Benefits Buzz

Industry Update: Health Savings Accounts and Medical Loss Ratios

Posted on June 9th, 2020

Health Savings Account News

You may have previously heard that the 2019 federal tax filing deadline was extended until July 15, 2020. In the event you were unaware, contributions to Health Savings Accounts (HSAs) for the prior year can be made up until the tax filing deadline. The tax filing extension is impactful to HSAs for two reasons:

  1. HSA contributions for the 2019 tax year can be made up until July 15, 2020.
     
  2. Form  5498-SA,  the  tax  form  that  is  distributed  by  HSA  providers  to  account  holders  to  show  total contributions  that  were  made  for  the  year,  will  not  be  distributed  by  its  normal  deadline  (which  is normally June 1, 2020). The Internal Revenue Service (IRS) recently announced in Notice 2020-35 that HSA providers have until August 31, 2020 to furnish a copy of Form 5498-SA to anyone with an HSA. HSA account holders should expect to receive Form 5498-SA sometime after July 15, 2020 and prior to August 31, 2020.

Medical Loss Ratio News

The Medical Loss Ratio (MLR) is a provision that was added by the Affordable Care Act (ACA), and it requires health insurance companies to use a certain percentage of the premiums they collect towards claims and quality improvement expenses.  This provision attempts to control the cost of health insurance premiums by limiting the amount of premium that can be kept for administrative expenses, operating expenses, marketing expenses and profit.

In the individual and small group markets, health insurance companies must use 80% of premiums collected toward claims and quality improvement expenses. In the large group market, health insurance companies must use 85% of premiums collected toward claims and quality improvement expenses.

Each year, health insurance companies must publicly report their MLRs. If a health insurance company fails to meet the MLR, they must provide rebate checks to affected individuals and/or employer clients. These checks are not typically sent until September after the year ends. As an example, rebate checks for the 2020 year would not typically be sent until September 2021.

Due to the Coronavirus, some health insurance companies are tackling the MLR issue ahead of schedule. Many health insurance companies have seen a significant reduction in medical expenses this year. Claims are down because many non-emergency, elective and routine procedures have been postponed. Some health insurance companies have started to provide premium discounts for one or more months of coverage in 2020. Anthem and UnitedHealthcare are two examples of health insurance companies providing discounts.

 

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