2012 HSA and FSA Information

What are they?
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.

What’s new for 2012?
HSA contribution limits and HDHP out-of-pocket maximums will increase slightly, while the HDHP minimum required deductibles remain unchanged.

HSA Contribution Limits:
• Individual (self-only HDHP): $3,100 ($50 increase from 2011)
• Family: $6,250 ($100 increase from 2011)

Limits for catch-up contributions (for persons over age 55): $1,000 (unchanged from 2011)

HDHP Minimum Required Deductibles:
• Self-only: $1,200
• Family: $2,400

HDHP Out-of-Pocket Maximum:
• Self-only: $6,050 (a $100 increase from 2011)
• Family: $12,100 (a $200 increase from 2011)

What changed in 2011?

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 increased from 10 percent to 20 percent.

Flexible Spending Accounts

What are they?

• Also known as a flexible spending arrangement, a flexible spending account 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 or health reimbursement 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.

• Paper forms or a debit card may be used to access account funds.

• The flex spending account allows you to contribute money to the FSA for costs not covered by insurance: deductibles, copays, and coinsurance. In addition, you can use your FSA to pay for health care costs that health insurance doesn’t cover.

What’s new for 2012?

Contribution limits

2012 is the last year that there are no limits. Although there is no limit as mandated by law, the plan must prescribe either a maximum dollar amount or maximum percentage of compensation that can be contributed to the FSA.

What changed in 2011?

Beginning in 2011, FSA funds cannot be used for over-the-counter medicines unless specifically prescribed by a doctor.

What to expect for 2013:

FSA contributions will be limited to $2,500 each year with annual inflation increases

Employees value benefits more than ever

Benefits matter more than ever to employees. The third annual study of employees’ views by Unum toward their benefits and enrollment was conducted online in December following the 2010 benefits enrollment period among more than 1,700 working adults. The research finds the perceived importance of many employee benefits notably increased from 2008 to 2010 across all age groups.

“This economic environment has caused employees to take a hard look at how to protect their income and savings from not only another recession, but from personal hardship, as well,” says Bill Dalicandro, vice president at Unum. “Employees are recognizing the important role financial protection benefits in particular can play in protecting their financial stability.”

When employees were asked to rate benefits in terms of their importance, regardless of whether or not they were available through their employer, financial protection benefits saw some of the highest gains.

* On a scale of importance from 1 (not at all important) to 10 (extremely important), 53% of employees rated long-term disability insurance an 8 or higher, a seven-point increase from 2008.

* Half of employees rated short-term disability insurance an 8 or higher, up from 45% in 2008.

* Fifty percent of employees gave an 8 or higher rating to accidental injury coverage, a 10-point increase from 2008.

Further, the study finds employees age 45 and older consider long-term disability more important than life insurance as a benefit. “This is an encouraging trend because research shows that employees are far more likely to become disabled than die,” Dalicandro says. “So while life insurance is still very important to have, employees are also recognizing the need to protect their paychecks should they become disabled during their working years.”

But although employees rate the importance of benefits higher, participation has remained relatively constant since 2008 across benefits. Unum’s research also shows employees have had less access to printed benefits education materials and in-person benefits education since 2008, and that some employees are not provided enough time to make informed choices.

“Employees clearly value these benefits, particularly in a struggling economy,” Dalicandro says. “Ensuring that they understand their options and feel comfortable making benefits decisions helps them choose the coverage they need and want.”

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Employers focus more on dental plans when seen in larger health promotion context

Employers understand that improving employee health is not only highly desirable in itself, but also the most effective long-term solution to the high and rising cost of health benefits. A fact unknown to many employers, however, is that a strong, prevention-oriented dental benefit can play a critical role in promoting employee health.

Focus on health habits

Fresh evidence of employers' priorities came in this year's Aon Hewitt Healthcare Survey of Employers: Nearly 69% of employers said they want to "improve health habits" of their employees, while less than half picked achieving a "lower medical cost trend" in a list of top priorities. "Yet what many employers don't realize," according to Swanker, "is the close connection between oral health and overall health, not to mention the workplace impact of dental illness."

According to the National Center for Health Statistics, in one year, dental illness causes more than 160 million lost work hours (not to mention another 51 million lost school hours for students) for treatment. "This is a staggering cost to business," Swanker says.

Those statistics do not even reflect the fact that poor dental health (including periodontal disease) is commonly linked to a host of major medical conditions including diabetes, cardiovascular and respiratory disease, cancers, stroke and complications from pregnancy. These are some of the biggest drivers of health plan costs.

Window on diseases

Dentists can detect many disease symptoms through the mouth in many cases, catching it before it worsens, during the window when it is more treatable.

The health care costs of patients with severe periodontal disease are 21% higher than those without, citing a 2007 study reported in the Journal of Periodontology.

Some additional statistics that may seize employers' attention when discussing the importance of dental benefits:

• Diabetics who have regular periodontal services can lower their overall medical and pharmacy costs by more than 10%, and their diabetes-related costs by up to 19%;¹
• Periodontal treatment reduces the medical costs of patients with coronary artery disease and cerebrovascular disease by 16% and 11%, respectively;²
• Patients who ignore regular dental care have a higher chance of visiting hospital emergency departments.³

Dental wellness

Employers who see that a well-designed dental benefit plan with preventive care features can be an integral component of a wellness strategy can distinguish themselves from other employer groups. Providing comprehensive employee education on the importance of oral health may be a perfect fit, and fill an important gap, within an employer's wellness program.

Motivating employee action

Even when employers fully grasp the importance of dental health in the larger medical and health promotion context, some may question what it will take for employees to take full advantage of a dental plan that includes preventive benefit elements. While employers may pay greater attention to plan design when the benefit is employer-paid, many are also interested even when dental is offered on a voluntary basis when they see the benefit's potential to have a big impact on employee health.

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Illinois Health Exchange

The Illinois Department of Insurance has been awarded a $5.1 million federal grant to develop and maintain a health insurance exchange where consumers can shop for coverage.

The nation's new health care law requires the exchanges to be running in states by 2014

Insurance exchanges will allow people and small businesses to comparison shop online for insurance.

The grant will help Illinois design the data infrastructure. It will go toward hiring staff to plan and coordinate with consultants to create the design features.

Gov. Pat Quinn said in a statement released Tuesday that the grant will help create a good exchange and develop tools to make it easy to use.

Illinois State Legislation Update – Recently Enacted Laws During its recently concluded legislative session, the Illinois General Assembly passed a va

Public Act 97-0091 (House Bill 1191) – Routine Care in Clinical Cancer Trials
Signed into law on July 11, this new law prevents a group accident and health insurance policy from excluding routine patient care administered to an insured participating in a qualified cancer trial if the policy covers that same routine patient care for an insured not participating in a qualified cancer trial. It further requires no difference in out-of-pocket liability between an insured in a trial versus one not in a trial. This law is effective Jan. 1, 2012.

Public Act 97-0142 (Senate Bill 1555) – Illinois Health Benefits Exchange Law / State Employees HSA Law
Also effective as of July 14, this law requires Illinois to establish a Health Insurance Exchange program that consists of a marketplace where individuals and businesses can purchase subsidized health care plans. The law includes the creation of a Legislative Study Committee to study and report on the implementation needs to establish the exchange. To ensure balance, six of the 12 appointed members will come from the Illinois House of Representatives and six members from the Illinois Senate. The committee is required to report on the governance of the program by Sept. 30.

This law does not create the actual health insurance exchange; it simply provides guidelines as to how the exchange will be set-up at the legislative level.

In addition, PA 97-0142 includes the creation of a health savings account (HSA) for employees of Illinois state agencies and departments. Beginning in taxable year 2011, each employer shall make available to each eligible individual a HSA program and deposit $2,750 annually into each individual’s account. The law provides that funds can only be used for:

1. the purpose of paying qualified medical expenses of the eligible individual or his or her dependents,
   
2. to purchase a health coverage policy, certificate, or contract, or
   
3. to pay for health insurance other than a Medicare supplemental policy for those who are Medicare eligible.

This law also repeals the Health Care Justice Act.

Public Act 97-0198 (House Bill 1825) – Oral Cancer Drug Parity
Signed by Governor Quinn on July 27, this law requires that health insurance plans that provide coverage for cancer medications cannot have more restrictive treatment limitations or more restrictive financial requirements for oral cancer medications than intravenous and injected cancer medications. However, the law does not mandate coverage for cancer medications.

Public Act 97-0281 (House Bill 2249) – A1C Diabetes Self-Management Training and Education
Signed on Aug. 9, this law requires a group policy of accident and health insurance that is amended, delivered, issued or renewed after the law’s Jan. 1, 2012, effective date to provide coverage for outpatient self-management training and education, equipment and supplies. Further, the law defines “diabetes self-management training” as instruction in an outpatient setting which enables a diabetic patient to understand the diabetic management process and daily management of diabetic therapy as a means of avoiding frequent hospitalization and complications. This is specifically designed to help diabetics maintain their A1C levels within the normal range.

Public Act 97-0282 (House Bill 3039) – Heart Disease Prevention Notification
This law requires insurers to provide annual information regarding the importance and value of early detection and proactive management for cardiovascular disease. It was effective immediately upon the governor’s signature on Aug. 9. However, doctors have up to 60 days to update their information.

Top Ten Reasons for using Dental Insurance

1. To Prevent Oral Cancer--According to The Oral Cancer Foundation, someone dies from oral cancer, every hour of every day in the United States alone. When you have your dental cleaning, your dentist is also screening you for oral cancer, which is highly curable if diagnosed early.

2. To Prevent Gum Disease—Gum disease is an infection in the gum tissues and bone that keep your teeth in place and is one of the leading causes of adult tooth loss. If diagnosed early, it can be treated and reversed. If treatment is not received, a more serious and advanced stage of gum disease may follow. Regular dental cleanings and check ups, flossing daily and brushing twice a day are key factors in preventing gum disease.

3. To Maintain Overall Good Physical Health—Recent studies have linked heart attacks and strokes to gum disease, resulting from poor oral hygiene. A dental cleaning every six months helps to keep your teeth and gums healthy and could possibly reduce your risk of heart disease and strokes.

4. To Keep your Teeth—Since gum disease is one of the leading causes of tooth loss in adults, regular dental check-ups and cleanings, brushing and flossing are vital to keeping as many teeth as you can. Keeping your teeth means better chewing function and ultimately, better health.

5. To Detect Dental Problems Early—Your dentist and hygienist will be able to detect any early signs of problems with your teeth or gums. Early detection of cavities, broken fillings and gum disease are easily treatable. If these problems go untreated, root canals, gum surgery and removal of teeth could become the only treatment options available.

6. To Maintain Good Oral Health—Your dental hygienist will help to ensure that you are maintaining your good oral health by visual examination and comparing your previous dental check-ups. If you are falling off track with your oral hygiene, your hygienist will help put you back on the right path.

7. To Use Your Dental Plan—Dental insurance plans usually pay for all or most of the cost of dental cleanings and check-ups every six months. Take advantage of this and save a lot of money in the long run by avoiding costly dental procedures that can result from poor oral hygiene. If you can’t afford insurance, get a discount dental plan for a few dollars a month, and you will pay a vastly reduced cost for the procedures. Even if the cleaning isn’t free, it’s cheap with a discount plan. It is more expensive later on if you don’t take care of these preventive items up front.

8. To Create a Plan for Treatment—If your dentist diagnoses any problems in your mouth, he will most likely give you a treatment plan. This treatment plan should have the cost of each procedure that you will need, so that you can discuss financial arrangements with the front office.

9. To Have a White, Bright Smile—Your dental hygienist can remove most tobacco, coffee and tea stains. During your cleaning, your hygienist will also polish your teeth to a beautiful shine.

COBRA subsidies finally at an end?

Remember those pesky COBRA subsidies? The federal COBRA subsidy, originally introduced in March of 2009, provided that 65% of the cost of COBRA health insurance premiums would be covered by the employer for up to 15 months. To be subsidy eligible, recipients must have originally become eligible for COBRA as the result of an involuntary termination of employment occurring between September 2008 and May 2010.

Well, it is possible that they are coming to an end. The last group eligible recipients (those who began receiving assistance in May 2010) would cease to be subsidy eligible as of August 31, 2011. That means that if you still have former employees receiving subsidies for COBRA coverage, that should end as of next month. Also, there is presently no action from Congress pending to extend the subsidy further.

Although there is no specific notice requirement, we recommend that if you have COBRA participants that are still receiving the subsidy, you provide them with some notice that their subsidy eligibility is coming to an end. Consider a simple notice that the subsidy period has expired and that they are now responsible for 100% of the COBRA premiums if they want to continue coverage.

fromm Employee Benefit News