LDI Tells Louisiana Insurers And HMOs To Warn Insureds About Potential Tax Consequences From Pharmacy Discount Cards And Coupons – Insurance – United States – Mondaq News Alerts
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LDI Tells Louisiana Insurers And HMOs To Warn Insureds About Potential Tax Consequences From Pharmacy Discount Cards And Coupons
18 February 2022
Phelps Dunbar
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The Louisiana Department of Insurance advised health insurance
insurers and health maintenance organizations on Feb. 14 to notify
insureds enrolled in high-deductible health plans (HDHPs) with a
health savings account (HSA) that they may face unintended tax
consequences from the use of certain third-party payments, such as
pharmacy discount cards. The potential for these “serious tax
event[s]” comes as a result of the recently enacted Louisiana
insurance statute La. R.S. 22:976.1 and its
interplay with both the federal tax code and IRS rules.
La. R.S. 22:976.1 mandates that the value of third-party
payments, such as discounts, vouchers, financial assistance,
pharmacy discount cards, or other out-of-pocket reduction payments
used to purchase prescription drugs be applied toward satisfaction
of an insured’s annual deductible. According to IRS rules,
HDHPs are not allowed to provide benefits for any year until the
insured’s minimum deductible for that year is met. However,
applying the value of third-party payments deemed ineligible toward
satisfaction of an individual’s HDHP annual deductible could
render that individual ineligible to contribute to an HSA for that
tax year. So for those with an HSA, if third-party payments like
prescription drug discount coupons are applied before their HDHP
annual deductible is met, the tax benefits provided by the HSA
could be lost, which could very well “potentially create a
serious tax event for the individual.”
In order to avoid this potential pitfall, the Louisiana
Department of Insurance advised consumers enrolled in HDHPs with
HSAs to avoid using third-party payments, including pharmacy
discount cards. Likewise, the Department of Insurance advised
employers that offer state-regulated HDHPs to their employees and
health insurance issuers carrying HDHP products to notify insureds
enrolled in HDHPs with HSAs of these tax risks.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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