Executive Order Proposes Expansion of Health Savings Account and Flexible Spending Account Benefits

June 25, 2019 – Charlotte, NC - On Monday, June 24, 2019, President Trump issued an executive order that, among other initiatives including a call for increased price transparency for healthcare services, featured a proposed expansion of Health Savings Accounts (HSAs) and Health Care Flexible Spending Accounts (HCFSAs).

Section 6 of the order calls for the Secretary of the Treasury to issue guidance, within 120 days, on expanding the ability of HSA-qualified health plans to cover low-cost preventive care, including care for chronic medical conditions, before the insured meets the deductible requirement.

In order to be considered an HSA-compatible health plan in 2020, a health plan must have a minimum deductible requirement of $1,400 for individuals and $2,800 for families. Services incurred to manage chronic conditions currently apply toward the deductible requirement that must be met by the insured before the health plan will issue payment for services. The proposed change will mean that costs incurred by the insured to manage chronic medical conditions would be covered by insurance before the deductible requirement is met.

Section 6 also included two directives regarding Health Care FSAs. Within 180 days of the order, the Secretary of the Treasury was directed to propose regulations to expand Section 213(d) expenses covered by Healthcare FSAs and HSAs to include direct primary care arrangements and healthcare sharing ministries. The Secretary of the Treasury was also required to issue guidance on increasing the maximum Health Care FSA carry over fund allotment beyond the $500 maximum currently allowed.

As a background, Health Care FSAs are structured as use-it-or-lose-it accounts. Employees elect to contribute a certain amount, up to an allowed maximum ($2,700 for 2019), to contribute to the account on a pre-tax basis. If funds are unused by the end of the applicable plan year, they are forfeited by the employee. In 2013, an optional carry over provision was added by the IRS to allow employees to carry over up to $500 of a remaining Health Care FSA balance to the next plan year to help mitigate the risk of participating in an FSA. There is no carry over provision for the Dependent Care FSA.

Analysis
The directives included in the executive order will reduce the risk of participating in a Health Care FSA by increasing the carry over allowance beyond the $500 currently allowed. Reduced risk of forfeiting funds, along with an expansion of Section 213(d) allowable expenses to include direct primary care arrangements and healthcare sharing ministries, may make FSAs a more attractive option for many employees if the proposed regulations advance.
The proposed expansion of HSA-qualified health plans to include payments for expenses related to the management of chronic conditions before the deductible is met will be a welcomed relief to many employees participating in HSAs. However, the impact on premiums for the underlying health plans in response to this proposed expansion is to be determined.
Employers should continue to monitor guidance from the Secretary of the Treasury as it is released and be prepared to update plan documents if needed. Flores will release additional information to clients and broker partners after the Secretary of the Treasury proposes specific regulations. In the interim, if you have questions regarding the executive order, please contact your Flores Business Development partner at 800.532.3327 or 704.335.8211.