One part of the discussion focused on the impact this legislation continues to have on benefits accounts. For example, over-the-counter drugs not prescribed by a doctor are already excluded from reimbursement through a Flexible Spending Account (FSA), Health Savings Account (HSA), or Health Reimbursement Arrangement (HRA). This exclusion continues to challenge employees who may no longer purchase these necessities tax free.

Coming soon are limits for medical FSA contributions. Effective January 1, 2013, employees will be able to contribute no more than $2,500 to a medical FSA in a Plan Year. Of course, a husband and wife with access to separate FSAs can each max out their Plan and increase their family’s limit to $5,000.

Coming in 2018, an excise tax will be imposed on high-cost insurance plans. This will affect plans with aggregate expenses that exceed $10,200 for individual coverage and $27,500 for family coverage. There are lingering questions regarding this provision…  Will the portion an employee runs through an FSA count toward that total?  Stay tuned for more.

Of particular concern to HR personnel are the administrative actions that need to be taken to comply with the new rules. Again, for example, TASC quickly updated our Plan Documents to accommodate the federally mandated extension of healthcare coverage to dependent children through age 26. Further, while delayed twice already, the new W-2 reporting requirement is now scheduled to take effect in 2014. The formula for determining the amount to report is complicated and employers are well advised to leave this calculation to administrators like TASC.

Of course there are opportunities for gains as well. One that comes to mind is the Small Business Tax Credit. To get the credit, a business must have fewer than 25 full-time workers or the equivalent (for example, two half-time employees equals one full-time employee), must pay an average annual wage of less than $50,000, and must cover at least half the cost of health insurance premiums for their workers. Through 2013, the tax credit covers up to 35% of the amount a qualifying business spends on its health insurance premiums. In 2014, the top tax credit bumps up to 50%. The credit is available for up to six years. Employers should consider how this credit plays against the traditional deduction (Section 162) and choose the most advantageous route for their circumstance.

In the future we will see grants to help small businesses provide wellness programs to their employees. Eligible employers will be those without a workplace wellness program who employ fewer than 100 individuals who work 25 hours or more per week. Other than that, the details of this program have not been worked out. TASC will step in to help facilitate the grant competition process for our participating employers.

Clearly, many of these new provisions are still very much in play. TASC continues to watch these developments to determine the best course of action for our customers.  In my next blog, I will look at the new notice and documentation requirements.

With MyTASC Mobile, Participants can use their mobile device to easily stay current with their FlexSystem account balances from anywhere at any time.  MyTASC Mobile App is secure and available as a free download to a smartphone, or other mobile device.  It is easy to login with a current MyTASC username and password, and access to account information is secured through Secure Socket Layer (SSL) encryption.  Coming soon, Participants will be able to submit requests for reimbursement and substantiation documents, and view account transactions.

The need to check an account balance can happen at any time.  Is there enough money to pay for a child’s braces?  Is there enough in the account to cover the prescription the doctor just wrote? With the MyTASC Mobile App, Participants hold right in the palms of their hands all the information they need to make informed decisions.

Since its release, we have been averaging about 45 downloads a day from the Apple Store alone.  Through August 18^th, the MyTASC Mobile App has been downloaded 1,406 times through Apple and 746 times via Android.  One of the first to download the MyTASC Mobile App is Jeanne LaFountain, Principal of the Lee County School District’s Early Childhood Learning Services in Fort Myers, Florida.  Jeanne sent us this message regarding the App.

“Can I just tell you that you guys are the BEST!?!  I love all the things you do in insurance and benefits to keep us informed and make things easier,” wrote Jeanne.  “Love this (MyTASC Mobile App) feature!!!  Love it! Love it!”

Wow.  Thank you Jeanne.  There’s more where that came from!  For example, TASC Mobile also offers text messaging and email notification. Once again, Participants can use these mobile services daily to obtain account balances, request reimbursements, and receive account status alerts.

Customers are downloading TASC Mobile every day.  Download the TASC Mobile App today at either the Apple Store or the Android Market.  Don’t be the last in your neighborhood to go mobile with TASC!

Just before midnight Eastern Time the third of the three steps was completed.  First had been the “rules” vote in the afternoon; next came votes in the evening to pass Senate Bill HR 3590; passage of House Reconciliation Bill HR 4872 immediately followed.  At that point healthcare reform was in place for two final steps.  Next, with the Senate Bill passed in the Senate and the House, Reconciliation Bill HR 4872 heads back to the Senate where it needs 51 votes to pass.  While it is not over until it’s over, the likelihood is looking pretty good.  The Senate Bill, with its passage in the Senate and the House, is free to head to the President’s desk for signature.  While HR 4872 will not pass in the Senate without debate, the Reconciliation Bill and thus the legislation as a package heads to the President’s desk where he is expected to sign it into law.

It is very difficult to digest the 2,300+ pages of HR 4872 in a manner that effectively connects/ties it to the language in the 2,000+ pages of HR 3590.  At TASC we strive to keep current with what is shaking out.  To this aim, TASC belongs to organizations that have spent considerable time deciphering the language of the Bills.  Some of the expected results of the Bills as they relate to TASC and our customers have been stated in this Blog previously.  I am still learning… One example: except for insulin purchases, deductions for medicines or drugs will be allowed only when a prescription applies.  This means over-the-counter medicines or drugs will not be deductible.  We had seen this previously in HR 3590.   It appears Reconciliation Bill HR 4872 places language that ensures this is consistently applied to all medical reimbursement vehicles, including Section 105 Medical Reimbursement Plans such as Health Reimbursement Arrangements (HRAs), Health Savings Accounts/Medical Savings Accounts (HSAs/MSAs) and Flexible Spending Accounts (FSAs).

At TASC, much of our attention to healthcare reform has focused on the Group side of the business… Meanwhile, numerous TASC Clients are self-employed, and we’re watching developments that will affect them as well.  We know it’s important that TASC review the language carefully to ensure our understanding of the impact on the self-employed.  So far we’ve seen half a dozen references to the self-employed in both HR 4872 and in the Manager’s Amendment.

Very few Third Party Administrators (TPAs) serve the self-employed and larger employers alike.  At TASC we make it our business to serve businesses of all sizes, and we will be looking out for all our customers.  I invite you to check back to this CEO Blog and watch for other communications from TASC for guidance regarding these sweeping changes.

1. The bill calls for creation of a SIMPLE Cafeteria Plan (Pages 371-374 of the bill).  Much like the SIMPLE Plans in the retirement world, this would ease the non-discrimination requirements small employers face when implementing a Cafeteria Plan.
2. There appears to be a push amongst a handful of Senators to raise and index the proposed cap on total benefits an employee can receive (Page 337 of the Committee Report).  Their proposal would index the cap tied to the Consumer Price Index plus 1 percent.  These Senators are also talking about bumping up the cap for employees 55 years or older.  This proposal would increase the cap for older employees by $1,850 a year for single employees and $5,000 a year for families.

TASC sees both proposals as positive.  Too often poorly-designed non-discrimination requirements have discouraged small employers from using these Plans.  Anything that can ease these regulations will increase acceptance, which ultimately will benefit employees.

This is a first, quick look at a very extensive document.  We will take a step back and review this material more closely.  Watch for more updates soon.

Some key survey findings include:

• An estimated 33 million Americans participate in FSAs either as a Participant or as a dependent of a Participant.
• Forty-two percent of FSA Participants contribute more than $2,000 a year; the mean contribution per Participant is $1,569 per year.
• Almost 35 percent of Participants live in households income with less than $55,000, while for 73 percent household income is under $100,000.  The mean household income for all FSA Participants is $77,625.
• Participation is disbursed across all age groups, with nearly 60 percent under the age of 44.
• Participants use their FSA dollars for these top five types of expenses: prescription drugs, medical office visits, dental office visits, eye care, and over-the-counter medications.

The findings clearly indicate that a large number of middle-class Americans participate in a FSA.  Also interesting is the number of Participants who contribute more than $2,000 a year to their FSA.  The $2,000 yearly cap on FSA contributions that has been proposed in the Senate Finance Committee’s America’s Healthy Future Act would affect nearly half of all Participants.

Beyond the numbers, there some other enlightening facts to be gleaned from the survey findings.  For example, 89 percent of FSA Participants believe the benefit is important and 51 percent claim that losing the benefit would have detrimental effect on them. Seventy percent of the respondents feel that participation in a FSA is an essential part of their family’s healthcare budget, with 62 percent stating that if they had no FSA they would have to take funds from other important sources to afford their family’s healthcare.

Not surprisingly, 91 percent agree that FSAs should remain an option for Americans, 87 percent agree that more Americans should be able to have access to a FSA, and 85 percent agree that continued availability of FSAs should be part of any healthcare reform legislation.  Also not surprising, 84 percent of the Participants stated that they would contribute more to their FSA if there was no risk of losing funds at the end of the year.

So what is the big takeaway from this survey?  Large numbers of middle-class Americans depend on FSAs to afford healthcare and strongly believe that any healthcare reform bill should include continuation of Flexible Spending Accounts.  At TASC, we agree 100 percent.

Once a bill is released by the Senate Finance Committee, it will be coupled with the Affordable Health Choices bill from the Senate Committee on Health, Education, Labor and Pensions (HELP) Committee and brought to the Senate floor.  Most likely, the bills will be merged into a blended, compromise bill.  This will occur in the Senate, while the Affordable Health Choices Act of 2009 bill from the House remains in play. The House bill and the Senate Finance Committee bill will be approaching the issue of how to “pay-for” the reform effort from different angles. Ultimately, the bills will need to converge into one cohesive bill to then finally arrive at the President’s desk. Closer, but still a way to go.

The current Finance Committee bill features four items that would impact our customers negatively:

1. The health Flexible Spending Account (FSA) benefit will be capped at $2,000.
2. No longer will over-the-counter medication be tax deductible; these items will not be considered a qualified expense in FSAs, Health Reimbursement Arrangements (HRAs), and Health Savings Accounts (HSAs).
3. An excise tax will be placed on health benefits totaling more than $8,000 for singles and more than $21,000 for families.
4. The cap and the amounts related to the excise tax will be tied to the Consumer Price Index (CPI).

I’ve closely studied these four items, and believe the proposed cap on FSAs will have no material affect on whether a person will or will not participate in a FSA.  Of the several hundred thousand Participants in our FlexSystem service, fewer than 20 percent run more than $2,000 through the Plan annually. To state that differently, 80 percent of our Participants will feel no affect from this proposed cap (at this time…see reference to CPI discussed later in this post). I believe that even those who contribute more than $2,000 a year will continue to participate up to the limit for the tax savings available. The net tax relief to those funding more than $2,000 will decrease, but their participation is expected to continue.

Our industry on behalf of our customers is attempting to improve the FSA by inserting a provision into the bill to eliminate the use-it-or-lose-it rule.  TASC believes doing so would prompt a positive reform of the FSA and place it on par with other health accounts.  Keep in mind that the window of opportunity for adding anything to this bill is quickly closing.  Soon, the only items that will be considered are those which could directly affect the chances of the bill getting that much needed vote(s) to pass in Congress.

In point two, the removal of the over-the-counter deduction returns FSAs to pre-2003 status.

I believe point three will receive the lion’s share of attention from the media, because so many individuals could be impacted.  In effect, this excise tax will place a limit on all health benefits, by acting as as a penalty for those exceeding an aggregate tax free health care benefit limit.  While there are potential negative effects of such an excise tax, this still would not mean a complete loss for taxpayers.   Depending on the final details, it remains likely that we will see a tax value for benefit amounts that exceed the limit, with the net tax value likely reduced as a result of the excise tax.

The cap/limits being tied to the CPI mentioned in the fourth point may represent a more significant impact as we move forward.  Over the past decade or so the average increase in the CPI has been about two to three percent annually.  In fact, for 2009 the CPI has decreased, not increased.  Over the same time period, healthcare costs have risen by a percentage several times larger than the CPI.  If healthcare costs continue to increase at a faster rate than the CPI, any caps/limits will become more painful.  Meanwhile, if cap/limits aren’t implemented until 2013, you will lose ground right out of the gate, simply because a $2,000 medical expense cap set in place for 2013 is roughly equivalent to $1,500-$1,600 in today’s dollars.

As I have stated before, I do not believe these proposed changes will dramatically hurt those who benefit from our services.  Don’t mistake my matter-of-fact communication on this subject to imply that I am “okay” with these possibilities. Most of our customers fall within our nation’s middle class and will feel a tax increase–an increase in the cost of their healthcare. In his speech just a week ago this increase is something the President vowed not to let happen. We are not pleased that some customers will face increased healthcare costs.  At the same time, we are pleased that most of our customers will be able to continue receiving the many benefits of our services and the tax savings they represent.

I encourage you to voice your concerns to your representatives in Congress.  Let them know how strongly you feel about continuing tax-free medical expenses. Visit savemyflexplan.org to learn more and voice your opinion.

This post was made before the release of the bill that is expected to surface from the Senate Finance Committee.  This bill is expected to arrive for public consumption any day now. Look for a post in the near future notifying you of the bill’s release and any changes (corrections) to what I’ve written here. Closer, but still a way to go.

Today, an estimated 72 million working age Americans have a chronic condition such as diabetes, high blood pressure or heart disease.  The annual out-of-pocket cost of treatment for chronic conditions ranges from $3,200 to $5,000 — and that’s even with comprehensive medical insurance coverage.  A study conducted by the Robert Wood Johnson Foundation found that the average healthy American with no chronic conditions spends approximately $850 per year on out-of-pocket healthcare expenses.  But for individuals with one or more chronic health conditions, the per year out-of-pocket health related expenses climbs to $4,398, on average.

Americans who suffer from chronic illness often depend on FSAs to help them afford necessary treatments and medicines.  Restricting or capping FSAs will raise taxes on the very people who need this benefit the most.  One of the driving forces behind this recent effort to reform our healthcare system is to ensure that all Americans will be able to obtain the care they need, and FSAs ensure working class Americans will be able to afford that care. The median FSA Participant has an annual income of $55,000.  These Americans use their FSA to pay for necessary out-of-pocket medical care.

Here’s a breakdown of how those FSA dollars are spent:

• Forty-three percent: on medical expenses, such as hospital admissions and physician visits.
• Twenty-six percent: on prescription and over-the-counter medications, often used to manage chronic illness.
• Twenty-one percent: on dental expenses.
• Ten percent: on vision expenses, such as check-ups, glasses, and contact lenses.

Any capping of these benefits would mean a tax increase on America’s middle class.  TASC holds that because FSAs provide a means for working Americans to pay for essential out-of-pocket healthcare expenses, FSAs should remain an integral part of any healthcare reform package.

New information!

Are you concerned about the possibility of a cap being placed on Flex plans?  If so, we urge you to advocate for your position and express your concerns to your congressional representatives.  It’s easy for you to do just that.  Simply visit savemyflexplan.org, the pathway to Save Flexible Spending Plans.  This national grassroots advocacy campaign is sponsored by the Employers Council on Flexible Compensation (ECFC), a non-profit organization dedicated to the maintenance and expansion of private employee benefit programs on a tax-advantaged basis.

This informational website lets you advocate for your position. It provides a user-friendly way to send a message to your local representatives, to President Obama, and to Vice-President Biden.  It is vital that your elected officials hear your concerns.

Of course our nation’s lawmakers are concerned with and talking about health care.  Recently, Senate Finance Committee Chair Max Baucus (Dem.-MT) released a white paper entitled “Call to Action: Health Care Reform 2009″ that outlines the steps he sees necessary to provide insurance to all Americans, to improve the quality of that health care, and to reduce costs associated with the current health care system.

Some highlights of the Baucus plan include an individual mandate that everyone buy health insurance (possibly enforced through the U.S. tax system or some other point of contact); an employer play or pay mandate for large employers (employers who choose not to provide coverage, must contribute to a fund to help cover the uninsured); and an establishment of a nationwide insurance pool known as the Health Insurance Exchange (where refundable tax credits would be available to low income individuals and families who purchase coverage through the exchange).

Also under Baucus’ plan, all except the smallest employers will be required to offer a Section 125 Plan.  In  actuality, more and more states are already mandating that employers offer a Section 125 Plan; this is something I discussed in my last blog…Section 125 Plans are expected to stay for a while.  Meanwhile, we may see Health Savings Arrangements (HSAs) decline in value or go away altogether.  (Legislation on HSA claim substantiation is currently working its way though the House.)

These changes are obviously good news for TASC!  After all, a heightened public awareness of these great tax-savings tools will undoubtedly make for heightened opportunities for TASC and others in our industry.