University Outlines 2013 Healthcare Reform Changes
Article Three in the Series on Health Care
by Rachel Voris
As a new University of Alaska employee, you receive a lot of mail. I have received about six packets from my retirement firm and haven’t opened a single one. I don’t like mail. I check the mailbox every day, but it is more out of respect for my mailman than a desire to actually read the mail.
The mail comes out of the box, into my home and may sit unopened for days. I don’t thrive on being organized and mail requires just that. Mail requires a need to take appropriate steps and make a plan of action.
The university communicates about health care through the mail. So, to be informed, especially about health plans, one needs to closely examine their mail. If not, you may be forfeiting large amounts of money due to simple oversights. You may be missing out on using untaxed money towards health care costs. You may even be like me and not know there are changes coming in 2013 regarding the ongoing process of healthcare reform.
And like it or not, change is quickly approaching. Some changes, like the changes to the flexible spending accounts (FSA), will mean that employees are only allowed to contribute $2,500 toward their account instead of $5,000. Changes to the summary of benefits coverage information packets will make it easier to understand plan design and costs. Small changes, like the one that will appear on the W2 forms starting in January 2013, will help the employee understand the monetary value of their health plan.
Flexible Spending Accounts
One of the most substantial changes in 2013 will be capping the flexible spending accounts at $2,500. A FSA is a savings vehicle used to pay health care costs with pretax dollars. The funds contributed to this account lower an employee’s annual taxable income.
The amount of money an employee can put towards the FSA will be capped beginning in July 2013 due to the Affordable Care Act. The government will cap the amount that can be contributed to the flexible spending account because it is income that is not taxed and the government does not receive tax profit from it. The reduced amount will mean more taxable income. The IRS will use those funds to help pay for mandates made within the Affordable Care Act. Currently, the UA has set the maximum FSA amount to $5,000.
Contributing to the FSA offers many benefits if done correctly. The employee contributes a set amount to this account every pay period and in turn can be reimbursed for medical costs that are paid out of pocket, including deductibles, coinsurance, copays, vision needs, dental or other items not fully covered by the UA health plan. Employees can be reimbursed for the full account amount even before that amount has been contributed through bi-weekly pay periods. If an employee signed up for the FSA and were to have surgery a month after creating the account, the employee could use the full amount to pay their deductible and other out-of-pocket costs, even though that amount has not been completely contributed.
The FSA can also be used with dental, vision and pharmaceutical related costs. Since the cap amount for dental is $2,000 in a plan year, the money from the FSA can be used to help with additional expenses like orthodontics and wisdom teeth extraction, which can cost about $900 out of pocket. Using the information given, like the Wage Works Quick Start Guide found here, can make it easier to understand the process. An easy way to get reimbursed for medical expenses is to use the Explanation of Benefits (EOB) found at Premera.com. The employee can save the EOB as a PDF, complete the Pay Me Back form from Wage Works and complete the reimbursement all online. Funds could be returned as quickly as a week later.
Erika Van Flein, director of benefits at the Statewide Benefits Office, said that the university wants people to sign up for the FSA. “The FSA helps make out of pocket expenses more affordable,” Van Flein explained. “The account makes expenses easier to pay, and you can access to the entire goal amount from day one.”
There are disadvantages to using the FSA, many of which have been overlooked or unnoticed by university employees. The FSA account does not rollover every year. If an employee contributes $2,500 to the spending account incrementally throughout the fiscal year and does not use that money for reimbursement for health care costs, the money is forfeited to the university. In fiscal year 2011, a total of $76,000 was forfeited. The forfeited funds go toward costs the university is charged to outsource the flexible spending accounts administration. It also goes to offset other staff benefit costs, like retirement, disability, life insurance, unemployment or workers compensation.
“Everyone could benefit from the flexible savings account, as long as they really look and see what they are planning on spending on health care in the given fiscal year. People need to do a good estimate,” Pope said.
“Many employees aren’t making correct estimates or not filling out the required paperwork to get reimbursed for health care costs,” Van Flein said. When considering potential health care costs, employees should consider deductibles, dental care and prescriptions that are regularly refilled.
The university is looking into more options for an employee to be reimbursed, which may make it easier to use more of the funds in the flexible spending account instead of having to forfeit the money.
One of those options being considered is using a debit card to deduct money from the flexible spending account, but there are a lot of administrative issues associated with this, according to Pope. Even with a debit card provided through Wage Works, the employee would still need to submit paperwork for the refund. “The card becomes problematic. Not all health care costs are eligible for reimbursement.”
There is a list of items created by the IRS found here that spells out what is covered through the FSA and what is not. Over the counter medications are not eligible for reimbursement, unless you have a doctor’s prescription.
The university is also seriously considering the use of a health savings account (HSA) which is different from the FSA in that it does roll over from year to year and is considered “portable,” meaning it can be taken with an employee if they go to another place to work, or retire. The plan design, as is, would have to be altered if the university were to offer an HSA. HSA’s are used in conjunction with qualifying high deductible health plans (HDHP), and the university does not currently offer a qualifying HDHP.
The FSA is not connected to any type of health care plan. An employee can sign up for a FSA if you are a new hire, have a life event (see image left), or during open enrollment beginning in April.
W2 Reporting Changes
Starting on July 1, 2013, the employer contribution on the UAOnline paystub will look a little different. The employee will see the amount the employer contributes on W2 forms—a mandate required by federal law as part of the Affordable Care Act. The information won’t be on the printed paystubs, but it is on the UAOnline paystub. The money will represent the value of the employee’s plan (the amount they have paid and the amount the employer has contributed).
“The money the UA pays on behalf of employees is currently not taxable,” Pope said. “There is a potential for the IRS to turn health care contributions into taxable income instead of untaxed like it is now.”
Pope said that the cost of employee sponsored health care amount is presented for information purposes only, but it could be used in the future as a method for the government to collect information for healthcare and examine a potential taxable income source.
Summary of Benefits Coverage Changes
Employees will also see a new Summary of Benefits Coverage (SBC) information handout distributed during open enrollment in April 2013. According to the mandates in the health care reform, the new SBC will be a “plain English” summary in a standard format, making the provider information easier to understand. This sounds like a welcome addition to me as I wade through the material.
“People don’t clearly understand their benefits or what benefits we offer and how to take advantage of them,” Van Flein said. The new SBC will give an example of the cost to have a baby, the cost to treat diabetes and the cost to treat breast cancer. Pharmaceutical cost, medical treatments and x-ray costs will be included in the cost scenarios.
Additional Tax Changes
There will also be new taxes instituted on high wage earners. This new tax applies to earners that make over $200,000 in annual salary or a joint salary (married filing jointly) over $250,000. There will be a 0.9 percent Medicare tax, unmatched by the employer, and a 3.8 percent tax on passive investment gains. This does not apply to the majority of UA workers, but the changes will go into effect at the beginning of the New Year. The new taxes will create additional funding for the IRS. According to the salary database on the UAF Sun Star website, the individual tax ($200,000) will apply to about one percent, or around 10, of UA employees.
An excise tax will also go into effect for medical device manufactures. While this is not a direct cost increase for the UA employee, the cost may eventually be passed on to health care consumers eventually leading to a cost increase, according to Van Flein. Medical device manufactures are companies that make oxygen tanks, pace makers, and other medical equipment. The cost increase will first be placed on insurance companies, like Blue Cross and Aetna, and may filter down towards the insurance consumer.
There will be an increase of fees in 2013 for comparative effectiveness research, which is money used to research the effectiveness of various procedures like MRIs, CT scans and even x-rays. The fees fund research, which examines the value of the procedures and what the consumer is getting out of them. The fees are going to be rolled into plan costs, which will impact employee rates.
It's in the Details
You may be like me and often overlook the small details after you sign up for new accounts, but in this case, you could be missing out on knowledge about your hard earned money or tax increases that will affect your income.
In an effort to continue an understanding about healthcare reform, next month The Statewide Voice will continue the series “Healthcare Reform and How it Affects the UA” and discuss the actual cost of health care in last year, FY 2012, and the impact to next year’s rates, possible plan design changes and how to contact your constituent on the JHCC to make your opinion known.