Are TPA-Administered Health FSAs Subject to HIPAA? What Employers Need to Know

Are TPA-Administered Health FSAs Subject to HIPAA? What Employers Need to Know

As employers prepare to offer health flexible spending accounts (FSAs), a common question arises: Are health FSAs administered by third-party administrators (TPAs) subject to HIPAA’s privacy and security rules? The short answer is yes—and here’s why that matters.

Understanding HIPAA’s Scope for Health FSAs

Under HIPAA, a health FSA is considered a group health plan, which makes it a covered entity subject to HIPAA’s privacy and security rules. The only exception is for self-administered FSAs with fewer than 50 participants—a rare scenario for most employers.

If your company uses a TPA to manage FSA claims, this exception does not apply. That means your health FSA must comply with HIPAA’s full privacy and security requirements.

Why Fully Insured Plans Are Different

Employers with fully insured major medical plans often take a “hands-off” approach to protected health information (PHI), receiving only summary or enrollment data. This limits their HIPAA obligations because the insurer, not the employer, handles PHI.

However, most health FSAs are self-insured, and the “hands-off” exception doesn’t apply. Even if a TPA handles the day-to-day administration, your company is still responsible for HIPAA compliance.

What Employers Must Do

To comply with HIPAA when offering a TPA-administered health FSA, employers should:

  • Enter into a Business Associate Agreement (BAA) with the TPA, outlining how PHI will be handled.
  • Implement privacy and security policies for the health FSA.
  • Limit internal access to PHI to only those who need it for plan administration.
  • Train staff who may come into contact with PHI.
  • Ensure electronic PHI (ePHI) is protected under HIPAA’s security rule.
Minimizing Risk and Burden

While you can’t avoid HIPAA obligations entirely, you can minimize your exposure by delegating as much as possible to the TPA. This reduces the amount of PHI your company accesses and simplifies compliance.

If your company is offering a health FSA administered by a TPA, you are subject to HIPAA’s privacy and security rules. Taking proactive steps to comply—especially by working closely with your TPA—will help protect employee data and reduce legal risk.

Source: Thomson Reuters

Are TPA-Administered Health FSAs Subject to HIPAA? What Employers Need to Know

Top 5 FSA Buys Before Grace Period Ends

As the FSA grace period draws to a close on March 15, it’s crucial to make the most of your remaining funds. Flexible Spending Accounts (FSAs) offer a fantastic way to save on healthcare expenses, but any unused money will be forfeited if not spent by the deadline. To help you avoid losing your hard-earned dollars, here are five essential items you can purchase with your leftover FSA money:

1. Prescription Eyewear

Why not treat yourself to a stylish new pair of prescription glasses or contact lenses? Not only will you see better, but you’ll also have a chic accessory. Check out the options at the FSA Store.

2. Over-the-Counter Medications

Stock up on everyday essentials like pain relievers, allergy meds, and cold remedies. These are FSA-eligible and super handy to have around. You can find a wide selection at the FSA Store.

3. First Aid Supplies

Be prepared for minor injuries and emergencies by updating your first aid kit. Grab some bandages, antiseptic wipes, and gauze. Check out the FSA Store for all your first aid needs.

4. Health and Wellness Products

Consider investing in health and wellness products like heating pads, hot/cold packs, or even a new humidifier. These items are FSA-eligible and can help you stay comfortable and healthy. Explore the options at the FSA Store.

5. Sunscreen and Skincare Products

Protect your skin by investing in high-quality sunscreen and skincare products. Many of these items are FSA-eligible, making them a smart choice for using up your remaining funds. Check out the FSA Store for some great options.

Don’t let your FSA money go to waste! By purchasing these essential items, you can maximize your savings and ensure you’re well-prepared for the year ahead. Remember to check with your FSA provider for a complete list of eligible expenses and make your purchases before the grace period ends. For a full list of eligible FSA items click here.

Are TPA-Administered Health FSAs Subject to HIPAA? What Employers Need to Know

Midyear Health FSA Election Changes: Essential Guidelines for Employers and Employees

Administering a Health Flexible Spending Account (FSA) can be challenging, especially when employees request midyear changes to their elections due to unforeseen medical circumstances. This blog post aims to clarify the rules surrounding midyear election changes and provide practical tips for employers to manage these situations effectively.

Can Employees Change Health FSA Elections Midyear?

Question: Can employees reduce their Health FSA contributions if they are prevented from receiving anticipated medical care after enrollment?

Answer: No, employees cannot change their Health FSA elections under these circumstances. According to IRS regulations, an employee’s Health FSA election is irrevocable during a plan year unless an event occurs that fits within one of the exceptions available under IRS regulations or other guidance. Changes in medical condition or a provider’s recommendation do not qualify as changes in status and do not fall within the other exceptions applicable to Health FSAs.

Examples of Non-Qualifying Situations
  • Pregnancy and Laser Eye Surgery: If a doctor refuses to perform laser eye surgery on an employee who is pregnant, the employee cannot change their Health FSA election.
  • Dental Work Changes: If an employee’s spouse does not undergo planned dental work because the dentist’s recommendation changed, the employee cannot adjust their Health FSA contributions.

These situations do not qualify as “mistakes” that would allow an election change. The IRS’s 2007 proposed cafeteria plan regulations include an example where an employee elects Health FSA salary reductions for the next plan year in anticipation of eye surgery. If the surgery cannot be performed after the plan year starts, the employee must forfeit the remaining balance under the use-or-lose rule if their other eligible medical expenses are less than the amount contributed.

Minimizing Employee Relations Issues

While election changes are not allowed under these circumstances, employers can take steps to minimize employee relations issues:

  1. Clear Communication: Ensure that enrollment and other materials clearly explain the limited reasons for midyear election changes. Including real-life examples can be helpful.
  2. Remind Employees of Eligible Expenses: Employees may still use the funds by submitting other eligible expenses for reimbursement.
  3. Plan Amendments: Consider amending your plan to allow Health FSA carryovers of up to $660 to the next plan year. The maximum carryover amount is indexed, so stay updated on the latest limits.
  4. Grace Period: Adopt a grace period to give employees extra time to use up remaining funds.

By proactively addressing these issues, employers can help employees better understand their Health FSA options and reduce frustration related to midyear election changes.

Source: Thomson Reuters

Are TPA-Administered Health FSAs Subject to HIPAA? What Employers Need to Know

Understanding Employee Benefit Acronyms: A Quick Guide

Employee benefits often include a lot of acronyms. What do these and other acronyms mean? They are primarily used in Cafeteria PlansConsumer-Driven Health CareERISA Compliance, COBRA, HIPAA, and Group Health Plan Mandates manuals. The list below provides a comprehensive collection of all the acronyms used.

AD&D Plan – Accidental Death and Dismemberment Plan

ADA – Americans with Disabilities Act

ASG – Affiliated Service Group

ASO – Administrative-Services-Only

ATIN – Adoption Taxpayer Identification Number

CE – Covered Entity

CMS – Center for Medicare and Medicaid Services

COB – Coordination of Benefits

COBRA – Consolidated Omnibus Budget Reconciliation Act

COLA – Cost-of-Living Adjustment

CONUS – Continental United States

DCAP – Dependent Care Assistance Program

DCTC – Dependent Care Tax Credit

DFVC Program – Delinquent Filer Voluntary Compliance Program

DOL – Department of Labor

EAP – Employee Assistance Plan

EBHRA – Excepted Benefit HRA

EBSA – Employee Benefits Security Administration

EDI – Electronic Data Interchange

EFAST2 – ERISA Filing Acceptance System II (electronic submission of Form 5500s)

EIN – Employer Identification Number

EOB – Explanation of Benefits

EOI – Evidence of Insurability

EPP – Employer Payment Plan

ERISA – Employee Retirement Income Security Act

ePHI – Electronic Protected Health Information

FAVR – Fixed and Variable Rate

FICA – Federal Insurance Contributions Act

FITW – Federal Income Tax Withholding

FLSA – Fair Labor Standards Act

FMLA – Family and Medical Leave Act

FSA – Flexible Spending Arrangement

FUTA – Federal Unemployment Tax Act

GCPCA – Gag Clause Prohibition Compliance Attestation

GHP – Group Health Plan

GTL Insurance – Group Term Life Insurance

HCE – Highly Compensated Employee

Source: Thomson Reuters

HCI – Highly Compensated Individual

HCP – Highly Compensated Participant

HDHP – High-Deductible Health Plan

Health FSA – Health Flexible Spending Arrangement

HHS – Department of Health and Human Services

HIPAA – Health Insurance Portability and Accountability Act

HMO – Health Maintenance Organization

HRA – Health Reimbursement Arrangement

HSA – Health Savings Account

ICHRA – Individual Coverage HRA

IIAS – Inventory Information Approval System

LTCI – Long-Term Care Insurance

LTD Plan – Long-Term Disability Plan

MACRS – Modified Accelerated Cost Recovery System

MCC – Merchant Category Code

MEWA – Multiple Employer Welfare Arrangement

OCR – Office for Civil Rights

PBM – Pharmacy Benefit Manager

PCORI – Patient-Centered Outcomes Research Institute

PEO – Professional Employer Organization

PHI – Protected Health Information

POP – Premium-Only Plan

PPO Plan – Preferred Provider Organization Plan

PTO – Paid Time Off

QB – Qualified Beneficiary

QE – Qualified Event

R&C – Reasonable and Customary

RRTA – Railroad Retirement Tax Act

SAR – Summary Annual Report

SBC – Summary of Benefits and Coverage

SIFL – Standard Industry Fare Level

SIHP – Self-Insured Health Plan

SMM – Summary of Material Modification

SPD – Summary Plan Description

STLDI – Short-Term, Limited-Duration Insurance

TPA – Third-Party Administrator

UCR Rate – Usual, Customary, and Reasonable Rate

VEBA – Voluntary Employees’ Beneficiary Association