Health Saving Accounts vs. Flexible Saving Accounts

Health Savings Accounts - HSAs are tax-advantaged medical savings accounts available to taxpayers who are enrolled in an HSA-qualified high-deductible health plan. The funds contributed to the account are not subject to federal income tax at the time of deposit. Unused amounts in one year can be carried over to following years and added to subsequent contributions.

In order to qualify for an HSA, the policyholder must be enrolled in an HSA-qualified high deductible health plan, and must not be covered by other non-HDHP health insurance or Medicare, and cannot be claimed as a dependent on someone else’s tax return.

Flexible Spending Accounts - Also known as a flexible spending arrangement, is a tax-advantaged account that allows an employee to set aside a portion of earnings to pay for qualified medical expenses.

Unlike health savings accounts FSAs are more commonly offered with traditional medical plans.

Unlike health savings accounts, funds in the account that are unused when the plan year is over are lost and cannot be carried over to the following year.
The flex spending account allows you to contribute money to the FSA for costs not covered by insurance: deductibles, co-pays, and coinsurance. In addition, you can use your FSA to pay for health care costs that health insurance doesn’t cover.

Medical Accounts                        HSA                           FSA
Contribution Limit - 2013      Individual $3,250     Per Employee $2,500
                                              Family $6,450
Catch-up Contribution (55+)          $1,000                          None
Medical Plan                          HSA-Compatible              Plan Any
                                                   HDHP
Unused Amount                           Carry Over           Cannot Carry Over


Important notes:
Effective Jan. 1, 2011, expenses incurred for over-the-counter medicines, with the exception of insulin, will not be eligible for reimbursement under a health FSA, HRA or HSA without a prescription.

The penalty for using HSA funds for ineligible expenses is 20 percent of the HSA distribution.

W-2 Reporting for 2012 & 2013

As we move closer to the end of tax year 2012 and the beginning of 2013, you may have questions regarding whether or not your company must comply with the Affordable Care Act (ACA) requirement for reporting the cost of employer-provided health care coverage on their W-2 forms.

Legacy Benefits & Insurance Services' goal is to keep you updated on health reform concerns. Here is a summary of the current Internal Revenue Service (IRS) guidance regarding W-2 reporting:

IRS transitional relief provides that only employers issuing 250 or more W-2s are required to report the cost of employer-provided health care coverage on their W-2s for tax year 2012.

This information reported in box 12 of the W-2s is for informational purposes only.

This relief applies to future calendar years until the IRS publishes additional guidance. To date, the IRS has issued no additional guidance for 2013.

Any IRS guidance that expands the reporting requirements will apply only to calendar years that start at least six months after they issue the new guidance.

To save you valuable time we have gathered these helpful resources:

1. Link to IRS website information on W-2 Reporting of Employer-Sponsored Health Coverage
2. IRS Notice 2012-9: Interim Guidance on Informational Reporting to Employees of the Cost of Their Group Health Insurance Coverage
3. 2012 General Instructions for W-2 and W-3
4. Copy of 2012 W-2

 Information provide by the Word & Brown General Agency.

What you might not know about the PPACA

Yes, you have probably heard about the individual mandate – tax. And, you may know about Medicaid (MediCal) expansion, free birth control, and the exchanges.
Here are some of the lesser known effects of the law.

1) Domestic violence help - Health care reform brings attention to a subject that usually doesn’t get much. As of Aug. 1, 2012, the law requires that all insurance plans cover screening and counseling for domestic abuse, a provision found under preventive services for women’s health. (The other women’s health benefits are more widely known and include contraceptives and routine breast and pelvic exams, pap tests and prenatal care). The law also will prevent domestic violence from being considered a “preexisting condition.”

2) Fake tanners will pay - This really has been a hot-button issue, so to speak: Since July 1, 2010, Jersey Shore wannabes have had to pay a 10 percent tax every time they visit an indoor tanning service.

3) Smokers need not apply? - Under a provision of the law, smokers can be charged up to 50 percent more than nonsmokers for health insurance beginning in 2014. Regulations now allow companies to require workers who fail to meet specific standards to pay up to 20 percent of their insurance costs.

4) Breastfeeding support - The provision states employers shall provide reasonable, unpaid break time and a private, non-bathroom location for an employee to express breast milk for her nursing child for up to one year after the child’s birth. Employers with fewer than 50 employees are excluded if it would cause “undue hardship.”

5) Caloric reality - The law requires restaurants with 20 or more locations to list calorie counts on menus, menu boards and even drive-thrus. The entire nutrition label also would have to be available in writing upon request.

6) Mental health focus - PPACA mandates coverage parity, putting mental health treatment on par with medical care, which means deductibles; copayments and doctor visits can’t be more restrictive for mental illnesses than medical and surgical coverage.

7) A pricier pizza - Papa John’s CEO John Schnatter got national attention in August when he said that health reform will cause consumers to pay more for their pizza. He estimates that the law will cost 11 to 14 cents more per pizza, or 15 to 20 cents per order. That’s because under PPACA, the company will have to offer health care coverage to more of its 16,500 total employees or pay a penalty to the government. The National Restaurant Association said the law could adversely affect restaurants’ ability to maintain already slim profit margins because it requires companies of more than 50 employees to provide affordable health insurance.

8) Your FSA (Flexible Spending Account) - A popular consumer-driven health care tactic is also changing because of the PPACA. As of Jan. 1, 2011, flexible spending accounts may no longer be used to purchase over-the-counter drugs or medicines. But the most significant change to FSAs under the law will be the implementation of the $2,500 cap on health care FSA contributions beginning in 2013. Previously there was no cap.

The information in this blog was gathered from an October 1, 2012 on-line article in benefitspro.com. Click Here to review the complete article.

Interesting Numbers

Today I found a website that the Kaiser Family Foundation developed: www.StateHealthFacts.org.

Here are a few facts that I found interesting, you can decide what they mean:

                                                                        CA                   US

• Life Expectancy at Birth                         80.4                 78.6
• Overweight/Obese Children                   30.5%              31.6%
• Overweight/Obesity Adults                    61.6%              63.8%
• Cancer Incidence Rate per 100,000       436.7               462.1
• Smoking Among Adults by Sex   
• Male                                           15.0%               19.1%
• Female                                         9.2%               15.1%
• Violent Crime Rate per 100,000             440.6               403.6

Here is how CA rates compared to the other 50 states and the District of Columbia:

• Population below the Federal Poverty Level: 24% tied for 5th worst
• Unemployed (Aug 2012): 10.60% 3rd worst
• Annual Group Health Insurance Premium* (employee only) $5,255 32nd among states
• Annual Group Health Insurance Premium* (family) $15,837 43th among states

I was surprised by some of these facts and others I was not. The site has lots of data if you are interested. Happy researching.

* Total amount paid by both the employer and employee.

Are HSAs Good?

There have been many articles written about the growth of Health Saving Account compatible health plans and their value to consumers.

I have many clients that have found these plans valuable. The reason, in many cases they are cost effective for the purchaser of the plan and can provide a tax shelter for medical expenses.

One thing that is often not mention when discussing the benefits of the HSA compatible plan is that since the policyholder has a high deductible and has to pay the first dollar expenses, you can create a more informed consumer.

The articles state three things often happen when using a HSA compatible plan: the communication between the doctor and patient increases resulting in less unnecessary tests, the consumer brings to understand the true cost of medical services, and consumers will often shop for services.

One of the problems with our medical system today is that the patient normally does not understand the costs of services and therefore uses the most expensive service available. For example, when I was a baby, if a baby starts crying, parents first though was that the baby was teething and would rub a little whiskey on their gums, this would often solve the problem. Today, we have trained the parents to run down to the ER. So instead of a solution that costs a few cents, we use the most expenses door in the healthcare system and the cost is hundreds of dollars.

So if HSA compatible plans can make us smarter consumers, then we should promote them and the concept of understanding the true cost of services. If we all spent the time to learn more how to reduce the cost of services, then cost health insurance will also go down.