You may be fielding questions from clients about how the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act, signed by President Obama in March, will affect their benefit plans this year and beyond.
Following is a summary of the laws’ impacts on account-based benefit plans. If you have other questions, please call or email your OptumHealth Financial Services representative, or contact us.
Over-the-counter medications
Beginning Jan. 1, 2011, consumers may not pay for over-the-counter (“OTC”) medicines, such as pain relievers and cold and flu medicine, from tax-advantaged health accounts unless prescribed. Consumers will still be able to use tax-advantaged health accounts to pay for insulin.
The types of accounts affected by the OTC restriction are: health savings, health reimbursement, health care flexible spending, retiree reimbursement and funded health reimbursement (HSAs, HRAs, health care FSAs, RRAs and FHRAs, respectively).
The U.S. Department of Health and Human Services (HHS) is expected to issue guidance regarding the appropriate use of prescriptions for OTC medicine and how to implement the new rules. We will update you as we learn more.
FSA caps start in 2013
Starting Jan. 1, 2013, health care FSA contributions will be limited to a maximum of $2,500. The limit will be adjusted according to the consumer price index (CPI) starting in 2014.
The cap is, however, below the national average for employee health care FSA contributions, which was $1,424 in 2009, according to Mercer’s National Survey of Employer-Sponsored Health Plans.
There are no changes in FSA contribution limits in 2011 or 2012.
HSA penalty increases
The penalty for nonqualified distributions from HSAs increases from 10 percent to 20 percent on Jan. 1, 2011.
Coverage of adult children
Employers may now – but are not required to – allow health care FSA, HRA, FHRA and RRA plans to reimburse eligible expenses of adult children who have not turned 27 as of the end of the calendar year. In other words, the plans may reimburse health care expenses of an adult child through the end of the year in which that child turns 26.
Separately, there is the new coverage mandate for group health plans that requires coverage of adult children through age 26. The premium payments for this new mandated coverage may be run through a cafeteria plan. Employers may need to update the eligibility rules in their plan document to comply with the new law.
High-deductible health plans (HDHPs) that accompany HSAs may now – but are not required to until January 1, 2011 (for calendar year plans) – cover adult children who have not turned 27 as of the end of the calendar year. The tax laws regarding HSAs have not changed, though, and an adult child must still be considered a tax dependent in order for the adult child’s medical expenses to qualify as HSA-qualified expenses.
