IRS Rules in Favor of Consumer-Driven Health Plans

In a decision that could change the benefit landscape of the nation's workplaces, the Internal Revenue Service ruled on Wednesday, June 26 that employers who participate in high-deductible health care insurance policies may create Health Reimbursement Arrangements (HRAs) with rollover rights for their employees.

For an HRA to qualify for the rollover treatment, employers must provide employees with a high-deductible health insurance policy with lower premiums than the typical low-deductible health plan popular in the workplace today. In addition, employers will fund a health savings account called an HRA with money that can be used to pay for medical expenses that are not covered by the insurance plan due to the high deductible. A key factor in this plan is that employees will be entitled to rollover unused HRA money from one year to the next, tax-free.

So far few employees have signed on to these new plans, awaiting the IRS decision. Nationally, only a few hundred thousand employees participate in such a plan. It is assumed that with IRS approval of the rollover feature of the HRA plans, many more employers will opt for the high deductible insurance plans.

The new plans will be funded entirely by employers with no payroll deductions, and will provide insurance coverage for only high-cost medical expenses.

One theory behind the new plan is that by shifting the burden of smaller, routine medical expenses to the employee, to be funded through the employee's own HRA account, employees will be less frivolous and more cost-conscious in their decisions about using medical care services.

You may like these other stories...

Ernst & Young 2013 audit deficiency rate 49%, regulators sayMichael Rapoport of the Wall Street Journal reported on Thursday that the Public Company Accounting Oversight Board (PCAOB) found deficiencies in 28 of the...
Some of your clients may get away to business conventions from time to time. It gives them a chance to rub shoulders with colleagues, catch up on the latest developments, and fine-tune their skills. And, when the meetings or...
PwC must face $1 billion lawsuit over MF Global adviceA federal judge on Wednesday ordered PricewaterhouseCoopers (PwC) to face a $1 billion lawsuit claiming that its bad accounting advice was a substantial cause of the...

Already a member? log in here.

Upcoming CPE Webinars

Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
Sep 10
Transfer your knowledge and experience to prepare your team for the challenges and opportunities of an accounting career.
Sep 11
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.
Sep 24
In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards. A dashboard condenses large amounts of data into a compact space, yet enables the end user to easily drill down into details when warranted.