Earlier this summer (2016) the IRS released its annual guidance affecting Health Savings Accounts (HSA), and associated qualified high deductible health plans (QHDHP). Interestingly, for the first time since rules were relaxed to allow contribution amounts to be higher than a percentage of the deductible (remember those days?), the IRS chose to keep the maximumLEARN MORE
Back in the 1960’s, the average cost of an overnight hospital admission was around $100. Not coincidentally, most health insurance plans at the time set their deductible amounts somewhere between $0 and $100. Today, adjusting for geographical differences, PPO discounts, etc., an overnight stay in a hospital will run you between $1,700 – $2,500. According to the Kaiser Family Foundation (KFF), the average health insurance plan deductible in 2014 for an individual covered by employer based coverage was $1,214 (up from $826 in 2009). Smaller employers (fewer than 200 employees) tend to have higher deductibles (nearly $1,800); while larger employers lean toward lower deductibles ( $971). Clearly, there is a relationship between health insurance deductible amounts, and the average cost of an overnight hospitalization.
The Internal Revenue Service (IRS) has announced the Health Savings Account (HSA) maximum contribution amounts, and qualified high deductible health plan (QHDHP) deductible and out of pocket limits for 2015. Since I have provided basic guidance on “all things HSA” in a previous post, I thought I would provide some advanced HSA guidance in this week's blog, along with the recently announced 2015 IRS maximums.
For 2015, the maximum allowable HSA contributions are:
– INDIVIDUAL Coverage (self only): $3,350
– FAMILY Coverage (self plus 1 or more dependents): $6,650
Ordinarily, I try to couple a picture with the content of my post, creating a theme of sorts. This week, my selected picture IS the essence of the blog post. The picture is a chart provided by the Centers for Medicare and Medicaid Services (CMS) showing the slowing of health care spending from 2002 to 2013, by nearly 90%. One of the factors contributing to the slow down in health care spending cited in this post (titled appropriately – Whats Causing Health Care Spending to Slow?) is the growth in popularity and implementation of so called high deductible health plans with accompanying tax preferred spending accounts.
Since the “birth” of so called Consumer Driven Health Plans (CDHP) in the mid 90;s, opponents have argued that CDHP;s merely shift health care related costs from employer to employee. This is simply not the case, and health insurer/administrator Cigna's eighth annual “Choice Fund Experience Study” offers quite the opposing view, buttressed by empirically derived facts. Over the course of CDHPs evolution, I have learned a great deal from many of the pioneers and trailblazers of CDH, including the “father of HSAs” (John Goodman), and the “Godmother of CDH” (Regina Herzlinger). And studies like Cignas provide sound data and efficacy to once again advance the fact that CDH LOWERS HEATH CARE COSTS without sacrificing care or coverage!
For years, politicians, policy wonks, and various health insurance stakeholders have debated the merits of how the tax code encourages employer provided coverage, yet seemingly discourages the individual purchase of coverage outside of the workplace.
The primary example of this confounding situation is the fact that health insurance is tax deductible to an employer, yet not so to an individual who purchases coverage on their own, outside of the workplace. There are numerous tax incentives and benefits available to individuals who purchase health insurance, but virtually all of these incentives are attached to the purchase…
When people hear or see the acronym IRS they generally do not associate it with gift giving. But that is precisely what the IRS delivered on October 31, 2013 in the form of Notice 2013-71, which allows for a partial carryover of unused FSA funds (click – http://www.irs.gov/pub/irs-drop/n-13-71.pdf). The often cited “use it or lose it” rule deters many otherwise eligible Flexible Spending Account (FSA) enrollees from setting aside funds on a pre-tax basis for future use. However, with the issuance of Notice 2013-71, the IRS is allowing the option of a rollover of up to $500 at the end of the FSA plan year, even for 2013 plan years! This is great news for FSA plan participants and employers alike.
Over the course of the last several years, Consumer Driven Health (CDH) has grown in popularity, and effectiveness, as a way for employers to reduce their health insurance and health care related costs. CDH’s evolution has not come easy or without its detractors. However, both the empirical and anecdotal data collected over the last ten years point to CDH as a proven and effective method of true – “health care reform”! According to the Kaiser Family Foundation (KFF), the number of employers offering CDH plans has jumped from 4% in 2005 to 31% in 2012. KFF also released data indicating the average cost of family coverage is $1,500 less per employee on a CDH plan than a traditional PPO plan.
Last weeks post provided an overview of Health Savings Accounts or HSAs. This weeks post is meant to provide an in depth understanding of the HSAs 1st cousin – the Health Reimbursement Arrangement or HRA.
In June of 2002 the IRS issued an important revenue ruling which created the HRA. The ruling created tremendous flexibility for the use of employer funded dollars set aside to pay for specific health care items. As this week's blog title suggests, HRAs are similar to HSAs, but are actually much more similar to Flexible Spending Accounts (FSAs). However, HRAs have distinct advantages for both employer and employee, over FSAs and HSAs.
Last weeks blog post recognized (and celebrated!) the upcoming 10th birthday of Health Savings Accounts (HSAs) in 2014. Recognizing that some readers don't necessarily understand all the “ins and out;s” of HSAs, this weeks post offers an in depth overview, and addresses many of the key requirements, limitations, benefits, etc. Once again, HAPPY BIRTHDAY HSAs!
A Health Savings Account (HSA) is a tax-favored savings account used to pay qualified medical expenses (See IRS Publication 502; click – http://www.irs.gov/pub/irs-pdf/p502.pdf ), in conjunction with a QUALIFIED HIGH DEDUCTIBLE HEALTH PLAN. Some have described them as a “medical IRA”.
