or rejected in 60 days.
For contracts which started on or after Jan. 1, health insurers increase requests averaged 12.7% for small business health insurance plans, but the NYDFS only granted average increases of 8.2%.
If you believe your rate increase is unfounded, please call Small Business Benefit Solutions, LLC for a free, no obligation review of your plan and your premiums.
