BALTIMORE, Dec. 21, 2006 (PRIME NEWSWIRE) -- ConnectYourCare, a provider of health account administration solutions for employers, recognizes the positive affect H.R. 6111 has on the future of Consumer-Directed Healthcare (CDH) and has prepared solutions to work with existing and prospective customers to adapt their CDH strategy in order to reap the benefits of these new guidelines. The bill, which was signed by President Bush on December 20, 2006, makes many of the Health Savings Account (HSA) provisions effective for taxable years beginning January 1, 2007.
"The law has added fuel to CDH by making HSAs more palatable to employers who have been on the fence about offering or proliferating them," said Jamie Spriggs, President and COO of ConnectYourCare. "We anticipate that most of our clients will want to take full advantage of this new law and we see no problems in supporting transition strategies effective January 1, 2007."
Some of the more significant provisions that will affect HSA enrollees are as follows:
-- Individuals with existing Flexible Spending Accounts (FSAs) or
Health Reimbursement Arrangements (HRAs) can now transfer funds
from these accounts into an HSA. It is considered to be a
rollover that does not count towards the annual maximum HSA
contribution level. This enables an individual to save money in
an interest bearing account or investment vehicle that has the
opportunity to grow exponentially over time rather than in an
account that does not earn interest.
-- Prior to the passage of this bill, individuals had a limited
maximum contribution level -- the lesser of the high deductible
health plan (HDHP) deductible amount or the statutory annual
maximum dollar contribution amount. Now, contributions will only
be limited by the maximum yearly contribution amount, which, in
2007, will be $2,850 for self-only coverage and $5,650 for family
coverage. These amounts are reviewed and adjusted annually for
inflation. New amounts will be announced no later than June 1st
for the next year. Effectively, consumers can substantially
increase the amount of savings over time by contributing the
maximum yearly amount and continuing to participate in a
compatible health plan with the lowest premium allowable.
-- Individuals will now have the ability to make a one-time transfer
of funds from an Individual Retirement Account (IRA) to an HSA.
The amount of funds transferred cannot exceed the annual maximum
HSA contribution limit. Although the philosophy behind this
provision is to enable individuals to save more money for future
healthcare expenditures tax-free, it does allow them to use the
money they transfer into an HSA for approved healthcare
expenditures they incur today or in the future. Since this money
is rolled over from trustee to trustee and not withdrawn from an
IRA, the individual will not be taxed for using it for qualified
healthcare expenditures before they reach retirement age.
-- Prior to the passage of this bill, employer contributions to
highly compensated employees (HCEs) had to be equitable to the
contributions paid to non-highly compensated employees (NHCE).
Now, employers can make different HSA contributions to HCEs and
NHCEs and still comply with comparability regulations. This
provision gives an employer greater flexibility to make higher
HSA contributions to lower-paid employees' HSA accounts.
"This bill makes HSAs even more valuable to employers and their employees. We are already working with ConnectYourCare to determine how to seamlessly make the changes our employees will want, such as transferring funds from their existing FSAs to HSAs," stated Matt Turner, General Counsel for Agora Publishing and long-time client of ConnectYourCare.
Many industry experts agree this legislation will open the door to HSAs and retirement health savings for many more individuals. Nav Ranajee, Vice President of Healthcare Strategy for LaSalle Bank, suggests, "The new legislation will make it easier for individuals to steadily increase the amount of money they have invested in their HSAs by being able to roll over their FSAs, HRAs or IRAs and fully fund it every year at the maximum indexed amount regardless of the time of year."
Others view the bill favorably, but believe more needs to be done to help employees save for their future. Jay Savan, a Principal with Towers Perrin, also sees the legislation as a step in the right direction, "The legislation helps, but we are projecting that HSAs won't be enough for most employees' post-retirement healthcare costs, even if they never spend a dime during their active employment. We also advise that employers consider supplementing HSAs with Retirement accounts that are 'vestible' by employees to ensure something is left for retirement years."
"As written, some of the provisions are ambiguous and raise additional questions that will have to be addressed in the near term in order for the critical mass of the industry to readily adopt and support complex employer strategies. However, the general consensus is that the provisions raise the status of HSAs to a level where every employer must consider HSAs as part of their employee benefits strategy," stated Spriggs.
About ConnectYourCare
ConnectYourCare's benefit delivery platform provides a pathway for migration to CDH, supplying tools for employees to better manage their healthcare choices and a vehicle for employers to realize healthcare cost containment. ConnectYourCare solutions include a multi-purse health payment card and Internet portal for employees to manage tax-advantaged accounts and related investments, completely transparent financial claims adjudication, multi-channel access to ConnectYourCare's customer support services, and comprehensive medical information and decision-support tools with a focus on wellness. ConnectYourCare is a Revolution Health Group company. Please visit http://www.ConnectYourCare.com for more information or call 1-877-495-3341.