GBAC Client Seminar - March 6, 2007

FSAs, HRAs and HSAs - The Role of Consumerism in Healthcare Today


Group Benefit Administrators of Connecticut will be hosting a seminar for clients, colleagues and associates on Tuesday, March 6th, 2007 at The Omni Hotel on Temple Street in New Haven, CT in the Temple Room from 8:00am to 10:00am.
The speaker will be Melanie Testa, Director of Sales for Progressive Benefit Solutions LLC. Registration is from 8:00am to 8:30am; parking under The Omni Hotel will be paid for by GBAC and a buffet breakfast will be served. Seats are reserved on a first-come, first-serve basis, so please contact Charlotte or Danielle with your RSVP.
Thank you.

HSAs Simplified........please see attached analysis

HSA Fact Sheet (1-2007)

Dec. 20, 2006 - President Bush signs New HSA Legislation in favor of Consumers.....

Washington, DC- President George W. Bush signed the Health Opportunity Patient Empowerment Act of 2006 today, enhancing Americans' access to tax-advantaged health care savings. The law, part of the Tax Relief and Health Care Act of 2006, provides new opportunities for health savings account (HSA) participants' to build their funds.

"Health savings accounts are improving the way Americans obtain the care they need. This bill makes HSAs more flexible and makes it easier for participants to put money aside for their personal health care," said Treasury Assistant Secretary for Tax Policy Eric Solomon.
HSA provisions of the Act include:

Allow rollovers from health FSAs and HRAs into HSAs through 2011. Employers can transfer funds from Flexible Spending Arrangements (FSAs) or Health Reimbursement Arrangements (HRAs) to an HSA for employees switching to coverage under an HSA-compatible health plan. The amounts rolled over to HSAs from FSAs or HRAs are over and above the amounts allowed as annual contributions. The maximum contribution is the balance in the FSA or HRA as of September 21, 2006, or if less, the balance as of the date of the transfer. The provision is limited to one distribution with respect to each health FSA or HRA of the individual. If an individual does not remain an eligible individual for the 12 months following the month of the contribution, the transferred amount is included in income and subject to a 10 percent additional tax.

Increase in annual HSA contribution. Previously, the maximum HSA contribution was the lesser of the deductible of the individual's HSA-eligible plan or a statutory maximum. The new rules make the limit the statutory maximum contribution, regardless of the individual's deductible. For 2007, the maximum contribution for an eligible individual with self-only coverage is $2,850, and the maximum contribution for an eligible individual with family coverage is $5,650. These limits are indexed for inflation.

Full HSA contribution regardless of month individual becomes eligible. Normally, the HSA contribution is pro rated based on the number of months that an individual during the year a person was an eligible individual. The new provisions provide an exception to this rule that will allow individuals who become covered under an HSA-eligible plan in a month other than January to make the maximum HSA contribution for the year based on their coverage in the last month of the year. This eliminates a common barrier to switching to HSA-eligible coverage. If an individual does not stay in the HSA-eligible plan 12 months following the last month of the year of the first year of eligibility, the amount which could not have been contributed except for this provision will be included in income and subject to a 10 percent additional tax.

One-time transfer from IRAs to HSAs. The new rules allow for a one-time contribution to an HSA of amounts distributed from an Individual Retirement Arrangement (IRA). The contribution must be made in a direct trustee-to-trustee transfer. The IRA transfer will not be included in income or subject to the early withdrawal additional tax. The transfer is limited to the maximum HSA contribution for the year, and the amount contributed is not allowed as a deduction. Generally, only one transfer may be made during the lifetime of an individual. If an individual electing the one-time transfer does not remain an eligible individual for the 12 months following the month of the contribution, the transferred amount is included in income and subject to a 10 percent additional tax.

Certain FSA coverage treated as disregarded coverage. Under previous law, if an FSA had a grace period following the end of the plan year allowing participants to incur additional reimbursable expenses, participants were treated as having disqualifying coverage, reducing their HSA contribution for that year, even though they had switched to HSA-eligible coverage at the first of the year. The new rules treat certain FSA coverage during a grace period as disregarded coverage, eliminating any resulting reduction in the HSA contribution for the year. First, the coverage is disregarded if the balance in the health FSA at the end of the plan year is zero. Second, the coverage is disregarded if the year-end balance is transferred directly to an HSA fom the FSA, as noted above.

Earlier indexing of cost of living adjustments. Previously, indexing was based on a 12-month period ending on August 31. The new rules change the base period to the 12-month period ending on March 31 and require that adjusted amounts for a year be published by June 1 of the preceding year. This change will provide employers and health plans with more time to design qualifying HSA-eligible plans and individuals with more time to make decisions about their health care for the next year.

Allow greater employer contributions for lower-paid employees. Previously, employer contributions under the comparability rules had to be the same amount or percentage of the deductible for all employees with the same category of coverage. Consequently, employers could not contribute higher amounts to lower-paid employees. The new rules provide an exception to the comparability rules allowing employers to contribute more to the HSAs of non-highly compensated individuals. For this purpose, the definition of "highly compensated employee" is based on same definition used for qualified retirement plans.

GBAC Introduces Human Resource Consulting Services

GBAC is proud to announce the establishment of a Human Resource Consulting Department as an addition to its already extensive menu of service and offerings. GBAC has developed a solid reputation over the years for delivering prompt, professional service in the employee benefits arena. "The expansion into Human Resource Consulting "rounds out" the additional needs of our clients and the marketplace..." stated Joseph A. Bucci Jr. CFO for GBAC. Leading the charge will be Christy Bernard, who brings with her many years of human resource management and education. "I am excited to be part of a new venutre with a professional services firm that has an untarnished reputation in the marketplace..." Christy stated upon accepting the position with GBAC. Over the last 34 years Michael P. Coppola, President and CEO of GBAC has seen many changes to the employee benefits arena. Mr. Coppola stated, "that over the last few years the rapidly changing market requires diversification of our products and services. I am pleased we have such a talented group of professionals to meet such demands."

Ways & Means Committee approves HSA HOPE Act of 2006

The House Ways and Means Committee approved this afternoon a bill to improve Health Savings Accounts. The action follows a hearing the committee had in late June (see ECFC Bulletin 2006-12). A summary of the measure, a substitute version of H.R. 6134, offered by committee chairman Bill Thomas (R-CA) for the original bill sponsored by Rep. Eric Cantor (R-VA) can be reviewed at http://gbac.com/Editor/assets/HSA

The committee approved the bill with all Republicans supporting it and all Democrats opposed.

The future of the measure in this Congress is up in the air. Congress is scheduled to recess at the end of this week. It will return for a short post-election session in November. In the Senate, the Senate Finance Health Subcommittee conducted a hearing yesterday on a similar bill, S. 3585, sponsored by Sen. Orrin Hatch, (R-UT). However, there are no current plans in the Senate for action on that measure. Nonetheless, it seems certain that today's approval of an HSA bill by the House Ways and Means Committee will spur further action on consumer-direction health issues in the next Congress, which convenes in January.

In-Network High Cost Radiology Services - Public Act 06-180 - Effective October 1, 2006

Public Act 06-180 Signed into law on June 7, 2006, Public Act 06-180 was signed into law, establishing copayment maximums and an annual maximum on in-network high cost radiology services. The mandate states that effective October 1, 2006:

• All health insurance policies will have a copayment of not greater than $75 per service for in-network magnetic resonance imaging (MRI) or computed axial tomography (CAT), to a maximum of $375
• All health insurance policies will have a copayment of not greater than $100 per service for in-network positron emission tomography (PET), to a maximum of $400.

Effective October 1, we will implement this benefit as follows:

• All fully insured policies that have a copayment of greater than $75 will be moved to $75 with a $375 maximum on all high cost radiology services (MRI, MRA, CAT, CTA, PET and SPECT)
• Fully insured polices that have a copayment greater than $0 but less than $75 will remain the same, with an annual maximum of $375
• Fully insured polices that have a copayment of $0 will remain the same
  Self-insured polices will remain unchanged
• This applies to group and individual plans but does not apply to health savings account (HSA) plans, per the mandate
• This does not apply to Access 10 plans or coinsurance plans such as Comprehensive

Health Savings Accounts (HSA) -

On July 12, 2006, Lewis Freeman, President of the Employers Council on Flexible Compensation submitted a Statement on Health Savings Accounts to the committee on Ways and Means, U.S. House of Representatives. This statement provides an overview of proposed changes to Health Savings Accounts to help improve the efficiency of health care and particpation by providers and consumers. A complete copy of the submitted Statement is available at www.ecfc.org