may 20, 2009
WASHINGTON
The Senate Finance Committee Recently released its options for financing health care reform. Included in the proposals for discussion are a number of options relating to employer provided health care, including HSAs, FSAs, and HRAs.
- One proposal would eliminate entirely the exclusion for FSA and HRA contributions.
- Another proposal under consideration would repeal the exclusion for reimbursement of over the counter (OTC) items.
The options relating to HSAs include an unspecified substantiation requirement.
Any changes in this area could impact companies over a wide spectrum, ranging from employers, to third party administrators, to providers, to banks that provide related services.
A copy of the Senate Finance Committee Report is available by clicking the link on the right side of this page.
Below is a summary:
The document is the last in a series of option papers on health care reform.
Next steps for the Committee are closed door sessions leading to a mark up of a health reform package, which is targeted for June release.
Comments on the financing options may be submitted by email in PDF or Word file formats to Health_Reform@finance-dem.senate.gov.
The deadline for public comment on the financing reform options is May 26, 2009.
A summary of the proposed options the Committee may consider in this area is as follows:
Modify the Exclusion for Employer-Provided Health Coverage (Page 17):
· Limit the amount excludable to the actuarial value of a benchmark plan, such as the value of the standard option under the Federal Employees Health Benefit Program (FEHPB).
· Apply a limit on the exclusion only to taxpayers with incomes over a specified threshold (such as $200,000 for single taxpayers and $400,000 for joint returns).
· Limit the exclusion based on both actuarial value and income of the taxpayer.
· Limit the exclusion to a percentage of the total premium for health insurance coverage obtained through the employer.
· Indexing options for any dollar limit include indexing based on the increase in health expenditures, changes in CPI, or changes in gross domestic product (GDP).
· Other possible options include a limit that considers geographic variations in costs and reforming the exclusion as a tax credit, deduction, or both.
· Benefits provided under a current collective bargaining agreement could be grandfathered from any changes until the agreement expires.
Health Savings Accounts (page 21):
· HSA contributions could be limited to the lesser of the individual's deductible under the high deductible health plan or the dollar amount of the maximum allowable HSA contributions. For 2010, a high deductible health plan must have a deductible of at least $1,200 for self-only coverage and $2,400 for family coverage and the maximum permitted HSA contribution is $3,050 for self-only coverage and $6,150 for family coverage.
· Increase the tax on nonqualified expenses to 20%.
· Impose substantiation requirements.
· Apply any limit on the exclusion for employer provided health coverage to HSA contributions.
FSAs and HRAs (Page 22-23):
· Apply a separate limit on the amount excludable under an HRA or FSA.
· Repeal the exclusion for contributions to FSAs and HRAs.
· Include FSA and HRA contributions under any limit on the exclusion for employer provided health coverage.
Over The Counter (OTC) Drugs (Page 23):
Reimbursements for OTC drugs are currently tax free when provided through an FSA or HRA. One proposal under consideration would eliminate the exclusion for OTC expenses for FSAs, HRAs, and HSAs.