By: Nick Bonds, Esq.
On July 17, 2019 the Internal Revenue Service issued Notice 2019-45, and, if our consulting question inbox is any indication, caused quite a stir in our community. At least among the groups offering HSA-qualified high deductible health plans.
We have been inundated with a deluge of inquiries, ranging from the vaguely curious to the slightly manic: Are they changing the definition of preventive services? Does this change what we have to cover? How do we account for this in our plan document? What is the airspeed velocity of an unladen swallow?
Okay, that last one might be from Monty Python, but seriously everyone – relax.
This new rule essentially stems from an executive order President Trump issued on June 24, his “Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First,” which tasked the Treasury Department with a few homework assignment. Among these was Section 6(a), which called for guidance to expand the ability of patients to select high-deductible health plans (HDHPs) that can be used alongside an (HSA), and that these plans cover low-cost preventive care, before the deductible, to help maintain the health of people with chronic conditions, all within 120 days.
Five weeks later, the Treasury delivered, and the IRS introduced Notice 2019-45 to the world. The notice’s stated purpose is to “expand the list of preventive care benefits permitted to be provided by a high deductible health plan (HDHP) . . . without a deductible, or with a deductible below the applicable minimum deductible (self-only or family) for an HDHP.”
Our interpretation of this notice is fairly straightforward: it does not create any requirements for an HDHP to cover the listed services differently. Rather it gives HDHPs the ability to cover fourteen new services and items at 100% without applying their deductible, and without endangering their HDHP status.
The whole point of this notice is to help individuals utilizing an HDHP to manage their chronic conditions, like asthma, diabetes, and heart disease. A growing majority of employers are offering their employees HDHPs in tandem with a Health Savings Account. This rule offers those employers greater flexibility and eases the strain high deductibles put on the wallets of employees with chronic conditions.
Section 6(b) gave us something else to look forward to: Treasury has 180 days to propose regulations that could potentially expand eligible medical expenses under Section 213(d) to include direct primary care and healthcare sharing ministries. Forthcoming regulations could open some exciting possibilities for employers contemplating on-site clinics. So stay tuned.
By: Erin Hussey, Esq.The IRS has recently been enforcing the Employer Shared Responsibility Mandate (“employer mandate”) by sending letters to employers implicating that they may have violated the employer mandate rules and may owe a substantial penalty called an Employer Shared Responsibility Payment (“ESRP”). This employer mandate was put in place by the Affordable Care Act (“ACA”). The ACA requires Applicable Large Employers (“ALEs”) who have 50 or more employees to (1) provide minimum essential health coverage to all full-time employees and their dependents (or the employer will face a subsection (a) penalty); or (2) offer eligible employer-sponsored coverage that is “affordable” and meets “minimum value” (or the employer will face a subsection (b) penalty). Employers who receive these letters may have to pay the ESRP, but have a chance to respond to the letter before the penalty is mandated.A client was presented with one of these letters from an employer. The employer was facing over $50,000 dollars in penalties if they did not respond to the letter properly and explain why they were/were not at fault. The IRS has specific guidelines of how to respond to these letters. This can become very daunting and confusing for employers facing these high penalties. The client reached out to The Phia Group for consultation. Krista Maschinot and Erin Hussey analyzed the situation and explained what the employer may or may not have done wrong to receive this large employer mandate penalty, and with their consultation, the employer was able to identify their mistake and properly respond to the IRS letter. After the employer explained their mistake and properly responded to the IRS letter, the IRS sent a second letter to the employer which lowered their penalty to less than $2,500, saving the employer thousands in penalties.Disclaimer: As these forms are heavily based in IRS regulations and taxation, we strongly recommended to the broker that the employer should discuss this with their tax advisor and/or the entity that assisted in preparing their tax forms.