If you have a high deductible health plan and have been wondering about FSA/HSA eligibility issues, this article is for you. It also includes updates on the health plan identifier (HPID) analysis for HRA/FSA plans. Technical stuff for sure, but nevertheless important. All this interesting info comes to us from our friends at ProBenefits, Inc. Thank you, ProBenefits, for helping to keep COBRAGuard readers on the cutting edge of health care reform!
Clarification of FSA/HSA Eligibility Issue
Potentially the most frequent compliance question for employers with existing or new high deductible health plans (HDHPs) is the interaction between Health FSAs and HSAs in terms of participant eligibility and elections.
In addition to coverage under a HDHP, in order to be eligible to make HSA contributions a participant also must not have disqualifying coverage under another health plan.
Generally, health flexible spending account (FSA) coverage is disqualifying coverage. However, employers offering HDHP plan options can still utilize the Health FSA if the plan is structured properly. For example, an employer that offers HDHP coverage as one of multiple health plan options can sponsor a general purpose FSA for employees that choose non-HDHP coverage or employees that elect the HDHP coverage but do not open an HSA bank account.
In addition, limited purpose Health FSAs designed to reimburse only dental or vision expenses are not considered disqualifying coverage. A detailed discussion of applicable considerations can be found here.
Health Plan Identifier (HPID) Analysis for HRA/FSA Plans including Update on Enforcement
Visit our website to see a full summary on this topic. Since last month, the Centers for Medicare and Medicaid ("CMS") released further guidance on the HPID requirement in the form of Frequently Asked Questions. CMS confirmed our analysis of the requirement for employers that sponsor multiple health plans. According to CMS, only one HPID is required for each ERISA plan. Therefore, an employer that sponsors multiple group health plans consolidated into one ERISA plan (a "wrap" plan) needs to obtain only one HPID. An employer that sponsors multiple group health plans that are not wrapped into a single ERISA plan may need to obtain an HPID for each benefit.
In another FAQ, CMS stated that FSAs and effectively all HRAs do not need to obtain an HPID. While this is certainly welcomed news for sponsors of FSAs and HRAs, this interpretation appears to contradict the HIPAA definition of group health plan. We believe this guidance can be relied upon at this time, but we will continue to monitor the issue for clients. You can find a complete list of the HPID FAQs from CMS here.
[Further Update on HPID Enforcement]: On Friday, October 31, CMS posted a Statement of Enforcement Discretion on the HPID website. In the statement, CMS announced an indefinite enforcement delay of the HPID requirement until further notice. We will continue to process this development and will provide an update shortly.
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