e3 Financial News Archive For May / June 2011
Blue Shield of CA Giving Back $180 Million to Customers
Jun 13, 2011
As you may have heard, Blue Shield of CA released a statement last week announcing their pledge to limit net income to 2% of revenue. As a result, they will be giving back $180 million to Blue Shield customers and the community.
Here is how the $180 million will be distributed:
- PREMIUM CREDITS - Blue Shield's individual and fully insured group customers will each get a 30 percent credit against one month of premium. Customers with whom Blue Shield shares risk will each get a 10 percent credit against one month of premium. In total, the company will credit $167 million back to its individual and business customers.
- INVESTMENTS IN ACCOUNTABLE CARE - Blue Shield will also provide $10 million in funding to California hospitals and physician groups to help them participate more effectively in accountable care organizations.
- AID TO LOCAL NONPROFITS - The company will give the remainder, about $3 million, to the Blue Shield of California Foundation, which provides grants to local nonprofit organizations that provide health care to low-income Californians.
How this translates into actual dollars for policyholders:
Customers with fully insured coverage in May 2011 (other than government programs whose contracts do not permit such credits) will receive a credit in the bill for their October 2011 premiums. The average credit will vary depending on the monthly premiums:
- The average individual customer will be credited approximately $80 and an average family of four will be credited approximately $250. The range is roughly $25 - $160 for individuals and $130 - $415 for a family of four.
- For all group customers, the average credit to the group will be $110 - $130 per employee. Employers who pay part of the premium must decide whether and how to apportion it.
- For small groups (2-50 employees), the averages are $125 for one employee and approximately $340 for a family of four.
***To read the entire news release, please Click Here.
If you have any further questions, please contact your e3 Financial Client Service Team and they will assist you.
June 30 Deadline for FSA Amendments
Jun 01, 2011
Last year's Affordable Care Act (ACA) restricted the ability of employer health plans, including flexible spending arrangements (FSAs) and health reimbursement arrangements (HRAs), to reimburse expenses incurred for over-the-counter (OTC) medications. With the exception of insulin, expenses for OTC medications may now be reimbursed only if the medications are prescribed by a physician. Sponsors of FSAs face a June 30 deadline for amending their plans to comply with this ACA restriction.
This restriction actually became effective as of January 1, 2011. Ordinarily, the IRS requires that FSA amendments be adopted before they take effect. Moreover, proposed IRS regulations state that any failure to satisfy this requirement results in all employee contributions to the FSA becoming taxable. Perhaps recognizing the severity of this result, the IRS in Notice 2010-59 granted FSA sponsors an additional six months to adopt amendments designed to comply with this restriction. That six-month extension expires on June 30, 2011.
A similar restriction applies to the reimbursement of expenses for OTC medications under health savings accounts (HSAs) and Archer Medical Savings Accounts (MSAs). However, the consequences of non-compliance under such arrangements differ from those that apply under FSAs or HRAs. Distributions from an individual's HSA or MSA for OTC medications that are not prescribed by a physician are treated as "nonqualified" distributions. They are therefore includible in the individual's taxable income, and also subject to a 20% penalty tax. In any event, because most HSAs and MSAs are maintained on documents provided by financial institutions, employers will generally rely on those institutions to adopt timely amendments complying with this ACA restriction.
In drafting amendments to their FSAs or HRAs, employers will want to keep in mind several key points. First, such an amendment should be retroactively effective as of January 1, 2011. This date applies regardless of an arrangement's plan year, and even if an FSA has been amended to take advantage of the 2 ½ - month "grace period" allowed by the IRS. However, any expenses for OTC medications that were incurred before January 1, 2011, may still be reimbursed after that date, even without a prescription.
Another point to be addressed in any FSA or HRA amendment involves the treatment of OTC items other than medications. Notice 2010-59 made clear that expenses for equipment (such as crutches), supplies (such as bandages), and diagnostic devices (such as blood sugar test kits) may still be reimbursed under an FSA or HRA, even without a prescription. In other words, the prescription requirement applies only to OTC medications. (As under longstanding law, however, expenses for items that are merely beneficial to the general health of an individual - such as toiletries - may not be reimbursed from these arrangements.)
Finally, any amendment to an FSA or HRA that allows participants to use debit cards to purchase OTC medications should take into account additional IRS guidance. For instance, Notice 2010-59 granted such arrangements an additional fifteen days (through January 15, 2011) to comply with the requirement of a physician's prescription for an OTC medication. IRS Notice 2011-5 then outlined specific procedures that must be followed if debit cards will continue to be an option for the purchase of OTC medications after January 15, 2011. In general, these procedures are designed to ensure that these cards can be used to purchase OTC medications only after a prescription has been obtained.
If you have any questions regarding this deadline, please contact your e3 Client Service team.
2012 Health Savings Account Limits Released by IRS
May 17, 2011
Annual Contribution Limitation
For calendar year 2012, the annual limitation on deductions under § 223(b)(2)(A) for an individual with self-only coverage under a high deductible health plan is $3,100. The limitation for an individual with family coverage under a high deductible health plan is $6,250.
High Deductible Health Plan
For calendar year 2012, a "high deductible health plan" is defined under § 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,200 (no change from calendar year 2011) for self-only coverage or $2,400 (no change from calendar year 2011) for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,050 for self-only coverage or $12,100 for family coverage.
If you have any questions on how these new limits affect your benefit plans, please your e3 Client Service team.