THE IMPACT OF HEALTHCARE REFORM ON THE CONSUMER

The Impact Of Healthcare Reform On The Consumer



The Impact Of Healthcare Reform On The Consumer

Healthcare Reform On The Consumer

The health care reform legislation making its way through the 111 th Congress will likely have a modest impact on consumer-driven health plans and their associated health care accounts (i.e., FSAs, HRAs, and HSAs). Earlier proposals that would have eliminated some of these options (particularly FSAs and HRAs) did not survive the legislative process. Below is a description of the remaining provisions that may be included in the final health reform legislation. (Place 2005)

Changes Impacting All Health Care Accounts (FSAs, HRAs, HSAs, and Archer MSAs) Both the House and Senate bills include a change in the definition of a “qualified medical expense” that impacts reimbursements and withdrawals under all types of health care accounts (i.e., FSAs, HRAs, HSAs, and Archer MSAs). As of 2011, expenses incurred for over-the- counter (OTC) medications will no longer be eligible for payment or reimbursement from any of the health care accounts. (Pearson 2005)

The House bill definition appears to apply to all OTC medications. However, the Senate bill would still allow OTC medicines obtained with a prescription and insulin to be reimbursed or paid tax-free from the health care accounts. (Kelly 2005)The Senate bill would impose an excise tax of 40 percent on employer-sponsored coverage that has a benefit value in excess of $8,500 for single coverage and $23,000 for family coverage (indexed annually). The benefit value of employer-sponsored coverage would include the value of the group health plan and contributions to employees'(Howanitz 2003)

Costs To Consumers

This tax would be imposed on insurance companies, including self-insured plans and plans sold in the group market, and plan administrators. The House bill does not include a similar provision. The House bill would also extend the same tax treatment that applies to qualified spouses and dependents under current law to any person who is an eligible beneficiary under the terms of the plan. As a result, if a plan includes coverage for domestic partners (or other individuals who do not meet the current law definition of a spouse or dependent under the tax code), the partners would also be considered a qualified beneficiary for tax purposes. (Horowitz 2003)These provisions would also make these individuals eligible for tax-free reimbursement of qualified medical expenses under FSAs and HRAs, but HSAs were specifically excluded. The provisions would be effective beginning in 2010.

The Senate bill does not include a similar provision. Changes Impacting Only Flexible Spending Arrangements (FSAs) The most significant change likely to be enacted is an annual limit on contributions made by employees to flexible spending arrangements (FSAs) for health care. Both the House and Senate versions of health reform legislation would limit contributions to no more than $2,500 annually. (Fleisher 2003) The limit would be indexed to inflation for future years. Under the House bill, these changes would not take effect until 2013. In the Senate bill, these changes would take effect in ...