2020 HSA Limits

The IRS has released Revenue Procedure 2019-25 with the 2020 cost- of-living adjustments affecting HSAs and HDHPs. Here are the details:

•          HSA Contribution Limits. The 2020 annual HSA contribution limit for individuals with self-only HDHP coverage is $3,550 ($50 increase from 2019), and the limit for individuals with family HDHP coverage is $7,100 ($100 increase from 2019).

•          HDHP Minimum Required Deductibles. The 2020 minimum annual deductible for self-only HDHP coverage is $1,400 ($50 increase from 2019), and the minimum annual deductible for family HDHP coverage is $2,800 ($100 increase from 2019).

•          HDHP Out-of-Pocket Maximums. The 2020 maximum limit on out-of-pocket expenses (including items such as deductibles, co-payments, and co-insurance, but not premiums) for self-only HDHP coverage is $6,900 ($150 increase from 2019), and the limit for family HDHP coverage is $13,800 ($300 increase from 2019).

Post-55 “Catch-Up” Limit: $1000

Final Regulations on HRAs

On June 13, 2019, the Internal Revenue Service, the Department of Labor and the Department of Health and Human Services issued final rules that expand the use of Health Reimbursement Arrangements (HRAs). They also published a set of FAQ.     

Specifically, the final rules allow HRAs and other account-based group health plans to be integrated with individual health insurance coverage or Medicare, if certain conditions are satisfied (an individual coverage HRA). The final rules also set forth conditions under which certain HRAs and other account-based group health plans will be recognized as limited excepted benefits (an excepted benefit HRA).

 

Individual Coverage HRAs

Beginning Jan. 1, 2020, employers can offer individual coverage HRAs (ICHRAs) to provide tax-exempt dollars to their employees for the purchase of Affordable Care Act (ACA)-compliant individual coverage, but not the less comprehensive, short- term, limited duration insurance (STLDI) coverage. Under the final rule:

  • Employees can use ICHRA funds to pay the premium for individual insurance coverage purchased either on or off the public Marketplace.

  • Employers can offer their employees either a group health plan or an ICHRA, but not both.

  • Offering an ICHRA will satisfy the Section 4980H Employer Mandate, if it meets the affordability threshold.

  • Employees can opt out of an ICHRA if they are eligible for premium tax credits on the public Marketplace.

  • Employers are required to make the ICHRA available to entire “classes” of employees (e.g., full-time, part-time, or seasonal workers).

o    In response to comments received on the proposed rule, the final rule includes a minimum class size requirement based on employer size.

  • <100 employees: minimum class of 10 employees

  • 100-200 employees: minimum class of 10% of total employees

  • >200 employees: minimum class of 20 employees

  • Employers must provide a written notice to employees at least 90 days prior to the start of the plan year that details the terms of the ICHRA. The Departments will provide a model notice.

  • The total funds offered through an ICHRA may vary in two instances: as the age of the participant increases (not to exceed a 3:1 age band), and based on the number of dependents covered.

  • A new individual market Special Enrollment Period (SEP) has been established for when an employee or their dependent gains access to an ICHRA.

Excepted Benefit HRAs

Under the final rule, employers that offer traditional group health coverage can offer excepted benefit HRAs (EBHRAs) of up to $1,800 per year to reimburse employees for certain medical expenses, including stand-alone dental or vision benefits or premiums for STLDI coverage. The maximum amount will be indexed annually after 2020. Employees do not need to be enrolled in a group health plan to use EBHRA funds, and an employer cannot offer both an ICHRA and EBHRA.

What’s Next:

The National Association of Health Underwriters (NAHU) expect that this rule will be challenged in court. The basis of the court challenge will be that the original HRA rules were created by Congress and therefore any changes can only be made by Congress.

California Legislative Updates

The California Legislature voted June 24, 2019, to tax people who refuse to buy health insurance, bringing back a key part of former President Barack Obama’s health care law. No Republicans voted for it. One Democrat in the state Assembly — Rudy Salas Jr. — voted against it. The tax now heads to Democratic Gov. Gavin Newsom, who proposed a similar plan in January — an indication he will likely approve it.

Background: The federal Affordable Care Act (ACA) required everyone to buy health insurance or pay a penalty. The U.S. Supreme Court upheld the law, ruling the penalty was a tax. In 2017, Republicans in Congress eliminated the penalty — beginning this year — as part of an overhaul of the federal tax code. Mirroring the ACA, the California law exempts people in prison and those who are members of an American Indian tribe.

Effective Date: The bill passed by Democrats in California would reinstate the tax, effective Jan. 1, 2020.

If the bill becomes law, California would join Massachusetts, New Jersey, Vermont and Washington, D.C., next year as the only states to penalize people who don’t buy health insurance.

It would also make California the only state to use money it gets from the penalty to help people who earn as much as six times the federal poverty level to pay their monthly health insurance premiums. That means a family of four earning up to $150,000 a year would be eligible for a premium tax credit. It is estimated that this new subsidy will assist almost 1 million individuals.

Lawmakers on Monday also approved a bill that would expand government-funded health insurance to low-income undocumented young adults until age twenty-six. Democrats say the plan is part of their efforts to make sure everyone in California has health insurance.

Healthcare Transparency

President Trump signed an executive order on June 24th directing federal agencies to increase healthcare price and quality transparency. The order specifically directs the of Departments of Labor (DOL), Treasury, Health and Human Services (HHS) and other related agencies to issue guidance and propose regulations that would disclose negotiated rates, cost-of-care and de-identified federal healthcare data, and to expand the availability of health savings accounts (HSAs). The order does not immediately trigger any new federal policies except for the specific instructions to the federal agencies to develop regulatory guidance.

The order includes five main provisions instructing federal agencies to issue guidance. The first section instructs HHS to propose a regulation within 60 days that would require hospitals to disclose information about their negotiated rates in a format that’s understandable and usable by patients to be able to compare prices across hospitals.

These would need to include common or shop-able items and services, supplies, or fees billed by the hospital or provided by employees of the hospital. These princes would need to be based on actual prices by providers and insurers, rather than the list charges.

 The next section instructs HHS, DOL and Treasury to propose a regulation to require insurance companies to provide patients with information about cost of care, including out of pocket costs before they receive services. This would apply to healthcare providers, health insurance issuers, and self-insured group health plans that would need to provide or facilitate access to information about expected out-of-pocket costs for items or services to patients before they receive care.

 The third section instructs HHS along with the Attorney General and the Federal Trade Commission (FTC) to develop a comprehensive roadmap for consistent, limited, consumer centric quality metrics. The report should describe how the government and private sector are hampering patient transparency and include recommendations on how to promote competition. This report is largely intended to understand the impact of provider consolidation and how the FTC can apply antitrust enforcement to curtail some of this practice. The order also requests that HHS, and the Department of Defense and Veterans Affairs develop a health quality roadmap to align and improve reporting on data and quality measures across Medicare, Medicaid, the Children’s Health Insurance Program, the Health Insurance Marketplace, the Military Health System, and the Veterans Affairs Health System.

The next section instructs HHS, Treasury, Defense, Labor, Veterans Affairs and the Office of Personnel Management to increase access to de-identified claims data from taxpayer-funded healthcare programs and group health plans. This is being done so that researchers, innovators, providers and entrepreneurs can develop tools and analytics to allow patients to make more informed decisions on healthcare goods and services. The agencies would be required to provide access to this data within 180 days.

The order then instructs Treasury to issue guidance that would expand the availability of HSAs. The first part of this request guidance to be issued within 120 days on how high deductible health plans can cover more preventive services and products in the deductible period for care that helps maintain health status for individuals with chronic conditions. The order then instructs Treasury to issue guidance with 180 days to propose regulations that would allow direct primary care arrangements and healthcare sharing ministries to be eligible medical expenses, along with guidance to increase the amount of flexible spending arrangement funds that can carry over without penalty at the end of the year.

 Finally, the order instructs HHS to issue a report within 180 days on additional steps that the administration can take to address surprise medical bills consistent with the list of principles announced by President Trump in May. Those principles outline how patients scheduling appointments to receive facility-based care should have access to pricing information related to the providers and services they may need, and the out-of-pocket costs they may incur.

 The executive order is the president’s third major executive action on healthcare since taking office, after the order issued on his first day in office directing federal agencies to ease the regulatory burden of the ACA, and the order issued in October 2017 that led to the development of the rules on association health plans, short-term plans, and health reimbursement arrangements.

 What’s Next: As with previous executive orders issued by President Trump, this order does not immediately trigger any executive action apart from the instructions issued to the federal agencies to consider regulatory actions. These will need to go through the traditional rulemaking procedures of providing a proposed rule for public comment before being able to enact any final rules. Expect to hear more from us on this in the October newsletter!

*The newsletter is intended to provide accurate and authoritative information on legislative and market news. It is distributed with the understanding that Brown & Brown is not rendering tax or legal advice. Employers should consult their attorneys or tax advisors for specific compliance information and assistance.