by Chris Byrd
We’ve just returned from Capitol Hill, where WEX Health attended the nonprofit Employers Council on Flexible Compensation (ECFC) 37th annual conference, March 14-16, to promote choice in benefit solutions. Much of the conversation in D.C. this year was around three major issues which affect tax-advantaged health benefit accounts that are a central element of a Consumer-Directed Health strategy:
- The Excise Tax on High-cost Health Plans.
Commonly known as the Cadillac Tax, this provision of the Affordable Care Act has been delayed yet again until 2022. Although this is helpful for employers concerned by the implications of this tax – especially those in high-cost states – a delay only defers this issue and does not represent a final resolution. Given that many employers set their benefit strategies years in advance, 2022 is not terribly far away. Among the actions employers are already taking or evaluating is curtailing or eliminating Flexible Spending Accounts (FSA) and Health Savings Accounts (HSAs) from their benefit offerings. Employee contributions to these accounts are counted toward the computation of whether the employee’s benefit plan exceeds the excise tax threshold. Efforts continue to repeal the tax entirely, but if full repeal cannot be accomplished, to reform the tax by excluding employee contributions to CDH accounts.
- Strengthening HSAs.
Numerous bills have been introduced in both chambers of Congress to increase the availability and utility of HSAs to help individuals and families plan for and fund their health care needs. The focal point of discussion is around the HSA “gold standard” bills – S. 403 and H.R. 1175. These bills include a broad range of important provisions, including an increase in contribution amounts, allowing Medicare-eligible workers to continue contributing to an HSA, and restoring the tax-advantaged treatment of over-the-counter drugs and medicines. In addition to these bills, there is increased discussion regarding a proposal to allow HSA-qualified health insurance plans to cover certain chronic-care conditions below the deductible. This idea actually originated with the employer community and is now gaining traction.
- Supporting and Enhancing FSAs.
As are an important option for employees, particularly since surveys indicate the vast majority of employers offer traditional health insurance that is not HSA-qualified as one of their options in their benefit plans. H.R. 1204 would raise the limit that an employee may contribute to an FSA from $2,650 to $5,000. This would benefit individuals and families with high healthcare costs, particularly those dealing with chronic conditions.
Based on what we heard in D.C., prospects for near-term action on these issues are somewhat limited. It is, after all, an election year, and as the calendar advances, the ability to move legislation that isn’t “must pass” becomes more challenging. In the healthcare arena, the biggest issues are the opioid crisis, stabilizing the individual insurance market, and prescription drug pricing/affordability. In addition, the administration continues to advance regulatory reform, including supporting innovation and flexibility in plan design, distribution, and state regulation and programs (e.g. Medicaid). With all this said, however, HSAs also continue to occupy an important place in the administration’s healthcare policy, and so there may be an opportunity to advance provisions that would strengthen these accounts.
As we have seen in the past, the healthcare landscape in Washington is highly fluid, so the best advice is to stay tuned for updates and developments as they happen.