Category:
Healthcare Reform

IRS Issues Guidance on Small Employer HRAs

IRS Issues Guidance on Small Employer HRAs

11/03/2017

by Chris Byrd

 

This week, the IRS released guidance (Notice 2017-67) addressing qualified small employer health reimbursement arrangements (QSEHRA).

In the form of 79 questions and answers, the IRS explains the rules and requirements for providing a QSEHRA under section 9831(d) of its code, the tax consequences of the arrangement and the requirements for providing written notice of the arrangement to employees. A qualified small employer HRA may be offered by employers that have fewer than 50 full-time employees and do not offer group health plans to any of their employees.

The proposed guidance attempts to respond in part to President Trump’s executive order of Oct. 12, which called for expanded availability and permitted use of HRAs. It should be noted, however, that the response is only in the context of QSEHRAs and does not address potential further expansion of HRAs. The primary purpose of the proposed guidance is to address many questions that have arisen since QSEHRAs were created last December.

The guidance is intended to be incorporated into proposed regulations to be issued by the IRS and Treasury Department. It provides for public comments on the guidance and the proposed regulations through Jan. 19, 2018.

Chris Byrd, WEX Health’s executive vice president of operations, says, “The IRS ruling is proposed and not final. It answers many, if not most, of the questions that the industry had asked it to. That’s good, as it eliminates some of the uncertainty about how these accounts are to be administered, which should help adoption of QSEHRAs. Much of what is outlined is helpful, but it’s not perfect, and I would expect we and other industry participants will provide input during the comment period.”

HRAs were created by the IRS in 2002 to allow employers to fund medical care expenses for their employees on a pre-tax basis. In December 2016, the 21st Century Cures Act additionally created QSEHRAs, amending the IRS code, Patient Protection and Affordable Care Act and other laws to exempt QSEHRAs from certain requirements that apply to group health plans.

To read the IRS’s notice in full, go here.

 


Chris Byrd

Executive Vice President, WEX Health Operations & Corporate Development Officer

Chris Byrd brings more than 25 years of experience in employee benefits and banking to his role at WEX Health. A founder of Evolution Benefits in 2000, Chris played a key role in designing the proprietary architecture for the company’s prepaid benefits card.

Chris oversees the daily execution of WEX Health’s business and leads the company’s operations and service delivery, corporate development, merger and acquisition activity, and legal, industry, and government relations efforts.

He began his career in commercial banking, and prior to 2000, he focused on finance, strategy, and business development for Value Health and two start-up healthcare companies. He joined WEX Health in July 2014.

Chris, who serves on numerous industry boards, is a frequent speaker on emerging trends in financial services and benefits and is active in industry and government relations. He earned a degree in economics from Brown University.  


Why the Latest Healthcare Reform Defeat Shouldn’t Be a Distraction from Your Health Benefits Strategy

Why The Latest Healthcare Reform Defeat Shouldn’t Be a Distraction from Your Health Benefits Strategy

10/09/2017

by Chris Byrd

 

Now that the Graham-Cassidy healthcare bill has failed, Congress will move on. We can expect it to concentrate instead on some pressing items on the calendar—things like agreeing on a continuing resolution to keep the government operating, raising the debt ceiling and reauthorizing programs like the Children’s Health Insurance Program. And of course, as we all know, congressional leadership is poised to take on the very complex issue of tax reform. In other words, after a six-month-long healthcare debate during which politicians expended a considerable amount of political and emotional energy, healthcare is largely off the table for now, barring the (unlikely) inclusion of healthcare in a tax reform package.

 

This means the Affordable Care Act remains the law of the land. While it is far from a perfect framework (and both sides of the aisle agree on that), the employer market has adjusted to it. The repeal and replace efforts of the past six months led some employers to place their benefit strategies on hold pending an understanding of what a new world order might look like. My advice: Don’t put off making decisions about your benefits strategy any longer. The deliberation and debate over a wholesale overhaul of the present system is finished. There will be some targeted efforts, most notably to stabilize the individual market, but the employer market framework is known—more of the same.

 

If there is disappointment among supporters of consumer-directed healthcare approaches, it is over the missed opportunity to pass reforms that would have expanded HSAs, restored the OTC tax benefit, eliminated the cap on FSA contributions and further delayed the implementation of the Cadillac Tax. In the absence of a broad reform bill, these supporters will continue to advocate for these provisions in separate pieces of legislation. But much of that effort may have to wait until after the end of the year, given that the attention of the tax-writing committees is fully focused on tax reform. The industry’s biggest priority continues to be to repeal, reform or delay the Cadillac Tax.

 

The market forces that are causing employers to continue to move toward consumer-directed, higher-deductible healthcare plans haven’t changed, and the trend of consumers having more skin in the game is inexorable because it works. Even without the legislative changes that would have been favorable to consumers with tax-advantaged accounts had the broad healthcare reform bills passed, these accounts will remain a very effective and attractive tool for both employers and consumers. Consumers should be making use of them, as they provide a significant benefit by helping them save money and become wise stewards of their healthcare dollars. Consumer-directed health approaches—and the tools and products that have sprung up around them—continue to be an effective part of the answer to the challenges presented by healthcare’s ever-increasing costs. As Congress gathers its energy for another round of discussion and debate—this time around tax reform—employers and consumers should not be distracted by what’s happening in Washington as it relates to their health benefits strategy.

 


Chris Byrd

Executive Vice President, WEX Health Operations & Corporate Development Officer

Chris Byrd brings more than 25 years of experience in employee benefits and banking to his role at WEX Health. A founder of Evolution Benefits in 2000, Chris played a key role in designing the proprietary architecture for the company’s prepaid benefits card.

Chris oversees the daily execution of WEX Health’s business and leads the company’s operations and service delivery, corporate development, merger and acquisition activity, and legal, industry, and government relations efforts.

He began his career in commercial banking, and prior to 2000, he focused on finance, strategy, and business development for Value Health and two start-up healthcare companies. He joined WEX Health in July 2014.

Chris, who serves on numerous industry boards, is a frequent speaker on emerging trends in financial services and benefits and is active in industry and government relations. He earned a degree in economics from Brown University.  


Tax Reform Is the Next Hot Ticket for Healthcare Regulation

Why Tax Reform Is the Next Hot Ticket for Healthcare Regulation

10/03/2017

In spite of the many headlines and healthcare bills that have centered on repealing or replacing the Affordable Care Act (ACA), the healthcare landscape in the United States today looks remarkably similar to the way it did when the ACA was passed seven years ago: The majority of Americans still receive insurance through their employers. Continue reading

Technology Looking to Improve the Healthcare Recruitment Process

Technology Looking to Improve the Healthcare Recruitment Process

A new entrant into the healthcare marketplace looks to help address the shortage of physicians anticipated by 2025 – a 90,000 physician shortage to be exact, according the medical school and teaching associations.

Along with those numbers, the Bureau of Labor Statistics adds that healthcare practitioners and healthcare support positions are expected to be the fastest growing jobs from now until 2024. Registered nurses are on both lists, expected to be in shortage and among the fastest growing positions. Continue reading

Healthcare Reform to Travel Down One of Three Paths

Talk about the “repeal and replace” of the Affordable Care Act (ACA) has been circulating throughout the industry and in the media for months now.  Repeal and replace are actually two very different concepts in terms of affecting different aspects of the ACA. There’s also a third possibility that would be synonymous with “repair”. No matter the term or path, the outcomes therefore, would have vastly different consequences for every group involved – insurers, providers, hospitals, employers, etc.

Three Futures of the ACA

Although there are three paths lawmakers can take, there are many, many ways no matter which path they take, to enacting what they decide on. Meaning even once a decision is made it could be rolled out in a piecemeal approach under various administrative actions, stand-alone legislation or through state legislature moves.

Repeal Only

Looking at the first scenario this would essentially “repeal” the ACA budget-related provisions through a special budget process called reconciliation and not provide any health-reform replacement provisions. According to the Congressional Research Service paper, there are several aspects of the ACA that could be impacted by reconciliation in a repeal scenario:

  • Repeals the individual and employer mandate penalties
  • Eliminates the 40% excise tax for employer-sponsored “Cadillac Plans”
  • Repeals federal government subsidies for individuals to purchase exchange coverage
  • Repeals Medicaid expansion
  • Restores Disproportionate Share Hospital Funding

Repair

The second path lawmakers could take would be to “repair” the ACA, keeping most of it intact and making adjustments to a few of the provisions through the legislative process. ACA items that may be repealed/revised under this scenario are:

  • Repeals the employer mandate
  • Revises the individual mandate through a replacement option, such as a continuous coverage mechanism
  • Expands health savings account usage
  • Funds high-risk pools
  • Expands Medicaid, giving state more flexibility in plan design
  • Widens age-rate bands, increasing higher and lower rating flexibility

Replace

Lastly, the ACA can be “replaced” by one of several current proposals being considered by lawmakers. There is widespread concern that repealing the ACA without providing any replacement plan could cause destabilization in the markets, particularly in the individual market. Plans vary to the degree of addressing the following efforts:

  • Repeals individual mandate
  • Replaces income-based tax credits with age-based tax credits
  • Funds high-risk pools
  • Transforms Medicaid into block grants
  • Restores Disproportionate Share Hospital Funding

Conclusion

The health industry and employers need to consider the above scenarios and prepare their businesses accordingly. Companies will need to be flexible and resilient as the market undergoes future changes.  The evolving landscape will create a new healthcare environment for everyone.

Source: PwC Health Research Institute and Strategy&.  Health Reform 2.0: A guide to developing resilience amid an uncertain future for the Affordable Care Act.  April 2017.

Webcast Recap: Healthcare Benefits Trends to Watch in 2017

The only constant in the healthcare benefits environment is change. As 2017 marks a “changing of the guard” in the political world, a year in which technology is improving, and a year in which you will need to compete aggressively for the best talent; your organization must be able to adapt, evolve, and provide benefits that meet your employees’ unique needs.

In Wednesday’s article, we took a deeper look at the challenges and opportunities that other employer groups are facing in offering healthcare benefits as we looked into the results of our 2017 Healthcare Benefits Trends Benchmark Study, which was given to all attendees of our webcast and provided many insights from nearly 300 benefits professionals at organizations of all sizes.

Trends and Talking Points: 2017 Healthcare Benefits to Watch Webcast

The Healthcare Benefits Trends to Watch in 2017 Webcast brought together three of the leading voices in the community to present their insights on our survey, as well as offering strategies and predictions for the year ahead.

Featuring Tiffany Wirth, Executive Director of the Healthcare Trends Institute and Vice President of Marketing at WEX Health, Sander Domaszewicz, Principal and Senior Consultant at Mercer, and Chris Byrd, Healthcare Operations Officer at WEX Health, these leaders brought decades of combined experience in healthcare benefits, legal policy, and business strategies, condensing a lot of highly valuable information into a brief, one-hour webcast.

Engagement Driving Changes in 2017

With many employer groups already making changes to their strategies over the past few years—implementing a wellness or preventive health program, adjusting cost sharing, or focusing on defined contribution—the top concern for employers in 2017 is employee engagement.

Engaging these employees, however, does pose a challenge as nearly 40% of employees had concerns about benefit communication and education and only 36% felt that benefit cost information was clearly presented, according to our consumer survey completed in Fall 2016.

Five Top Benefits Communication Methods

With engagement being its own issue, employers need to look at the way they communicate. While email may be right for some, other employees have other preferences, with a notable discrepancy between employer methods and employee needs:

Employer Communication Methods Employee Communication Preferences
Email: 77.1% Website: 54.4%
Meetings with HR/Benefits: 51.4% Printed Factsheets: 47.4%
Print: 49.1% Live Presentations: 38.6%
Intranet: 48.6 Email: 38.6%
Meetings with Advisors: 41.1% Videos: 23.7

 

Employers feel confident in their ability to educate employees, rating themselves at a 7.2 out of 10, roughly in line with employees rating their employers at 69% in the consumer survey.

Cadillac Tax Not Changing Many Minds

Even as this survey was completed during the election season, many employers are still in a holding pattern with respect to the Cadillac Tax. As it had already been delayed once from 2018 to 2020, respondents may have expected the threat of the tax to be delayed again, as fewer than 6% of employers have made aggressive changes to prepare, and a vast majority were waiting for definitive guidance:

  • 6% of Employers haven’t taken any actions
  • 7% are unsure what they need to do
  • 7% were not affected

Some Things Change, Others Stay the Same

As much as there have been changes in the way employers look at benefits, many things have remained steady:

  • Dental, Family Coverage, and Vision were the most commonly offered benefits.
  • Three Quarters of Employers in the last two years believe that benefits offerings are critical to their recruitment and retention.
  • In this and last year’s report, nearly 90% are still yet to make changes for the Cadillac Tax

Much, Much More: Healthcare Benefits Trends to Watch in 2017

If all of the information above came from the first ten minutes of the webcast, imagine what you can learn from the remaining 50 minutes.

The entire Healthcare Benefits Trends to Watch in 2017 features proprietary research into health plans, costs, adoption rates, and more from Mercer, presented by Sander Domaszewicz, Principal and Senior Consultant, and an in-depth look at the legal and regulatory outlook under Trump, the importance of the CURES Act passed last year, and the repeal and replace/revise and repair future for the Accordable Care Act, presented by Chris Byrd of WEX Health.

Learn more about what you can expect and how you can prepare in 2017 by watching the entire Healthcare Benefits Trends to Watch Webcast.