De Minimus Benefits: Little Perks That Are Not Taxing

Want to give your employees something to smile about? A little section of the IRS code allows for something called de minimis fringe benefits. De minimis benefits are occasional small gestures, such as buying the office lunch, bringing a birthday cake in for an employee’s birthday, or the occasional dozen doughnuts. The key is that the value of such benefits is small—so small in fact, that determining the fair market value of the benefit is more trouble than its worth, to you or the IRS. De minimis benefits do not count towards an employee’s taxable income.

The de minimis rule exists for “administrative convenience,” but should not be abused. IRS regulations make it clear that season tickets to the local ball team or providing a company vehicle more than one day a month exceed the de minimis limit. The IRS would consider this type of benefit included in the employee’s taxable income.

Psychologically the occasional perk can be more effective than an everyday benefit. Employees are surprised, feel that the perk is special and appreciate it more.

Medicare Part D

On January 1, 2006 Medicare began offering a new prescription drug benefit called Medicare Part D. The federal law that created the Medicare prescription drug benefit also created reporting responsibilities for employers who sponsor a health benefit plan that include prescription drug coverage.

We want to remind you the notification of creditable coverage is an annual requirement.

The model notices and additional information regarding the reporting requirements are available at the CMS website:

www.cms.hhs.gov/CreditableCoverage

Debit Cards Add Convenience, Challenge to Consumer-Driven Plans

As companies shift from co-payment to deductible-based health plans, more providers are offering benefit debit cards to employees and giving them easier access to various consumer-directed benefit accounts. This convenience comes with a significant challenge when determining how to handle claims in real time at the point of service. As debit card vendors move closer to solving the problem, it's unclear if there will be enough cooperation between health plans and providers to make the technology useful. Here’s the latest on how technology is enhancing plan administration to save companies time and money.

What are benefit debit cards? Benefit debit cards have been part of the health care industry for several years. They work just like a “regular” debit card, except that instead of being linked to a checking account, the card is linked to funds that employees have set aside in health care cash accounts. Combined with a Flexible Spending Account (FSA), Health Savings Account (HSA) or Health Reimbursement Arrangement (HRA), the popularity of debit cards has increased, with an estimated 37% of large employers offering them in 2006. Due to reporting and investment aspects of HSA, these accounts require the involvement of a bank or financial institution. Now health plans, financial institutions, plan administrators and employers must all coordinate payments and manage deductibles.

Tracking eligibility and expenses. Several companies have introduced technology that can electronically substantiate HSA-eligible over-the-counter (OTC) drug purchases at the pharmacy. Walgreen’s, the nation’s leading drugstore chain, has implemented a system that will electroni¬cally track and verify that the items are eligible expenses—eliminating the typically tedious, paper-based substantiation and reimbursement process for claims administrators and consumers. For most plan par¬ticipants with debit cards, the program virtually eliminates the need to provide receipts to their administrator when they use their HSA dollars at the pharmacy.

“Real-time” challenges. Although real-time claims processing would streamline plan administration tremendously, complex health insurance plans could make such an application extremely difficult. Tiered provider networks, for example, could mean tiered copays. For real-time adjudication to take place at the point of service, claims have to be unbundled and bundled back again. A simple office visit, for example, might include procedure codes for several tests. But determining provider discounts and the amount owed by the patient can be difficult. Real-time adjudication depends not only upon the complexity of the claim, but also upon getting all of the pieces together at the right time.

Provider resistance could prove another significant barrier to real-time claims adjudication. Doctor's offices are unaccustomed to collecting more than copays from patients. Under a typical co-payment plan, providers can collect co-payments from patients at the time of service and submit clean claims to payers after the service is provided. Once that patient is in a deductible-based plan, the provider won't be able to collect if he or she doesn't know what the patient is being charged. For real-time claims adjudication to work, providers need to agree to expand the information they can deliver at the point of service to a health plan and health plans need to change their systems to make real-time claims adjudication less cumbersome.

Real-time claims adjudication will likely require a series of progressive steps, rather than happening with a single solution, according to debit-card vendors. But these integrated point-of-service initiatives are a major step in revolutionizing the health care industry. The industry needs to continue to adopt technology that will meet employees’ demand for convenience and the growing level of consumerism in health care. For more information on integrating technology into your company’s con¬sumer-directed plans, please contact us.

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Articles are provided for your personal, non-commercial use and may not be reproduced in any form. Articles are based upon analysis of information sources, necessarily condensed and, therefore, not applicable to all situations. Though we believe them to be accurate, facts and conclusions are not guaranteed. Articles are provided with the understanding that they do not constitute legal, accounting or other professional advice, which should be sought from professionals in those fields. © 2006 Thoits Insurance. All rights reserved.

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