How Your Voice for Consumer-Directed Benefits is Being Heard in Washington
April 4, 2019
Consumer-directed benefits take a number of different shapes but have a common goal: To help you and your employees save money. That’s why Discovery Benefits is proud to be an active and longtime member of the Employers Council on Flexible Compensation (ECFC), which advocates for legislation to keep benefits affordable and accessible for employers and employees.
Participation in consumer-directed benefits accounts is at an all-time high, with 163 million Americans relying on them. And the number of accounts is expected to grow in future years. Last month, ECFC sent 81 of its members, including a couple of our employees, to Washington, D.C., as part of its annual conference. We wanted to share with you a few of the issues we’re advocating for on your behalf.
Repeal or modify Cadillac tax
The Cadillac tax, which is scheduled to take effect in 2022 as part of the Affordable Care Act (ACA), is a 40 percent excise tax that’s scheduled to be applied to insurance companies when employer-sponsored health plans exceed certain thresholds. The burden of the tax would “likely fall on workers” in the form of lower wages, according to the Tax Policy Center. That’s why eliminating the Cadillac tax or modifying it is a focal point for ECFC.
ECFC seeks a full repeal of the Cadillac tax. However, if that’s not possible, adjustments to the tax can be made to lessen the impact on you and your employees. For example, the Cadillac tax is currently written to combine pre-tax employee and employer contributions toward health coverage when determining if the threshold (11,200 for single coverage and $30,150 for family coverage) has been reached. Those contributions include ones made to Health Savings Accounts (HSAs) and Medical Flexible Spending Accounts (Medical FSAs). ECFC would like this changed so employee pre-tax contributions are exempt when calculating if the Cadillac tax threshold has been reached.
Expand eligible expenses
The ACA also changed over-the-counter drug eligibility. Starting in 2011, HSA, FSA and Health Reimbursement Arrangement (HRA) funds could no longer be used on over-the-counter drugs unless they were purchased with a prescription. As a result, employees with these plans are feeling the burden of increased costs because:
- They need to schedule a doctor’s appointment to get a prescription for over-the-counter medication simply to use their funds.
- They purchase higher-cost prescription drugs that qualify for their funds rather than cheaper, over-the-counter alternatives.
ECFC encourages legislation that makes over-the-counter drugs once again eligible for HSA, FSA and HRA funds. Additionally, ECFC promotes adding menstrual care products, such as tampons, caps and liners, on the list of eligible expenses.
Enhance HSA usage
HSAs are sought-after because of their triple-tax advantage: Contributions are tax-free, earnings are tax-free and withdrawals for eligible expenses are tax-free. They’re especially popular with millennials, so it’s no surprise that the number of HSAs increased to more than 25 million in 2018. And, in the next two years, HSA assets are expected to grow by nearly 40 percent.
ECFC supports legislation that would expand HSA availability. These changes include:
- Letting your employees and their spouses who are 55 years of age or older each make catch-up contributions of $1,000 to the same HSA. Currently, only the accountholder can contribute the $1,000 catch-up contribution. A spouse would be required to open their own HSA in order to contribute.
- Allowing Medicare Part A beneficiaries to participate in an HSA. Currently, Medicare Part A beneficiaries can’t contribute to an HSA, but they can still use funds they’ve previously contributed.
- Permitting coverage of telemedicine consultations and on-site clinic services below the deductible.
Would you like to stay updated on industry news like this? Subscribe to our blog.