The maximum contributions that can be made to health savings accounts in 2012 will rise slightly, the Internal Revenue Service said on May 16.

Under IRS Revenue Procedure 2011-32, the maximum contribution that can be made to an HSA in 2012 is $3,100 for employees with single coverage, up from $3,050 this year.

The maximum HSA contribution for those with family coverage will be $6,250, up from $6,150 this year.

The maximum out-of-pocket employee expense, including deductibles, will rise next year to $6,050 for single coverage, up from $5,950 this year. For family coverage, it will increase to $12,100 next year from $11,900 this year.

Increases in the HSA limits are tied to changes in the cost of living, However, the minimum deductible for a high-deductible health care plan to which HSAs must be linked will stay at $1,200 for single coverage and $2,400 for family coverage, the IRS said.

As of 2010, about 10 million people were enrolled in high-deductible health insurance plans to which HSAs must be linked, a 25 percent increase over 2009, according to America’s Health Insurance Plans. Enrollment figures for 2011 are expected to be released soon.

Tags: 2012 health savings account changes, 2012 hsa contribution limits, 2012 maximum hsa contribution limits

If you were covered by a high deductible health insurance plan in 2010, you have until April 18, 2011, to make a tax-deductible contribution to an HSA. This account gives you a triple tax benefit: you deduct the contributions (whether or not you itemize other deductions), earnings in the account are tax deferred, and withdrawals for uninsured medical expenses are tax free.

The contribution amount for 2010 is $3,050 if only you are insured, or $6,150 for family coverage. If you were at least 55 years old by the end of 2010, you can contribute an additional $1,000.

Tags: 2010 hsa contribution deadline, deadline to contribute to hsa plan, hsa contribution deadline, last day to contribute to health savings account

The Internal Revenue Service issued new guidance allowing the continued use of flexible spending arrangement and health reimbursement arrangement debit cards for the purchase of prescribed over-the-counter medicines and drugs.

A few weeks ago, the IRS announced tough new rules for users of flexible spending account (FSA) and health reimbursement arrangement (HRA) debit cards in IRS Notice 2010-59. The IRS was set to let consumers use the cards to buy OTC drugs without submitting receipts to their plans only at retailers that had installed high-tech “inventory information approval systems” (IIAS). The IIAS were supposed to be able to distinguish between over-the-counter drugs, such as aspirin, and other types of merchandise, such as bubble gum and playing cards.

Updated Guidance

Now, in IRS Notice 2011-5, has backtracked. The IRS will be letting consumers use FSA and HRA cards to buy OTC drugs without submitting receipts at many retailers that simply save information about the transactions, officials say.

One new set of rules will apply to ordinary drug stores, other types of retailers that have pharmacies, and mail-order and Web-based vendors that sell prescription drugs.

A second, looser set of rules will apply to retailers that have health care merchant cards built into their debit card systems but have no pharmacy operations.

The IRS says it wants to apply still another set of rules — the rules given in the Notice 2010-59 — PPACA – debit cards – Notice 2011-5to “90% pharmacies,” or pharmacies that get 90% of gross receipts from the sale of items that the IRS classifies as medical items.

The prescription requirement applies to purchases made on or after Jan. 1, 2011, and not to purchases made in 2010 even if reimbursed after Dec. 31, 2010. Because the requirement applies only to over-the-counter medications, it does not apply to other health care expenses such as medical devices, eye glasses or contact lenses.

The requirement applies to holders of health savings accounts (HSAs) as well as FSA and HRA holders, but, due to a quirk in the HSA laws, HSA holders only have to substantiate that they made proper use of account funds when they are audited by IRS auditors. HSA holders do not have submit receipts, prescription copies or other documentation to employers, insurers or plan administrators, and the new IRS card use rules do not apply to HSA holders.

The Rules
A health account card system company that wants consumers to be able to use its cards to buy prescribed OTC drugs without worrying about receipts must make sure that the system will approve an OTC drug purchase only if the card holder has an “Rx” number, or prescription number.

To accept FSA and HRA cards without imposing extra substantiation burdens on the card users, ordinary drug stores, other types of retailers that have pharmacies, and mail-order and Web-based vendors that sell prescription drugs must:

• Get the card user’s Rx number.
• Store the Rx number, the name of the patient, and the date and amount of the purchase.
• Make prescription records available to employers upon request.

“If these requirements are met, the debit card transaction will be considered fully substantiated at the time and point-of-sale,” IRS officials say Notice 2011-5.

If a vendor without major pharmacy operations wants to accept FSA and HRA debit cards, it simply must store the name of the patient and the date and amount of the OTC drug purchase, and make records of available to employers.

A 90% pharmacy without an IIAS also can take FSA and HRA cards, but the card users must submit receipts, prescription copies and other documentation to their plan administrators, officials say in Notice 2010-59.

More Information

The new guidance, IRS Notice 2011-5, as well as answers to frequently asked questions on IRS.gov, also contain further details on health FSA and HRA debit card purchases, including purchases from health care providers other than pharmacies and mail order and web-based vendors.

For guidance on health FSA and HRA debit card purchases at “90 percent pharmacies,” see IRS Notice 2010-59. More information on health care reform provisions can be found on the Affordable Care Act page on IRS.gov.

Tags: 2011 IRS Health Insurance Debit Card Rules, IRS 2011 HSA Debit Card Rules, IRS Eases FSA Debit Card Rules

Due to the enactment of the National Health Law (PPACA – Patient Protections and Affordable Care Act) beginning January 1, 2011 the following changes will affect Health Savings Accounts:

1. The Excise Tax on ineligible HSA reimbursements increases from 10% to 20%. This is in addition to the normal income taxes for an ineligible HSA reimbursement.
2. Over the Counter (OTC) medicine or drugs (i.e. Tylenol & Claritin), with the exception of insulin, are no longer eligible to be reimbursed from an HSA unless you have a doctor’s prescription.

What exactly is considered an OTC medicine or drug? Below are abbreviated lists of OTC items that will be eligible for reimbursement, broken out into whether or not a prescription is or is not required. This list is not comprehensive. It is intended to be a reference guide until further guidance from the federal government is issued:

NO PRESCRIPTION REQUIRED: bandages, birth control, blood pressure monitors, braces and supports, catheters, contact lenses supplies, denture adhesives, diagnostic testing devices and monitors, elastic bandages and wraps, first aid supplies, insulin and diabetic supplies, ostomy products, reading glasses, wheelchairs, crutches, walkers and canes.

PRESCRIPTION REQUIRED: acid controllers, allergy and sinus medicines, antibiotics, anti-diarrhea medicines, anti-gas medicines, anti-itch and insect bite medicines, anti-parasitic treatments, baby rash ointments and creams, cold sore remedies, hemorrhoid preps, laxatives, motion sickness medications, pain relief medicines, respiratory treatments, sleep aids and sedatives, stomach remedies.

For more information, visit the IRS website at http://www.irs.gov/newsroom/article/0,,id=227308,00.html

2011 HSA Contribution Limits

In May of 2010 the IRS published Revenue Procedure 2010-22, which provides the 2011 cost-of-living contribution and coverage adjustments for HSAs (health savings accounts) as required under Code Section 223(g). The amounts for 2011 are unchanged from the amounts for 2010 because, after the application of the cost-of-living adjustment rules of § 223(g), the changes in the Consumer Price Index for the relevant period do not result in changes to the amounts for 2011.

2011 HSA Maximum Contribution Limit

• Self-only $3,050
• Family $6,150

2011 HSA Catch-Up Contribution Limit

• $1,000

2011 HDHP Minimum Annual Deductible

• Self-only $1,200
• Family $2,400

2011 HDHP Out-of-Pocket Maximum

• Self-only $5,950
• Family $11,900

Tags: 2011 Health Savings Account Changes, 2011 HSA Over the Counter Drug Changes, 2011 HSA Updates, Over the Counter (OTC) drugs no longer HSA Eligible, Patient Protections and Affordable Care Act Affects 2011 Health Savings Accounts

Effective October 1st, Bank of America will administer Health Savings Accounts (HSA) for HSA-compatible Aetna Advantage Plans for Individuals, Families and the Self-Employed. There is no change to Aetna’s HSA-compatible AARP® Essential Premier Health Insurance Plans at this time.

HSAs are currently administered by JPMorgan Chase Bank. Existing members who currently have an HSA with JPMorgan will not be impacted by this change.

What’s New?

Through Bank of America, HSAs will automatically be set up for new members who enroll in an HSA-compatible plan effective on or after October 1st. If no action is taken on the HSA, it will automatically close after 90 days.

The new HSA website will be co-branded with Aetna and Bank of America logos and will provide more tools to help members manage and modify their account online. For example, members can issue payments to providers using an online bill-pay option. They can also set up automatic money transfers to their HSA from their checking or savings account. As another perk, members can view their cash and investment accounts on a single integrated statement.

How are Members Impacted?

• There is no impact to existing members who currently have an HSA with JPMorgan.
• For new members who enroll in an HSA-compatible plan effective on or after October 1st, an HSA will automatically be set up for them. Members will receive a debit card and a welcome package with information to get them started.
• New members can opt out of the HSA by calling Bank of America– or if they take no action, the account will automatically close after 90 days.
• New members will not be able to link to their Bank of America HSA from Aetna Navigator; however, there will still be a link to the JPMorgan website for existing members. Members must save the website link www.benefitsolutions.bankofamerica.com that’s provided in their welcome packet.
• Member customer service is provided by Bank of America from 8:00-11:00 PM EST. The dedicated phone number for Aetna HSA members is 1-866-791-0250; TTY is 1-866-867-0701.

Tags: Aetna Bank of America HSAs, Aetna Health Savings Account Administrator, Aetna Health Savings Accounts, Aetna HSAs

New BlueEdgeSM HSA plan options for 2-150 groups are being introduced July 1, 2009. These additional plan designs offer $3,500 aggregate and embedded deductible options with either 100%/80% or 80%/60% coinsurance options, or a $5,000 aggregate or embedded deductible option with a 100%/80% coinsurance.

An aggregate deductible means the entire family deductible must be met before health plan benefits begin for any covered family member. An embedded deductible means each family member has an individual deductible amount; once it is satisfied,that member is eligible for health plan benefits.

The out-of-pocket maximum for in-network services is $5,800 for individual and $11,600 for family for the four $3,500 deductible options:

• $3,500 Embedded Deductible 100%/80% Option
• $3,500 Combined Deductible 100%/80% Option
• $3,500 Embedded Deductible 80%/60% Option
• $3,500 Combined Deductible 80%/60% Option

Tags: BlueEdge HSA Plans

The Internal Revenue Service (IRS) on May 14 issued Revenue Procedure 2009-29 providing inflation-adjusted limits for health savings accounts (HSAs) for use in 2010.

The annual contribution limits have been increased to:

• $3,050 for those with self-only coverage (up $50 from 2009)
• $6,150 for those with family coverage (up $200 from 2009)

As in previous years, you must be covered under a High Deductible Health Plan (HDHP) to qualify to make an HSA contribution. The limits defining what qualifies as an HDHP have also been increased for 2010:

• Self-only coverage must have a deductible of at least $1,200 (up $50 from 2009)
• Family coverage must have a deductible of at least $2,400 (up $100 from 2009)

These updates for 2010 will allow you to shelter even more of your investment dollars from taxes since any contribution to an HSA counts as a full deduction at the end of the year in addition to the ability to pay for nearly any medical expense with tax-free distributions from the account.

Tags: 2010 hsa contribution maximums, 2010 hsa limits, 2010 IRS Health Savings Account Guidelines, 2010 IRS HSA limits, Health Savings Accounts 2010 limits, Health Savings Accounts Limits

Health Savings Accounts (HSAs) are gaining popularity in the United States – in part because health care costs are rising, but also because consumers want to take charge and make the most of their health care dollars. HSAs can make a significant difference to your budget bottom line – at all stages of adult life.

What is an HSA?

An HSA is a personal, tax-advantaged saving account that works in conjunction with an HSA-qualified health plan – a high deductible health plan (HDHP) with a minimum deductible of $1,150 for single coverage, or $2,300 for family coverage. Maximum annual in-network out-of-pocket expenses are $5,800 for single coverage or $11,600 for family coverage. Through an HSA, you can save money to pay for qualified medical expenses as defined by the Internal Revenue Code.

HSAs can be effective because of their triple-tax advantage:

• Contributions are tax-free up to the IRS’ annual maximum limit.

• Interest and investment earnings are tax-free.

• Withdrawals used for qualified medical expenses are also tax-free.

In order to open and contribute to an HSA, you must be enrolled in an HDHP, cannot be enrolled in any non-HDHP plan, cannot be enrolled in Medicare, be a dependent on someone else’s tax return, or have received VA medical benefits in the past three months.

HSAs for 20-somethings

Parents understand how important health coverage is but their young adult children may not. If they are too old to be covered by your insurance, and not yet covered by their own, there are options.

The first step might be to obtain health care coverage in the form of an HDHP. According to the Center for Policy and Research think tank run by America’s Health Insurance Plans in Washington, D.C., the average premiums for a young adult are $1,500 per year. Once enrolled in an HDHP, and assuming other eligibility requirements are met, the young adult can open an HSA. He or she (or their loved ones) can then deposit money up to the maximum annual contribution limit as defined by the IRS, and use it for a variety of medical costs today and into the future.

Funds in an HSA can grow tax free. And, because there is no “use it or lose it” provision, the account stays with a person through their lifetime.

HSAs for middle age

Statistics from the American Medical Association show there are nearly 50 million individuals in families who spend more than 10 percent of their household income on medical care. Regular checkups, eyeglasses and braces can add up. HSAs can help stretch buying power because you are using pre-tax dollars to pay for qualified medical expenses.

These accounts also can help save money for healthcare costs during retirement. Financial advisers often characterize an HSA during this stage of life as a medical emergency fund and suggest it be part of your retirement planning strategy. One possible strategy suggested is to meet your company match for 401(k), then contribute the maximum to your HSA and put the remaining retirement saving dollars into your Individual Retirement Account or 401(k).

Contribution limits to an HSA change annually. In 2009, the maximum contribution limits are $3,000 for single coverage and $5,950 for family coverage.

HSAs for retirement age

Even if we take great care of ourselves today, we know that as we age we’ll inevitably require some form of health care, whether it’s a daily prescription or even long-term care in a nursing home. According to the Center for Retirement Research at Boston College, a couple retiring in the year 2030 can expect to spend nearly $400,000 during retirement on healthcare alone.

You can’t use HSA dollars to pay for “regular” medical insurance premiums, but the IRS allows you to use your HSA dollars to pay for Medicare premiums – that’s an average of $1,200 per year, according to the Centers for Medicare and Medicaid Services. And, if you are age 55 or older, you can make an additional catch-up contribution of up to $1,000.

An HSA in your health care tool box can help you better manage your healthcare costs. And that means you can save your retirement nest egg for the things you’ve been dreaming about – like spoiling your grandkids and traveling around the world.

Health care consumerism continues to grow through both consumer-directed health plans and tools that provide all health care consumers with more information about their health care choices and costs. Here are some examples of their growth:

• The number of employers with 500 or more employees offering CDHPs increased from 14 percent in 2007 to 20 percent in 2008
• Thirty-one percent of new coverage issued in the Small Group market was for HSA/HDHPs
• Companies that offered an HSA for 3 years saw significant growth each year, reaching 29 percent in the third year
• In 2008, enrollment in CDHPs reached 7 percent of all covered employees, up from 5 percent the previous year
• In companies that offer CDHPs, employee enrollment also continues to rise – from 8 percent in 2006, to 10 percent in 2007 and 15 percent in 2008

The top two reasons that plan sponsors give for offering a consumer-directed health plan (CDHP) are lowering benefits costs and promoting consumerism. Both of these reasons are likely to become even more important as plan sponsors deal with the current economic situation.

During a recession, health care use tends to increase. Consumers get care they might otherwise delay because they’re concerned about losing their employer-provided health coverage. People paying for coverage under COBRA also tend to have higher usage than active employees. And there is a higher incidence of stress-related medical and behavioral health conditions.

How CDHPs can help plan sponsors with benefits costs

CDHPs save money. According to one survey, companies with at least half of their workforce enrolled in a CDHP had a 2-year median cost trend, almost half that of companies without a CDHP. Another study found that CDHPs cost 4.8 percent less than PPOs and HMOs.5 One explanation for this cost difference is the fact that CDHPs have higher deductibles than other medical plans. But they still cost more than $400 less per employee when compared to PPOs with $1,000 or higher deductibles.

High deductibles are a growing trend among non-CDHPs. Over the last 2 years, the percentage of covered workers in a plan with at least $1,000 for single coverage grew from 10 percent to 18 percent. The jump was even greater for smaller companies – 16 percent to 35 percent.6 Plus, a recent Mercer study found that the median deductible for more traditional health plans is also rising, from $500 in 2007 to $1,000 in 2008, possibly due to the influence of CDHPs. The minimum deductible for an HSA-qualifying high-deductible health plan (HDHP) is $1,150 in 2009.

Higher deductibles are just one way plan sponsors are cutting costs. In the next year, 40 percent of companies report that they’re likely to increase employee premium contribution amounts, 45 percent are likely to increase office visit cost sharing, and 41 percent are likely to increase the amount employees pay for prescription drugs.

Healthier employees also reduce costs

The increase of CDHPs is also tied to a more general increase in health care consumerism. A survey by the Employee Benefit Research Institute found that CDHP participants make better-informed health care decisions and are generally healthier. That’s because employers who offer CDHPs also provide more and better health information tools to their employees. In most cases, these companies promote healthy lifestyles to all their employees, not just those participating in CDHPs.

CDHPs are here to stay

As more plan sponsors of all sizes adopt consumer-directed health plans, their impact on the entire health benefits industry will continue to grow. In fact, current economic pressures are likely to accelerate the growth of CDHPs.

HSAs accounted for most of the CDHPs added in 2008. Unlike HRAs, HSAs don’t require an employer contribution. In fact, 29 percent of large HSA sponsors do not contribute. This makes these plans particularly attractive to plan sponsors struggling to offer health benefits to their employees. They also provide attractive tax incentives.

Tags: CDHPs, consumer driven health plans, consumer driver health plan studies, HSA employer info

To capitalize on heightened consumer interest in higher deductible plans, Blue Cross and Blue Shield of Illinois is introducing a new deductible option to the BlueEdge Individual HSA (health savings account) plan. Along with the current deductible offerings of $1150, $1750, $2600 and $5000, a new deductible option of $3500 is being added beginning January 1, 2009.

The new $3500 deductible plan is available at both 80 percent and 100 percent coverage levels, with or without maternity benefits. Marketing of the $3500 deductible began November 15, 2008 with effective dates of January 1, 2009 or later.

Also, effective January 1, 2009, the deductible level for the $1100 plan increases to $1150, in keeping with the IRS HSA minimum deductible guidelines.

Tags: BlueEdge, Health Savings Accounts