The IRS has released the 2023 maximum contribution amounts for health savings accounts and flexible spending accounts. You’ll want to make note of the changes when discussing your employee benefits during annual open enrollment.
The changes, which the IRS releases in November each year, will affect contribution limits for HSAs, FSAs and 401(k) and other retirement accounts.
The maximum contribution levels are readjusted every year to account for inflation, along with maximum retirement plan contribution limits.
They also cover the minimum deductibles that qualify programs as high-deductible health plans (HDHPs), which an HSA must be attached to under law.
Here’s the rundown of the changes going into 2023:
HSAs and HDHPs
HSAs allow your staff to set aside a portion of their pre-tax earnings into an account they can tap later to reimburse for qualified medical expenses, including copays, coinsurance, deductibles and medications.
Every year, the employee must decide how much they want their employer to deduct (pre-tax) from their paycheck to set aside in their HSA. Funds in an HSA can be rolled over indefinitely year after year and invested, much like a 401(k) plan.
$3,850 for self-only coverage (up $200 from 2022); and
$7,750 for family coverage (up $450).
In order to have an HSA, an employee must be enrolled in an HDHP. To qualify, the health insurance plan must have a minimum deductible of:
$1,500 for self-only coverage (up $100 from 2022); or
$3,000 for family coverage (up $200).
FSAs
FSAs are similar to HSAs in that they are funded with pre-tax dollars and can be used to reimburse for qualified medical expenses. However, the funds in the account must be exhausted or the employee loses the rest, except if the employer allows them to carry over a set portion every year.
The annual contribution limit for 2023 has increased to $3,050, up $200 from 2022.
Employers, under the law, may allow employees to carry over FSA funds from one year to the next. Under this option, an employee can carry over up to $610 of unused funds to the following plan year.
In other words, a worker with $610 of unspent FSA funds at the end of 2023 could carry over those funds for use in in 2024. The catch: These funds must be spent by March 15, 2024.
The maximum for the current year is $570, and your employees, if you allow it, would have until March 15, 2023 to spend those funds.
Retirement plan maximums
In 2023, employees who participate in 401(k), 403(b) and most 457 plans will be able to contribute up to $22,500, up from $20,500 in 2022.
Staff aged 50 or older can include a catch-up contribution of $7,500 per year, up from $6,500.
Also, the limits on annual contributions to an individual retirement arrangement have been increased to $6,500, up from $6,000 — although the IRA catch-up limit for people age 50 and over is the same: $1,000.
The takeaway
As we enter the final stretch of 2022, it’s important that you inform your employees of these new limits so they can plan their salary deductions accordingly.
As group health costs continue climbing and more employees struggle with the cost of premiums and out-of-pocket expenses, some employers are starting to take a second look at self-funded, or partially self-funded plans.
These plans give employers more skin in the game and the ability to better address cost drivers and tailor their offerings to fit the needs of their employees.
But while the plans can save both employer and their workers money, they are not for every organization. Plus, there is a degree of risk as a few serious health issues among group participants can blow open claims costs.
Small employer considerations
While medium-sized and large organization are more apt to self-fund due to their resources, 21% of employers with three to 199 plan participants were self-funded in 2021, according to a study by the Kaiser Family Foundation. That’s compared to employers with:
200 to 999 plan participants: 63%
1,000 to 4,999 plan participants: 86%
5,000 and more plan participants: 87%
Recently, insurers have been trying to address small and mid-sized employers’ concerns about risk and costs by rolling out “level-funded” plans. These vehicles provide a lower level of self-funding with a stop-loss insurance program that has lower attachment points than typical plans.
For level-funded plans, the insurer estimates the employer’s expected monthly expenses, which include:
A portion of the estimated annual cost for benefits,
The stop-loss protection premium, and
An administrative fee.
The employer pays the above to the insurer every month. If, at the end of the year, claims were significantly higher or lower than expected, there will be financial reconciliation between the employer and the carrier.
These level-funded plans differ from fully self-funded plans, where the employer assumes direct financial responsibility for the costs of enrollees’ medical claims. The employer will usually contract with a third party administrator or insurer to handle claims and provide administrative services for the plan.
Employers may purchase stop-loss coverage to protect against catastrophic claims.
Stop-loss basics
While these plans are called self-funded, there is still a portion of the costs that is insured to protect against catastrophic claims or unexpectedly high utilization.
There are different types of stop-loss insurance that pay the cost of claims at a certain attachment point, when plan, individual or claims spending exceeds a designated value:
Specific stop-loss coverage — This policy provides protection for the employer against a high claim on any one individual. This is protection against abnormal severity of a single claim, rather than abnormal frequency of claims in total.
Aggregate stop-loss coverage — This policy may limit the total amount the plan sponsor must pay for all claims over the plan year.
The benefits
Customization — Self-funded plans let employers customize their plan to meet the needs of their workforce.
Cost control — Self-funded plans only pay the actual costs, as opposed to fully insured plans where the premium goes towards the expected health care costs the insurer has forecast, plus its overhead, reserves, profit margin, and more.
Access to claims data — The employer gets detailed access to claims costs, so they can see what claims are driving costs. By looking at claims and plan participant needs, the employer can better decide which benefits to provide, enhance or remove if they are not being used.
Disadvantages
Compliance — Since the employer will be paying for the claims, they will be responsible for fiduciary and compliance issues.
Cash flow — The plan will need to have sufficient money going into its accounts regularly to pay for claims as they arise.
Volatility — Medical outlays can be unpredictable. A spate of high-cost claims can wipe out any potential savings.
The takeaway
If you’re fed up with rising group health plan premiums, talk to us about self-funding. We can review your current insurance arrangement and your plan costs to help you decide if it’s right for you.
By now you will know about the rapid uptake in telemedicine after the COVID-19 pandemic drove patients to use virtual appointments with their doctors.
While this form of medicine seems like it’s here to stay, there are other technologies that employers can look to include in their group health plans to help employees get the most out of their benefits, better manage their health and make more informed decisions about care.
And surveys of employees have found that employees want more from technology to be further woven into their benefits. Here are three technologies that can boost your current health benefits.
Apps and patient portals
More health plans are starting to offer user-friendly apps and online patient portals to allow their enrollees to manage their health care.
They are essentially convenient one-stop shops where they can, among other things:
Find a doctor.
Schedule appointments or doctor’s visits, annual exams and other procedures.
Receive reminders about important preventative care services, such as regular colonoscopies, blood work and vaccinations.
Renew prescriptions.
Check test results.
Get advice on managing chronic conditions.
The best apps and portals will allow enrollees to access their medical records, and to share them with their doctors or specialists they are seeing even if a doctor is not in the same health system that stores the health records.
By being able to share records with specialists in this manner, employees and their providers can streamline and better co-manage patient care. This can be crucial for patients with chronic conditions.
Some health plan portals and apps will also serve as the platform for virtual care visits with their doctors.
Real-time health tracking
One of the new frontiers in health care is remote patient monitoring, thanks to an explosion in new smartphone and tablet apps as well as wearable technology.
A 2021 survey by the Healthcare Information and Management Systems Society found that 52% of providers had recommended that patients use a smartphone or tablet app to monitor and track their care and health.
Additionally, 36% said they had recommended that patients wear a smartwatch or other wearable technology to monitor vitals like:
Heart rhythm and rate
Blood pressure
Temperature
Glucose levels.
In fact, a number of tech companies, including Apple Inc., have made health maintenance a major part of their platform by allowing them to user their iPhone connected to an Apple Watch to help them better manage their health by monitoring items such as the above.
There is even a function that will check to see if you are alright after falling down. And if you do not respond and are immobile for more than one minute, the watch will automatically call emergency services.
Benefits experts expect wearable technology to play an increasingly large role in helping people maintain their health and get help when they need it. In fact, a survey by Employer Health Innovation Roundtable and Hello Heart found that 65% of benefits executives expect use of remote patient monitoring to increase.
Virtual second opinions
Studies have found that 10% of patients are misdiagnosed for cancer, infections, heart attack or stroke.
Those mistakes are costly and can cost someone their life. In fact, the cost of false-positive mammograms and overdiagnosis among women accounted for $4 billion a year in health care spending, according to a study published in the journal Health Affairs.
Some employers are now offering virtual second-opinion services, which allow their employees to have their case reviewed by another doctor no matter where that specialist is in the country. This service can save the patient on travel costs and time to visit the specialist.
The patients will often deal with a nurse liaison, who can:
Gather all of the patient’s records and send them to a specialist to review.
Schedule video consultations with a specialist.
Arrange for reports to be sent to the patient and current provider after the specialist has reviewed their case and written a report.
Having access to a second opinion after receiving some bad medical news can help give the patient peace of mind, even if the original diagnosis is correct. In cases where mistakes were made, it could be life-altering or life-saving.
The takeaway
Technology will continue playing a greater role in people’s health. Offering new services that include technologies that can improve your employees’ health care experience is a win-win for you and your workers.
They’ll be happier with their health plans and the care they receive, and you can improve your employee retention.
As health care costs continue rising and employees are being asked to shoulder more of the expense burden, you can help them by offering a tax-advantaged plan that allows them to save for medical expenses.
These cafeteria plans, which are governed by Section 125 of the Internal Revenue Service Code, allow your employees to withhold a portion of their pre-tax salary to cover certain medical or childcare expenses. Employees can save an average of 30% in federal, state and local taxes on items they already pay for out of pocket.
Because these benefits are free from federal and state income taxes, an employee’s taxable income is reduced, which increases the percentage of their take-home pay.
The plans benefit employers, as well. Since the pre-tax benefits aren’t subject to federal social security withholding taxes, employers don’t have to pay FICA or workers’ comp premiums on those payments. A cafeteria plan can save employers an average of almost $115 per participant in FICA payroll taxes.
Types of cafeteria plans
Premium-only plan: POP plans allow employees to elect to withhold a portion of their pre-tax salary to pay for their premium payments. Most companies currently have this set up through their payroll provider. A POP plan is the simplest type of Section 125 plan and requires little maintenance once it’s been set up through your payroll.
Flexible spending account: With an FSA an employee pays — on a pre-tax basis through salary reduction — for out-of-pocket medical expenses that aren’t covered by insurance (for example, annual deductibles, doctor’s office copayments, prescriptions, eyeglasses and dental costs).
Dependent care flexible spending account: The dependent care FSA is an attractive benefit for employees who pay for childcare or long-term care for their parents. Employees may hold back as much as $5,000 annually of their pre-tax salary for dependent care expenses, which include expenses they pay while they work, look for work or attend school full-time.
How an FSA works
Before the start of the year, employees estimate how much they expect to spend on medical expenses and dependent care over the course of the year.
Employees should be careful to not put too much into the account. (They can carry over $500 in unused funds from the prior year into the new year, but any funds in excess of that would be forfeited.)
Whatever amount they choose to deduct for the year will be deducted on a pro-rated basis from each paycheck and deposited into their FSA.
On or after the first day of the plan year, an employee is restricted from changing or revoking the Section 125 agreement with respect to the pre-tax premiums until the plan year has ended, unless a change in family status occurs.
Employees pay out-of-pocket expenses upfront and then submit a claim and documentation to the plan administrator. They are then reimbursed for their expense in the form of a check or account transfer.
Despite newly enacted federal transparency rules for hospitals and health plans, some large hospitals are still not posting the required price lists for their services, according to a recent report.
The Centers for Medicare and Medicaid Services’ transparency rules were implemented to shine the light on what hospitals charge for their various medical services, the negotiated rates insurers have with health plans and the out-of-pocket costs enrollees can expect to pay for these services.
The rule has taken effect in stages and hospitals were the first required to comply, but the report finds their efforts have fallen short. Insurers were required to start posting negotiated rates for their health plans starting July 1, 2022, but currently much of that information is hard to find and decipher.
That means, for now, it may be difficult for plan enrollees to shop around for procedures that they will pay for partially or fully out of pocket. But hopefully, that should change as more rules take effect.
The non-profit Patients Rights Advocate found a number of omissions when recently analyzing price data for seven hospitals in Florida and Texas that are owned by two major health systems: Ascension Health and HCA Healthcare.
The transparency rule requires hospitals to publish machine-readable price lists and display rates for medical services in a format that allows consumers to comparison shop, meaning they are published online.
Insurers for their part are required to post their negotiated rates with providers in machine-readable format.
The effect on health plan enrollees
Health plan enrollees that want to shop around for medical services may currently find it difficult. While the data is posted on the insurers’ and hospitals’ websites, it’s hard to access and decipher since each entity handles the data differently.
Another report, by National Public Radio, highlighted the hurdles a health plan enrollee may encounter if they were trying to find their insurance carrier’s negotiated price for an MRI:
Locating the files — First they have to find the files, which are unlikely to be posted in an easy-to-find section of the insurer’s website. They may have some luck by searching on Google and typing in their insurer’s name, plus “transparency in coverage” or “machine-readable files.” Maybe.
Finding their plan — If they succeed with that approach, next they need to find their plan in all of those files. The files are supposed to have a table of contents, but insurers can have hundreds, if not thousands of different plans, some specific to just one employer. They’ll have to find their plan among those plans, many of which will have similar names to theirs.
Deciphering the data — If they are able to find their plan and download the information, they will have to decipher the various codes for the service for which they are trying to find a price. Each procedure has a specific service code, which the enrollee may not have.
It may get easier soon
The process may become easier on Jan. 1, 2023, when a new rule that requires insurers to provide apps and other tools to help policyholders estimate costs for visits, tests and procedures takes effect.
At that time, carriers will be required to make available online, or in hard copy upon request, patient costs for a list of 500 common shoppable services. That includes things like knee replacements, mammograms, X-rays and MRIs, to name just a few.
In 2024, insurers must add all remaining shoppable items/services to their comparison tools.
A new survey has found that remote workers have a more difficult time choosing benefit plans that are the right fit for them compared to their colleagues who work on-site or have hybrid remote-office schedules.
The poll by MetLife found that nearly half of remote workers struggle to understand their employee benefits. As a result, these workers may end up choosing plans that do not meet their needs and they may also spend more time on trying to choose their benefits.
The survey results also reflect the challenges that employers continue to face in meeting their employees’ increasingly diverse needs and that they need to improve their communications, particularly with staff who are working remotely full-time — and especially if they are in another state.
It’s crucial that employers get this right in light of the importance these workers place on their employer-sponsored benefits.
The survey of 1,000 full-time employees at companies with at least two employees found that 61% of workers said that employee benefits are a significant part of what’s keeping them at their company. Those figures were even higher for work-from-home caregivers with children (72%) and millennial and Gen Z workers (67%).
Widespread concern
There are a number of benefit issues that concern remote workers. The survey found that:
45% of remote workers are struggling to understand their employee benefits, compared to 29% of their colleagues that work on-site.
55% of remote workers are highly anxious about their finances, compared to 46% of hybrid and on-site workers.
55% of telecommuters spend over one hour per week worrying about their benefits, compared to 37% of on-site and hybrid employees.
In fact, 65% of remote workers said that a better understanding of open enrollment would help make them feel more financially secure. That’s bad news for those employees, as their lack of knowledge can result in choosing the wrong plan, which may end up costing them more than necessary. As a result:
Remote workers are twice as likely to say they enrolled in the wrong type of benefits last year.
57% of remote workers require more information to make the right benefit choices, compared to 47% of hybrid and on-site workers.
What you can do
Without clear communication, employees are less likely to understand and utilize their benefits.
Set up virtual information sessions where plan options, including key defining details and specific benefits, are outlined and covered clearly.
Depending on how many employees you have, you may want to consider offering a few sessions for them to choose from, to ensure they can all make it. If not, record the original session for employees to watch later if they can’t attend.
Also, you should make sure your human resources department is available for one-on-one questions. Some of your employees may need additional help in choosing a plan. You may want to consider offering phone or video chat meetings for them in case you need to show them documents and graphics.
