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A new compromise proposal being discussed in the Senate Finance Committee would carve-out FSAs from any cap on the health insurance premium exclusion, but limit contributions to a flat dollar amount or base an FSA contribution limit on income. For example, FSA contributions could be limited to a percentage of the average contribution ($1250 in some studies, so the limit would probably be much higher like $3,000-plus). The FSA value would not be added to the premium calculation for the tax cap. FSA companies who have heard about the idea reacted favorably given the alternative of a long and possibly damaging campaign to exempt FSAs from any change.
HSA Banks Reporting No Major Slowdown
Our spot survey of just a few of the biggest HSA custodians finds no major slowdown in new account formation despite all the talk about the impact of legislation in a new Democratic Administration. The big reason: employers of all sizes and particularly mid-market to large firms are still pressing ahead with their desperate search for a lower-premium product, with CDH accounts on top of the list. Also, rising deductibles in all plans boosts demand for savings accounts. One caveat is that HSA banks do see a reduction in marketing budgets due to the economy and that may translate in to a slower percentage increase on average in 2009. Blues plans continue to drive HSA market growth along with continued strong sales by Wellpoint, Aetna, CIGNA, and multiple large regional carriers. CD Market Report will be doing a major mid-year update and outlook in next week’s new issue.
HRAs May Be Tough To Calculate In Tax Cap
A coming ceiling on the tax exclusion for employer-paid health insurance premiums might not include any special calculation of the value of a Health Reimbursement Arrangement, according to a detailed analysis of the cap released last January by EBRI. Reviewing the effort needed for the IRS and employers to calculate what constitutes a taxable premium, the analysis says it will be tough sledding. For instance, half of the health insurance sold is self-funded and has no “premium” per se, and most of the HRAs sold are self-funded. Also, the HRA is an employer-owned short-term liability, not a separate fund like an HSA or an FSA, so measuring an HRA’s value will be even tougher. Most likely Congress will let regulators figure it — out if they can.
Access the EBRI Report link at http://hsamarkets.com/library.htm