President Bush is expected to support of number of health reform efforts as he enters his second term in January. The Republican controlled Congress will be deliberating issues of interests to agents as well. Speculation regarding what issues will be tackled range from expanded Health Savings Accounts (HSA) and Flexible Spending Arrangements (FSA) modifications to tax credits/deductions for health and long term care insurance to enactment of Association Health Plans.

Association Health Plans (AHPs)  - Federal Charter

·         While proponents argue AHP legislation would benefit the small business community, it would actually hurt, not help small employers and their workers.

·         Recent AHP legislation would have exempted AHPs from state law mandates and regulatory controls creating an environment for market segmentation, consumer fraud and insolvency.

·         Cost savings are illusionary – most small businesses will actually experience cost increases.

·         The number of uninsured would actually increase.

Long-Term Care Insurance Tax Incentives

·         Encourage private LTC coverage through an “above-the-line” federal tax deduction for LTC premium payments.

Health Savings Accounts

·         As contrasted with proposals to create AHPs, the creation of Health Savings Accounts has opened a real way to increase access to more affordable health insurance.

·         The HSA program could be improved by:

·         Allowing individuals to take an “above-the-line” deduction for high deductible insurance premiums.

·         Allowing employees to roll over $500 from their flexible spending accounts each year into HSAs.

Malpractice

·         Adoption of malpractice and tort reform measures to reduce costs in the health care system.

Employer-based health tax deduction

·         Eliminating or capping the tax exclusion for employer-provided health insurance could result in more individuals losing their health care coverage.

·         Expanding the tax benefit to allow individuals to fully deduct the cost of their coverage is plausible.

·         Full deductibility should be considered in addition to, not in lieu of the employer exclusion.

IRS Publication 969 Corrected

  On December 20, the Internal Revenue Service announced that it had corrected 2004 Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans.

  IRS deleted the words "and expenses" from the second bulleted item under "Distributions from an HRA [Health Reimbursement Arrangement]" in the qualified medical expenses section.

  The corrected version of the publication is available at http://www.irs.ustreas.gov/pub/irs-pdf/p969.pdf.

Mental Health Parity Rules Extended

  The Department of Labor's Employee Benefits Security Administration recently released an interim final amendment extending the original sunset date of the Mental Health Parity Act (MHPA) from Dec. 31, 2004, to Dec. 31, 2005, effective Dec. 31.

  The requirements of the interim final amendment apply to group health plans and health insurance issuers offering health insurance coverage in connection with a group health plan beginning Dec. 31. Pursuant to the extended sunset date, MHPA requirements apply to benefits for services furnished before Dec. 31, 2005.

  MHPA amended the Employee Retirement Income Security Act and the Public Health Service Act to provide for parity in the application of annual and lifetime dollar limits on mental health benefits with dollar limits on medical and surgical benefits.