IN THIS ISSUE:
? Busy Times for Consumer Driven Conferences
? Treasury Releases Next Round of HSA Guidance
? Prescription Drug Carve-Outs
? Transition for Delayed Account Openings
? Preventive Services Defined
Of course, the Treasury meeting is just one of several events in Washington this week, all of which included major emphasis on CD health. The National Association of Health Underwriters (NAHU) is holding its annual Capitol Conference at which HSAs and other CD health approaches are a very big topic. The Society of Professional Benefit Administrators (SPBA) and the Employers Council on Flexible Compensation (ECFC) are both holding similar meetings.
National Association of Health Underwriters – http://www.nahu.org/
Society of Professional Benefit Administrators – http://users.erols.com/spba/
Employers Council on Flexible Compensation – http://www.ecfc.org/
In fact, there is hardly a meeting of employers, underwriters, insurers, health economists, or health care providers these days that does not feature consumer driven health as a major – and sometimes the only – topic on the agenda.
Don’t think for a second that this is a passing fancy. Serious people are putting serious money into this approach. They are developing all of the elements that will give this movement legs – new software programs, communications strategies, information platforms, financial services, strategic partnerships. I even know of a couple of groups of entrepreneurs who are starting or acquiring brand new insurance companies to serve this new market exclusively.
With all this competition, the registration at CDHCC is down this year – about 400 attendees, down from 700 last year. But a year ago, CDHCC was the only show in town. Nobody else was organizing conferences around this topic. But if you need to know about the business of consumer driven health, this is the place to be.
SOURCE: Most of the presentations are available at http://www.cdhcc.com
Treasury Releases Next Round of HSA Guidance
The announcement of the new Treasury regulations was a pretty big deal. It featured Treasury Secretary John Snow, Roy Ramthun and Bill Sweetnam from Treasury, and Mike Parkinson from Lumenos, speaking before an audience of more than 100 reporters and interested persons. It is very unusual, perhaps unprecedented, for the Secretary to be personally involved in the announcement of a set of new regulatory guidance. It underscores again the solid commitment of the Bush administration to consumer driven approaches to health care financing.
The new guidance surprised at least some observers, in that it included a lot more flexibility than was expected. The biggest surprise was on prescription drug carve-outs. The Service released Revenue Ruling 2004-38, which predictably ruled that a person with a drug co-pay plan is not eligible for an HSA if the coverage is not subject to the minimum deductibles of $1,000 for an individual and $2,000 for a family. Congress was quite specific about what would be a “permitted” coverage below the deductible, and prescription drugs were not included. But the surprise came in the form of Revenue Procedure 2004-22. This document provides “transition relief” to allow people with co-pay plans to be eligible for an HSA until 2006. The rationale for the exception is that “many employers and health plans have been unable to modify the benefits provided under their existing health plans” due to the short period between enactment and the effective date of the HSA legislation. The transition should help health plans convert to a drug benefit that includes the deductible by, for instance, moving first to a coinsurance approach instead of a copay benefit, or by raising the copay amount so that the total out-of-pocket responsibility is similar to what it will be with a deductible.
The Service released another transition notice in the form of Notice 2004-25, which modifies the previous guidance that medical expenses are qualified for HSA payment only if they are incurred after the HSA is established. But because many people who are otherwise qualified (i.e., they have a high deductible health plan) have not been able to find a qualified account administrator, the Service will allow all qualified expenses incurred in 2004 to be paid from an HSA established as late as April 15, 2005. Presumably, the same applies to HSA contributions, and people will be able to make contributions for as many months as they are covered by an HDHP, even if they establish the account later in the year. But the Notice is not specific on that issue.
Finally, the Service issued anxiously awaited guidance on what constitutes preventive care. Preventive services may be paid on a first-dollar basis, but defining preventive services has been a real kettle of fish. Some have argued that employers and health plans should define it any way they want. Others say any drug that is used to “prevent” re-occurrences of a symptom should be included. Still others maintain that early diagnosis is not strictly prevention, so screening services should not be included. Notice 2004-23 clarifies the issue: It allows immunizations, periodic “evaluations,” prenatal and well-child care, smoking cessation and obesity weight-loss programs, along with a long list of screening services. The IRS suggests that additional guidance will come out as the Service gains more information.
Importantly, the Notice also says that just because a state law mandates coverage of a service that it calls preventive, doesn’t mean it qualifies as far as the Service is concerned. A state mandate that requires first-dollar coverage beyond what the IRS allows will invalidate that coverage from qualifying as an HSA program.
Treasury has a web site for HSA information at http://www.treas.gov/offices/public-affairs/hsa/ and also has a special e-mail address and phone number for HSA inquiries at firstname.lastname@example.org and 202-622-4HSA. Additional guidance on the relationship between HRAs, FSAs, and HSAs will be coming out by June.
SOURCE: All these documents are available at the Galen web site at: http://www.galen.org/ccbdocs.asp?docID=621.
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