Under the Affordable Care Act, beginning January 1, 2013, annual contributions made to a health flexible spending account (FSA) will be limited to $2,500 (this amount will be adjusted for inflation in subsequent years). Plan sponsors should begin working with their third-party administrators to update cafeteria plan documents and summary plan descriptions (SPDs) to reflect this limit, and should begin preparing to communicate the changes to their employees.
Although regulations have yet to be issued on this provision, there are some things that are important to note: the $2,500 limit only applies to salary reduction contributions (and not employer contributions) and the requirement does not apply to
dependent care FSA (which have a statutory cap of $5,000 in a calendar year) or health reimbursement arrangements (HRAs).
Most calendar year plans will change their health FSA effective January 1, 2013, however, for non-calendar year health FSA,it may be a little more complex. The $2,500limit is tracked on a calendar year basis, so non-calendar year plans will need to
ensure their employees’ health FSA contributions will not exceed $2,500 for the 2013 calendar year. It may be a good idea for plan sponsors of non-calendar year plans to consider adjusting the health FSA contribution limit to reflect a $2,500 limit
beginning in 2012.
As information develops, we will continue to keep you updated.
Information provided by Emerson, Reid and Co.
Tuesday, January 31, 2012
Tuesday, January 24, 2012
First Quarter Updates
I hope you find our first quarter blog that summarizes updates in the insurance industry useful. I remain committed to keeping you up to date with the newest developments in health insurance reform and policy changes of individual carriers. I will also continue to bring information to you throughout the year about issues relating to life, health (including Medicare Supplement plans), disability and long term care insurance.
Each year the government announces adjustments for inflation, tax brackets, exemptions, thresholds and other items. This e-mail will highlight the 2012 allowances as it relates to health insurance and long term care insurance. Some provisions, already in effect, are reviewed for informational purposes. In addition, policy changes for Empire will also be described.
Information in this blog is sorted as follows:
1. Refunds due to New York Medical Loss Ratio Rules
2. 2012 Contribution Limits for Health Savings Accounts (HSAs)
3. Other changes for HSAs
4. 2012 Medicare D Prescription Plan Information (with an explanation of the donut hole)
5. 2012 Long-Term Care Premium Deductibility Limits for 2012
6. Updates under the Affordable Care Act
7. Empire Blue Cross Blue Shield Policy Change
I welcome any feedback and am available to answer any of your questions or concerns.
Robert S. Israel, CLU
Long Island Planning Group, Ltd.
Risrael@optonline.net
1. Refunds due to New York Medical Loss Ratio Rules
Under New York State law, insurers are required to spend 82 cents of every dollar collected in premiums on providing medical care. If the amount spent on care, known as a "medical loss ratio" or "MLR," is less than the 82 percent requirement, insurers are required to refund the difference to policyholders. On a Federal level, the Department of Health and Human Services issued rules that it will require 80% (small groups) and 85% (large groups) of premium dollars to be spent on clinical care.
The New York State Department of Insurance website disclosed that Insurers required to make refunds include Aetna, Empire, GHI, Health Net of NY, HIP Health Plan of Greater NY, MVP Health Plan and Oxford Health Insurance. Group health insurance policyholders have already begun to receive these refunds. Note that these refunds are due as a result of the New York Insurance Laws and are not part of the MLR rebate required under federal health care reform. (http://www.governor.ny.gov/press/110911health)
2. 2012 Contribution Limits for Health Savings Accounts (HSAs)
The IRS has issued the 2012 contribution limits for Health Savings Accounts: $3,100 for single plans and $6,250 for family plans. The 2011 limits were $3,050 for single plans and $6,150 for family plans. For participants ages 55 and up, catch up provisions are $1,000, allowing a $4,100 contribution. Employer and/or the employee pretax contributions can be made to these accounts. Withdrawals of funds for qualified medical expenses, including Long Term Care Insurance premiums, are tax free. Workers 65 and older can use the HSA accounts but cannot make contributions to the HSA account. Unlike other plans such as Section 125 Cafeteria plans and Flexible Spending Accounts (FSAs), unused money in HSA accounts can be carried over into future years. Note that a "high deductible" health plan is required to qualify to make an HSA contribution.
3. Other changes for HSAs
For 2012, HSA plans must have a "high deductible" health plan with an annual deductible of at least $1,200 for single plans and $2,400 for family coverage; these are the same as the 2011 amounts. Annual out-of-pocket expenses (besides premiums) cannot exceed $6,050 for single coverage and $12,100 for family coverage; the 2011 amounts were $5,950 for single coverage and $11,900 for family coverage.
4. 2012 Medicare D Prescription Plan Information
Medicare D prescription plans provide prescription coverage for Medicare enrollees. A deductible of $310 in 2011 rising to $320 in 2012 is usually followed by co-insurance (75%) or co-pays. Once a subscriber reaches the coverage limit $2,930 in 2012 (up from $2,840) the plan enters a coverage gap or donut hole. Coverage resumes with 95% of formulary drugs covered after a $4,700 maximum cost. Plans may be more generous than this, but must be equal to or better to be considered "creditable."
As required in the Medicare Prescription Drug, Improvement and Modernization Act of 2003, beginning in 2007 the Part B premium that a beneficiary pays each month is based on his or her modified adjusted gross income.
For Beneficiaries who file an individual tax return with income of $85,000 or less and for Beneficiaries who file a Joint tax return with income of $170,000 or less, the 2012 Part B Monthly Premium will be $99.90.
For Beneficiaries who file an individual tax return with income of $85,001 - $107,000 and for Beneficiaries who file a Joint tax return with income of $170,001 - $214,000, the 2012 Part B Monthly Premium will be $139.90.
For Beneficiaries who file an individual tax return with income of $107,001 - $160,000 and for Beneficiaries who file a Joint tax return with income of $214,001 - $320,000, the 2012 Part B Monthly Premium will be $199.80.
For Beneficiaries who file an individual tax return with income of $160,001 - $214,000 and for Beneficiaries who file a Joint tax return with income of $320,001 - $428,000, the 2012 Part B Monthly Premium will be $259.70.
For Beneficiaries who file an individual tax return with income above $214,000 and for Beneficiaries who file a Joint tax return with income above $428,000, the 2012 Part B Monthly Premium will be $319.70.
Note that Medicare D prescription cards may carry a higher charge for high income beneficiaries as well.
(https://questions.medicare.gov/app/answers/detail/a_id/2310/~/2012-part-b-premium-amounts-for-persons-with-higher-income-levels)
5. 2012 Long-Term Care Premium Deductibility Limits for 2012
The IRS is increasing the Long-Term Care Premium Deductibility Limits for 2012. Premiums for "qualified" long-term care insurance policies are tax deductible to the extent that they, along with other unreimbursed medical expenses (including Medicare premiums), exceed 7.5 percent of the insured's adjusted gross income. Business owners, self-employed, S Corp. owners as well as LLC and LLP members can take deductions for allowable premiums. The 2012 deductible limits under Section 213(d)(10) for eligible long-term care premiums includable in the term 'medical care' are based on attained age of the insured before the close of the taxable year. Any premium amounts for the year above these limits are not considered to be a medical expense. C Corps, paying long-term care insurance premiums, can take the deduction for the entire premium. They are not limited by the chart below. Since long-term care insurance is not an ERISA Benefit, discrimination rules do not apply.
2012 Deductible Limits Based on Age
40 or less: $350
More than 40 but not more than 50: $660
More than 50 but not more than 60: $1,310
More than 60 but not more than 70: $3,500
More than 70: $4,370
Please note that New York State offers a 20% tax credit for LTCI premiums. The per-diem limitation under 7702B(d)(4) is $310. This applies to policies that offer indemnity rather than reimbursement benefits.
(http://www.aaltci.org/long-term-care-insurance/learning-center/tax-for-business.php)
6. Updates under the Affordable Care Act
The Affordable Care Act originally required employers to report the cost of coverage under an employer-sponsored group health plan. Notice 2010-69, issued last Fall, made this requirement optional for all employers in 2011. IRS Notice 2011-28 provided further relief for smaller employers filing fewer than 250 W-2 forms by making the reporting requirement optional for them at least for 2012 and continuing this optional treatment for smaller employers until further guidance is issued. This reporting is for informational purposes. The amount reported does not affect tax liability, as the value of the employer contribution to health coverage continues to be excludible from an employee's income, and it is not taxable.
Beginning in 2010, group health plans must provide coverage for preventative care without any cost-sharing requirements. Preventative care services include yearly preventative medicine visits and standard immunizations recommended by the American Committee on Immunization Practices. Members at an appropriate age or risk status are entitled to screening for colorectal cancer, sexually transmitted diseases and HIV, counseling in a primary care setting for alcohol or substance abuse, tobacco use, obesity, diet and nutrition as well as for high blood pressure, diabetes and depression.
(http://www.irs.gov/newsroom/article/0,,id=237894,00.html)
7. Empire Blue Cross Blue Shield Policy Change
Empire intends to phase out many of its small group products on groups' renewal dates starting with groups renewing on April 1, 2012. Groups renewing during the first quarter will have the ability to renew their plans with prescription changes and rate increases. Empire's previously stated policy was to "simplify" its available plans for all groups on April 1, 2012 regardless of groups' renewal dates. Note that a group that fails to recredential or prove eligibility can be terminated with 30 days notice.
Each year the government announces adjustments for inflation, tax brackets, exemptions, thresholds and other items. This e-mail will highlight the 2012 allowances as it relates to health insurance and long term care insurance. Some provisions, already in effect, are reviewed for informational purposes. In addition, policy changes for Empire will also be described.
Information in this blog is sorted as follows:
1. Refunds due to New York Medical Loss Ratio Rules
2. 2012 Contribution Limits for Health Savings Accounts (HSAs)
3. Other changes for HSAs
4. 2012 Medicare D Prescription Plan Information (with an explanation of the donut hole)
5. 2012 Long-Term Care Premium Deductibility Limits for 2012
6. Updates under the Affordable Care Act
7. Empire Blue Cross Blue Shield Policy Change
I welcome any feedback and am available to answer any of your questions or concerns.
Robert S. Israel, CLU
Long Island Planning Group, Ltd.
Risrael@optonline.net
1. Refunds due to New York Medical Loss Ratio Rules
Under New York State law, insurers are required to spend 82 cents of every dollar collected in premiums on providing medical care. If the amount spent on care, known as a "medical loss ratio" or "MLR," is less than the 82 percent requirement, insurers are required to refund the difference to policyholders. On a Federal level, the Department of Health and Human Services issued rules that it will require 80% (small groups) and 85% (large groups) of premium dollars to be spent on clinical care.
The New York State Department of Insurance website disclosed that Insurers required to make refunds include Aetna, Empire, GHI, Health Net of NY, HIP Health Plan of Greater NY, MVP Health Plan and Oxford Health Insurance. Group health insurance policyholders have already begun to receive these refunds. Note that these refunds are due as a result of the New York Insurance Laws and are not part of the MLR rebate required under federal health care reform. (http://www.governor.ny.gov/press/110911health)
2. 2012 Contribution Limits for Health Savings Accounts (HSAs)
The IRS has issued the 2012 contribution limits for Health Savings Accounts: $3,100 for single plans and $6,250 for family plans. The 2011 limits were $3,050 for single plans and $6,150 for family plans. For participants ages 55 and up, catch up provisions are $1,000, allowing a $4,100 contribution. Employer and/or the employee pretax contributions can be made to these accounts. Withdrawals of funds for qualified medical expenses, including Long Term Care Insurance premiums, are tax free. Workers 65 and older can use the HSA accounts but cannot make contributions to the HSA account. Unlike other plans such as Section 125 Cafeteria plans and Flexible Spending Accounts (FSAs), unused money in HSA accounts can be carried over into future years. Note that a "high deductible" health plan is required to qualify to make an HSA contribution.
3. Other changes for HSAs
For 2012, HSA plans must have a "high deductible" health plan with an annual deductible of at least $1,200 for single plans and $2,400 for family coverage; these are the same as the 2011 amounts. Annual out-of-pocket expenses (besides premiums) cannot exceed $6,050 for single coverage and $12,100 for family coverage; the 2011 amounts were $5,950 for single coverage and $11,900 for family coverage.
4. 2012 Medicare D Prescription Plan Information
Medicare D prescription plans provide prescription coverage for Medicare enrollees. A deductible of $310 in 2011 rising to $320 in 2012 is usually followed by co-insurance (75%) or co-pays. Once a subscriber reaches the coverage limit $2,930 in 2012 (up from $2,840) the plan enters a coverage gap or donut hole. Coverage resumes with 95% of formulary drugs covered after a $4,700 maximum cost. Plans may be more generous than this, but must be equal to or better to be considered "creditable."
As required in the Medicare Prescription Drug, Improvement and Modernization Act of 2003, beginning in 2007 the Part B premium that a beneficiary pays each month is based on his or her modified adjusted gross income.
For Beneficiaries who file an individual tax return with income of $85,000 or less and for Beneficiaries who file a Joint tax return with income of $170,000 or less, the 2012 Part B Monthly Premium will be $99.90.
For Beneficiaries who file an individual tax return with income of $85,001 - $107,000 and for Beneficiaries who file a Joint tax return with income of $170,001 - $214,000, the 2012 Part B Monthly Premium will be $139.90.
For Beneficiaries who file an individual tax return with income of $107,001 - $160,000 and for Beneficiaries who file a Joint tax return with income of $214,001 - $320,000, the 2012 Part B Monthly Premium will be $199.80.
For Beneficiaries who file an individual tax return with income of $160,001 - $214,000 and for Beneficiaries who file a Joint tax return with income of $320,001 - $428,000, the 2012 Part B Monthly Premium will be $259.70.
For Beneficiaries who file an individual tax return with income above $214,000 and for Beneficiaries who file a Joint tax return with income above $428,000, the 2012 Part B Monthly Premium will be $319.70.
Note that Medicare D prescription cards may carry a higher charge for high income beneficiaries as well.
(https://questions.medicare.gov/app/answers/detail/a_id/2310/~/2012-part-b-premium-amounts-for-persons-with-higher-income-levels)
5. 2012 Long-Term Care Premium Deductibility Limits for 2012
The IRS is increasing the Long-Term Care Premium Deductibility Limits for 2012. Premiums for "qualified" long-term care insurance policies are tax deductible to the extent that they, along with other unreimbursed medical expenses (including Medicare premiums), exceed 7.5 percent of the insured's adjusted gross income. Business owners, self-employed, S Corp. owners as well as LLC and LLP members can take deductions for allowable premiums. The 2012 deductible limits under Section 213(d)(10) for eligible long-term care premiums includable in the term 'medical care' are based on attained age of the insured before the close of the taxable year. Any premium amounts for the year above these limits are not considered to be a medical expense. C Corps, paying long-term care insurance premiums, can take the deduction for the entire premium. They are not limited by the chart below. Since long-term care insurance is not an ERISA Benefit, discrimination rules do not apply.
2012 Deductible Limits Based on Age
40 or less: $350
More than 40 but not more than 50: $660
More than 50 but not more than 60: $1,310
More than 60 but not more than 70: $3,500
More than 70: $4,370
Please note that New York State offers a 20% tax credit for LTCI premiums. The per-diem limitation under 7702B(d)(4) is $310. This applies to policies that offer indemnity rather than reimbursement benefits.
(http://www.aaltci.org/long-term-care-insurance/learning-center/tax-for-business.php)
6. Updates under the Affordable Care Act
The Affordable Care Act originally required employers to report the cost of coverage under an employer-sponsored group health plan. Notice 2010-69, issued last Fall, made this requirement optional for all employers in 2011. IRS Notice 2011-28 provided further relief for smaller employers filing fewer than 250 W-2 forms by making the reporting requirement optional for them at least for 2012 and continuing this optional treatment for smaller employers until further guidance is issued. This reporting is for informational purposes. The amount reported does not affect tax liability, as the value of the employer contribution to health coverage continues to be excludible from an employee's income, and it is not taxable.
Beginning in 2010, group health plans must provide coverage for preventative care without any cost-sharing requirements. Preventative care services include yearly preventative medicine visits and standard immunizations recommended by the American Committee on Immunization Practices. Members at an appropriate age or risk status are entitled to screening for colorectal cancer, sexually transmitted diseases and HIV, counseling in a primary care setting for alcohol or substance abuse, tobacco use, obesity, diet and nutrition as well as for high blood pressure, diabetes and depression.
(http://www.irs.gov/newsroom/article/0,,id=237894,00.html)
7. Empire Blue Cross Blue Shield Policy Change
Empire intends to phase out many of its small group products on groups' renewal dates starting with groups renewing on April 1, 2012. Groups renewing during the first quarter will have the ability to renew their plans with prescription changes and rate increases. Empire's previously stated policy was to "simplify" its available plans for all groups on April 1, 2012 regardless of groups' renewal dates. Note that a group that fails to recredential or prove eligibility can be terminated with 30 days notice.
Thursday, January 12, 2012
Empire Changes Date for Dropping Small Business Plans
Empire Blue Cross Blue Shield announced changes to its company's policy that will affect small businesses that offer Empire's health insurance plans. Empire plans to issue a formal announcement in January regarding its decision, but I wanted to inform you immediately of the policy changes.
Empire intends to phase out approximately seven small group products on groups’ renewal dates starting with groups renewing on April 1, 2012. Groups renewing during the first quarter will have the ability to renew their plans with prescription changes and a rate increase. Empire's previously stated policy was to "simplify" its available plans for all groups by a hard date of April 1, 2012, regardless of groups' renewal dates.
Employer groups renewing April 1and thereafter with Empire HSA, EPO, Prism, or Point of Service plans among others will be terminated on their renewal dates. Empire has added two plans to the short list of those that it is keeping. It had said it was continuing PPO1 and 2, HMO/DHMO Option 12 and Healthy New York (with limited availability for new groups). Now it has added Blue Essential Option 10 and Total Blue Option 3 to the list. When this change becomes effective, members will not be automatically switched to another plan. The Group Administrator will be required to select another Empire product or change to another carrier. Pre-existing conditions will not apply to HIPAA compliant groups with a minimum of 12 months of continuous coverage.
For Empire groups with an upcoming renewal of January, February, or March, their plans will not be eliminated until the following renewal. Empire will alter the way its members pay prescriptions. Non-formulary drugs, and in some cases, brand named drugs will be reimbursed at a percentage. I expect an increase in rates despite the decrease in benefits. Participation and eligibility requirements will immediately apply.
Please call me with any questions or concerns at 516-682-8400. I remain committed to keeping you up to date with news from the health insurance industry. I am also available to discuss life, disability, and long term care insurance.
Empire intends to phase out approximately seven small group products on groups’ renewal dates starting with groups renewing on April 1, 2012. Groups renewing during the first quarter will have the ability to renew their plans with prescription changes and a rate increase. Empire's previously stated policy was to "simplify" its available plans for all groups by a hard date of April 1, 2012, regardless of groups' renewal dates.
Employer groups renewing April 1and thereafter with Empire HSA, EPO, Prism, or Point of Service plans among others will be terminated on their renewal dates. Empire has added two plans to the short list of those that it is keeping. It had said it was continuing PPO1 and 2, HMO/DHMO Option 12 and Healthy New York (with limited availability for new groups). Now it has added Blue Essential Option 10 and Total Blue Option 3 to the list. When this change becomes effective, members will not be automatically switched to another plan. The Group Administrator will be required to select another Empire product or change to another carrier. Pre-existing conditions will not apply to HIPAA compliant groups with a minimum of 12 months of continuous coverage.
For Empire groups with an upcoming renewal of January, February, or March, their plans will not be eliminated until the following renewal. Empire will alter the way its members pay prescriptions. Non-formulary drugs, and in some cases, brand named drugs will be reimbursed at a percentage. I expect an increase in rates despite the decrease in benefits. Participation and eligibility requirements will immediately apply.
Please call me with any questions or concerns at 516-682-8400. I remain committed to keeping you up to date with news from the health insurance industry. I am also available to discuss life, disability, and long term care insurance.
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