WHAT’S NEW IN INSURANCE

New H.S.A and F.S.A Changes under Health Care Reform

You need to know:

Beginning in 2011, HSAs and FSAs may no longer be used to purchase over-the-counter (OTC) medications, such as non-prescription pain relievers, cold medicines, antacids and allergy medications. Over-the-counter medications prescribed by a physician will still be reimbursable on a tax-favored basis by these plans.

This new rule does not apply to reimbursements for the cost of insulin, which will continue to be permitted, even if purchased without a prescription.

Increased Tax Penalty for HSA for non-qualified usage:

If you use your tax-qualified account to purchase OTC medicines or other drugs purchased without a prescription after 1/1/11, or for other nonqualified withdrawals, those nonqualified expenses will be includable in your gross income and subject to an additional tax of 20%. This penalty increased from 10% to 20%.

For Group Insurance Plans

This is a brief description of changes effective 9/23/10. Most of these changes will occur with your next renewal:

1. Preventive benefits with no cost sharing. This means preventive benefits will be covered at 100% with no deductible or co-pay. If your plan is grandfathered, which means it is exactly the same plan as before Health Care Reform was enacted on March 23, 2010, the new preventive benefit provisions will not apply until 2014.
2. Plan Maximums for Essential Benefits will be Unlimited. However, Essential Benefits are yet to be determined.
3. Dependents may now be covered up to Age 26 even if not full-time students or if they are married. Of course, in Florida we cover to Age 30 and we are still waiting to see how the various insurance companies handle the requirements for dependents between Age 26 and Age 30. Most insurance companies enacted this benefit early in June of this year.
4. Children under age 19 will be covered for pre-existing health conditions. Again, this is not new for us in Florida.

NEW - Small Business Tax Credit - Do You Qualify?

In general, the credit is available to small employers paying at least half the cost of single coverage for their employees.

• How to Qualify? Generally, the tax credit is available to employers with fewer than 25 full-time equivalent (FTE) employees paying wages averaging less than $50,000 per employee per year.

However, since the eligibility formula is based in part on the number of FTEs, not the number of employees, many businesses will qualify even if they employ more than 25 individual workers.

• How much is the Credit? The maximum credit is 35 percent of premiums paid in 2010 by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations. In 2014, this maximum credit increases to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible employers that are tax-exempt organizations.

Do you qualify for the Maximum Credit? The maximum credit goes to smaller employers – those with 10 or fewer FTEs – paying annual average wages of $25,000 or less. How to claim the credit: Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011. For tax-exempt employers, the IRS will provide further information on how to claim the credit. Your CPA will guide you in claiming your tax credit.

Link for More Information on Frequently Asked Questions:
Small Business Health Care Tax Credit: Frequently Asked Questions can be found at: http://www.irs.gov/newsroom/article/0,,id=220839,00.html