The Cadillac Tax Is Causing Employers to Eliminate HSA Contributions

Many employers with plan costs close to the Cadillac Tax threshold are eliminating payroll contributions to HSAs to avoid incurring excise tax liability, even though many HSA-qualified plans are likely to avoid the tax for years, according to a study by The American Bankers Assn through its Health Savings Accounts Council and HSA Consulting Services.

In a recent letter to the IRS, the HSA Council said that employee contributions should be excluded from the excise tax calculation. HSA plans have proven effective in increasing health and wellness behaviors while decreasing healthcare costs and enabling Americans to save for healthcare and retirement expenses, according to the Council.

Kevin McKechnie, executive director of ABA’s HSA Council said that many HSA-qualified plans are expected to remain under the initial Cadillac Tax threshold, but employers in expensive states or with expensive plans may incur tax liability in 2018. The tax is calculated monthly. Employers who contribute large amounts in one month to help employees seed accounts may need to spread contributions over a plan year in order to avoid the tax.

There is a very large premium variance among states. HSA plans in Connecticut are likely to be affected right away while Iowa plans appear to be safe for years to come.

Todd Berkley, president of HSA Consulting Services, the author of the study said, “We initially set out to prove that HSA plans would steer clear of the tax, but are dismayed to find some plans will be hit right away if payroll contributions are counted. While many HSA plans will likely be a safe haven for now, like the AMT, this tax will eventually affect every plan in America, including HSA plans.”

HSA Accounts Provide Financial Flexibility

An HSA plan is a valuable financial tool for consumers, providing flexibility to cover immediate medical expenses and save for health care costs, according to a study by the American Bankers Association (ABA) and America’s Health Insurance Plans (AHIP.) Fifty-five percent of HSAs received personal contributions during 2012. Roughly 80% of accounts had a positive balance that could be carried over to the next year. “This study confirms that HSAs are being used as they were designed: to pay for routine health care needs and to save towards future medical expenses. HSAs have the advantage of offering consumers greater choice and control over their health care,” said Kevin McKechnie of the ABA. The study also reveals the following: • 44% of the accounts received employer contributions. Of those accounts, the average personal contribution was $2,337, and the average contribution from employers was $1,142. • 58% of accounts had withdrawals during the year. Of those accounts, the average withdrawal during 2012 was $2,081. • 19% of accounts had $0 available at the end of the year; 31% had $1 to $499; 11% had $500 to $999; 12% had $1,000 to $1,999; 14% had $2,000 to $4,999; and 12% had at least $5,000. For more information, visithttp://www.hsaalliance.org.

Appeals Court Says HMO Regulator Cannot Discriminate Against Autistic Children

In a complex opinion issued yesterday, the California Court of Appeal ended the Department of Managed Health Care’s (DMHC) discriminatory practice of allowing HMOs to deny treatment for autistic children of state employees and low-income families enrolled in the Healthy Families program on the basis that such treatment can only be administered through state-licensed providers.

The case was brought by the non-profit Consumer Watchdog and Strumwasser & Woocher LLP. The treatment at issue, known as Applied Behavioral Analysis (ABA), has been found to be the most effective treatment for autistic children. After the lawsuit was filed, the California Legislature agreed with Consumer Watchdog by passing a law in 2011 clarifying that HMOs and health insurers must provide coverage for ABA for children enrolled in private health insurance plans and that such treatment could be provided through providers who are certified by a national board, but not state-licensed. However, the Legislature did not include public employees and Healthy Families enrollees.

The remaining issue to be decided by the Court of Appeal was whether the DMHC could allow HMOs to deny ABA for children enrolled in public health plans if an ABA provider does not hold a state license.  As Consumer Watchdog and Strumwasser & Woocher LLP pointed out in the lawsuit, no state licensing currently exists for ABA therapists. For more information, visit http://www.strumwooch.com

Last Updated 10/20/2021

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