HSAs
Health Care Reform
Prepared for Oklahoma City Chapter of OSCPA
July 16, 2015
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Beale Professional Services (BPS) owned by Jennifer Beale, Joe Strunk
and Guy Strunk
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Alexander & Strunk, Inc. (A&S) owned by Joe Strunk and Guy Strunk
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Oklahoma Bar Association - 1955
Oklahoma Society of CPAs - 1967
Association of Oklahoma Nurse Practitioners - 2013
Oklahoma Association of Realtors - 2014
Oklahoma Dental Association - 1972
Oklahoma Association of Optometric Physicians - 1994
3000 Insurance Group (3iG) established by Joe, Jenn and Guy to
streamline operations and handle carriers representing multiple
associations under one contract. Separately and together, we are independent
agencies representing hundreds of insurance carriers and working with many types
of businesses, associations, non-profits and individuals, primarily in Oklahoma.
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Combines an affordable qualified High Deductible Health Plan (HDHP)
and a tax-favored Health Savings Account (HSA)
Part 1: HDHP – Intended to cover serious illness or injury once the deductible
has been met
 Part 2: HSA – Used to cover small and routine medical expenses until the
deductible is met, or used as a savings vehicle for future medical expenses
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The HSA grows tax-deferred, and if you use your HSA funds for eligible
medical expenses, you never have to pay taxes on those funds
Any adult can open and contribute to an HSA if they:
Have coverage under a qualified “high deductible health plan (HDHP)”
 Have no other first-dollar medical coverage
 Are not enrolled in Medicare
 Cannot be claimed as a dependent on someone else’s tax return
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Contributions to your HSA can be made by you, your employer and/or
any other third party, but the total contributions are limited annually
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Employer contributions are excludable from income and employment taxes and
employee contributions are deductible “above the line”
Employer contributions must be made on a comparable basis
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Withdrawals from an HSA are tax-free provided the funds are used to
pay qualified medical expenses (Section 213(d) of the IRC), but only to
the extent they are not covered by insurance otherwise
You can use the money in the account to pay medical expenses for
yourself, your spouse, or your dependent children, even if they are not
covered by your HDHP
At age 65, unused HSA money can be withdrawn for non-medical
reasons without penalty (ordinary income tax still applies)
You can generally not use the money for medical insurance premiums,
except under specific circumstances, including:
Any health plan coverage while receiving federal or state unemployment
benefits
 COBRA continuation coverage
 Qualified long-term care insurance
 Medicare Premiums (but not Medicare Supplement Premiums)
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Any amounts used for purposes other than to pay for “qualified
medical expenses” are taxable as ordinary income and subject to
an additional 20% penalty
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Examples include:
 Medical expenses that are not considered “qualified medical expenses” under
federal tax law (e.g. cosmetic surgery)
 Other types of health insurance unless specifically described above
 Medicare supplement insurance premiums
 Expenses that are not medical or health-related
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Upon the accountholder’s death, the assets in the HSA become
the property of their named beneficiary
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Spousal beneficiaries may treat the account as their own
Non-spousal beneficiaries must pay ordinary income taxes on the funds
If no beneficiary is named, the assets go to the accountholder’s estate
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Plan Deductible
$4,500
($1,500/person)
$12,700
($6,000/person)
Savings
Annual Premium
$15,047.64
$8,484.60
$6,563.04
HSA Contribution
N/A
$6,650.00
HSA Tax Savings
N/A
$2327.50 (@35%)
Total Annual Savings
Out of Pocket Max
Total OOP and Prem
and Cont
-$4,322.50
$2,240.54
$10,500.00
$25,547.64
$12,700.00
$18,857.10
$6,690.54
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Guaranteed Issue coverage for all ages
 No pre-existing conditions imposed on anyone
Individual
Mandate
• As of 1/1/2014 most US citizens must have minimum
essential coverage (MEC) or pay a penalty.
• The penalty fee for not having health coverage is
calculated one of two ways: either a flat fee or a
percentage of your household income that falls above
the tax filing threshold, whichever is higher.
In 2015 the flat fee penalty is calculated as $325 per adult and $162.50 per
child under age 18, subject to a maximum of $975. The percentage penalty is
2% of household income, subject to a maximum equal to the national average
premium for a bronze plan.
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Exemptions from the Penalty
Income-related exemptions
 The lowest-priced coverage available to you, through either a marketplace or
employer plan, would cost more than 8.05% of your household income
 You don’t have to file a tax return because your income is below the level requiring
you to file
 Health coverage-related exemptions
 You were uninsured for no more than 2 consecutive months of the year
 You lived in a state that didn’t expand its Medicaid program but you would have
qualified if it had
 Group membership exemptions
 You’re a member of a federally recognized tribe or eligible for Indian Health services
 You’re a member of a recognized health care sharing ministry
 You’re a member of a recognized religious sect with religious exemptions to
insurance, including Social Security and Medicare
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Other exemptions
 You’re incarcerated
 You’re a US citizen living abroad, a certain type of non-citizen or not “lawfully
present”
 You experienced one of the hardships below
 Homeless
 Evicted in the past 6 months or facing eviction or foreclosure
 Received a shut-off notice from a utility company
 Recently experienced domestic violence
 Recently experienced the death of a close family member
 Experienced a natural or human-caused disaster (fire, flood) that caused substantial damage to your
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property
Filed for bankruptcy in the last 6 months
Had medical expenses you couldn’t pay in the last 24 months that resulted in substantial debt
You experienced unexpected increases in expenses caring for an ill, disabled or aging family member
Your individual plan was cancelled and you believe other Marketplace plans are unaffordable
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Open Enrollment Period
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The 2016 Open Enrollment period begins November 1,
2015 and ends January 31, 2016.
 If you submit an application between the 1st and 15th of the month, your
coverage will be effective the first of the following month. If you submit
your application between the 16th and the last day of the month, in most
cases, your coverage will be effective the 1st day of the second following
month. For instance, a member who enrolls February 16th will not have
coverage until April 1st.
 Deductibles reset each January 1
 When you change plans during the year, deductible resets
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Special Enrollment Periods
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Coverage can only be purchased outside an Open
Enrollment period if you have a Qualifying Life Event. This
period of time is referred to as a Special Enrollment
Period (SEP) and provides a 60-day window in which you
can make changes or enroll in a new plan.
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Qualifying Life Events that create a Special
Enrollment period include:
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Getting married
Getting divorced
Having, adopting, or placement of a child
Dependent child reaches age 26
Permanently moving to a new area that offers different health plan options
Losing other health coverage (for example due to a job loss, divorce, loss of
eligibility for Medicaid or CHIP, expiration of COBRA coverage, or a health plan
being decertified). Note: Voluntarily quitting other health coverage or being
terminated for not paying your premiums are not considered loss of coverage.
For people already enrolled in coverage, having a change in income or
household status that affects eligibility for tax credits or cost-sharing
reductions
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Preventive care covered 100% in-network
Insurer Fee, Transitional Reinsurance Fee, Risk Adjustment Fee
 Fees payable by insurance companies and passed on to consumers,
sometimes as a separate line item on your health insurance bills.
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Community Rating, i.e. rates can no longer differ based on gender,
health history or claims. Rates are based on geographic location, age
and tobacco use. Age factors are subject to a 1:3 maximum premium
ratio, with 3 age bands: under 21, 21-63, and 64+
Minimum Loss Ratio (MLR): carrier requirement to spend 80-85% of
premium dollars on healthcare. Carriers must provide a rebate or
premium credit to customers if they did not meet the MLR.
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No annual or lifetime limits on essential benefits
All plans include coverage for 10 Essential Health Benefits
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Ambulatory services
Emergency services
Hospitalization
Habilitative and rehabilitative services
Labwork services
Preventive and wellness services
Maternity and newborn services
Mental and behavioral health
Prescription drugs
Chronic disease management
Pediatric services
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Eligibility:
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Household income falling between 100-400% of FPL, AND
Employer does not provide affordable coverage that includes
minimum essential health benefits, AND
Not eligible for Medicare, AND
Not eligible for Medicaid
In addition to generous premium subsidies, people with
incomes up to 250% of poverty also are eligible for reduced
cost sharing (e.g., coverage with lower deductibles and
copayments) paid for by the federal government.
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What is considered Affordable Coverage?
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Employer coverage is considered affordable if the
employee’s share of the annual premium for self-only
coverage is no greater than 9.5% of annual household
income.
Do I have to register with or purchase coverage
through healthcare.gov?
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If you are not seeking a premium or cost-sharing subsidy,
then there is no need to register with or purchase
insurance through healthcare.gov. Whether you purchase
your next plan on or off the exchange, an agent can help
you.
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Subsidy Eligibility calculator http://kff.org/interactive/subsidy-calculator
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Apply for Qualified Health Plan on Public Exchange – In
Oklahoma, use Federally Facilitated Marketplace (FFM)
available at healthcare.gov OR your local agent
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Advanced Premium Payment or Tax Credit
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Requirements affecting ALL employers:
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Effective 10-1-2014: Provide “Notice of Coverage Options” to
all employees – applies whether or not group health
coverage offered
Provide Summary of Benefits and Coverage (SBC) to covered
employees
Small Business Tax Credit
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Available to companies with fewer than 25 FTE, average
compensation under $40,000 – beginning 1/1/2014, must
purchase coverage through a public SHOP exchange in
order to apply for the credit
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Does my employer have to offer health insurance
coverage to me?
Employers with fewer than 50 FTEEs – No
 Employers with 50-99 FTEEs – Yes, beginning 1-1-2016
 Employers with 100+ FTEEs – Yes, beginning 1-1-2015
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Full Time Equivalent Employees (FTEEs)
Employees working on average at least 30 hours of service per week.
 Two Part-time employees each working 15 hours/week = 1 FTEE
 Ex: An employer has 40 full-time employees working 35 hours/week, 5 parttime employees working 20 hours/week and 5 part-time employees working
10 hours/week. The employer has 50 FTEEs.
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Can employers reimburse employees for health premiums
purchased via an exchange or from an agent in lieu of setting up
their own plan?
The Internal Revenue Service addresses these arrangements - known as "employer
payment plans," in IRS Notice 2013-54. The IRS considers these plans to be group
health plans, and when undertaken by an employer who is otherwise required to
establish a group health plan and provide benefits to qualified employees, is not in
compliance with the ACA.
 According to the IRS, employers who do this in lieu of establishing a required ACA
compliant health plan may be subject to an excise tax of up to $100 per day per
employee. This could amount to a tax of up to $36,000 per employee per year, under
Section 4980D of the Internal Revenue Code.
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The IRS recently distributed Notice 2015-17 that allows a measure of
relief for some employers from the above excise tax in four
circumstances:
 The plans are 'employer payment plans' as defined in Notice 2013-54, provided the
plan is not sponsored by an Applicable Large Employer (ALE) as defined in
Paragraph (c)(2) of IRC 4980H (shared responsibility for employers regarding health
coverage) and sections 54.4980H-1(a)(4) and -2 of the application.
 The employer payment plan is an S corporation arrangement for shareholder
employees who own 2 percent of the company or more.
 The arrangements in question are to reimburse employees for Medicare premiums,
or
 The arrangements in question reimburse employees for TRICARE premiums within a
health reimbursement arrangement (HRA). Note also that the IRS allows for some
temporary relief for small employers (those not designated as ALEs by IRC 4980H)
for 2014 and up to July 1, 2015. Generally, this relief will apply to employers with
fewer than 50 full-time equivalents in the prior year.)
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