Changes to HSAs and FSAs
Beginning in 2011, over-the-counter drugs are no longer reimbursable through flexible savings accounts (FSAs) or health savings accounts (HSAs) unless the drugs are prescribed by a doctor. The health care reform law also caps annual contributions to an FSA to $2,500 beginning in 2013. And employees under the age of 65 who make non-qualified withdrawals from their HSA (in other words, don't use the money for health care purposes) will have to pay a 20% penalty.
Reporting and Notice Requirements
The health care reform law imposes several new informational requirements on employers. They include:
- Employers must report the value of the health benefits they provide to employees on each employee's W-2 Form. This requirement kicks in at the beginning of 2012 for benefits provided in 2011.
- Employers must give employees information about the state insurance exchange program, including how to get premium assistance if necessary. This requirement starts in 2013.
- Beginning in 2014, larger employers must report certain information about the health coverage they provide to employees.
Play or Pay: The Employer Mandate
Beginning in 2014, the individual mandate will kick in. Everyone will have to be covered by health insurance or pay a fine; those who can't afford insurance will be eligible for assistance.
The employer mandate kicks in at the same time. Employers with at least 50 employees must provide health care benefits or pay a penalty. Employers who provide benefits may still have to pay a penalty, depending on the cost of benefits to employees and employee ability to pay. Here are the basics:
- Employers that have more than 50 employees and don't offer coverage must pay an annual fine of $2,000 per full-time employee (those working at least 30 hours a week). The first 30 employees are "free"; the fine begins with employee number 31.
- Even employers that offer coverage may face a penalty if the employer doesn't pay for at least 60% of the actuarial value of the benefits the plan provides or the employee's cost for coverage is more than 9.5% of the employee's household income. In this situation, a full-time employee would be eligible to receive government-subsidized coverage -- and, if this happens, the employer would have to pay a penalty of $3,000 per full-time employee who receives the subsidy, up to a limit.
- Employers must offer a voucher to employees who (1) have an income that is less than four times the federal poverty level, (2) would have to pay more than 8% of their income for employer-provided coverage, and (3) choose to enroll in a plan from a state insurance exchange. The voucher requires the employer to pay what it would have paid to enroll the employee in its own plan.
Larger employers will also have to automatically enroll employees in their health insurance plan.
For More Information
To learn more about the health care reform law, check out:
- www.healthreform.gov, the federal government's website on the law
- http://healthreform.kff.org, a comprehensive site maintained by the Kaiser Family Foundation, and
- www.shrm.org, the Society for Human Resource Management's site, which includes detailed articles and a timeline for health care reforms affecting employers (some of the articles are available only to members).
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