Is MITRE s HD Care PPO + HSA right for you?

Transcription

1 Is MITRE s HD Care PPO + HSA right for you? How to leverage the plan for long-term advantages 2018 Healthcare MITRE Human Resources

2 BOOKMARK What is a High Deductible Health Plan...1 What is a Health Savings Account?...3 Why Consider an HDHP + HSA?...4 Is an HDHP + HSA Right for You...5 How Do HSAs Work?...6 Life Events...9 Saving with an HSA...10 Medicare & Health Savings Accounts...11

3 When choosing a health plan, many factors affect your decision. If you want an option with a high level of choice, tax-advantaged savings, and flexibility a high deductible health plan (HDHP) with a health savings account (HSA) might be the right choice for you.

4 What is a High Deductible Health Plan What is a High Deductible Health Plan? A high deductible health plan (HDHP) combines traditional medical coverage with lower premiums and higher deductibles. To qualify as an HDHP, a health plan must satisfy requirements for a minimum annual deductible and maximum out-of-pocket amounts, both set annually by the IRS. In general, the deductible must apply to all medical expenses (including prescriptions) covered by the plan. Plans can pay for preventive care services on a first-dollar basis (that is, without a deductible). MITRE offers an HDHP with HSA option: the HD Care PPO MITRE s HD Care PPO covers preventive services such as routine pre-natal and well-child care, child and adult immunizations, screenings, and annual physicals and mammograms at 100 percent when performed by in-network providers. Preventive prescriptions are also covered on a first-dollar basis. For most other services, members must first satisfy, or meet, the deductible before services are covered. For some services, a copayment applies after the deductible is met. Out-of-pocket expenses are limited by the out-of-pocket maximum, which is a protection on the amount of money you could pay for covered expenses during a single calendar year. Once a member meets this limit, covered in-network medical expenses will be paid at 100 percent. Example: Covered services SUBJECT TO DEDUCTIBLE NO CHARGE Exams for illness or injuries Consultations with specialists Emergency Room Inpatient acute hospital services and day surgery Hospital outpatient services Diagnostic procedures, including lab tests, MRIs and X-rays Treatments and procedures, such as surgical procedures and allergy treatments Preventative tests and services, including: - Adult annual visits - Annual gynecological visits - Routine pre-natal and post-partum visits - Cervical cancer screening, including Pap smears - Immunizations, including flu shots (for children and adults as appropriate) - Colorectal cancer screening, including colonoscopy, sigmoidoscopy and fecal occult blood test Note: Most prescription drugs are first subject to the plan deductible (excluding preventive drugs), and then subject to a copay. For full details on how all services are covered, please review the full benefit summary. HSA Guide 1

5 What is a High Deductible Health Plan What is a High Deductible Health Plan? cont d. What else do I need to know about the deductible? Most services apply to the deductible, excluding routine preventive care. Members can meet the deductible with a combination of out-of-pocket medical and prescription expenses. These expenses can be paid for using a Health Savings Account (HSA), your own money, or both. The in-network and out-of-network deductibles cross-apply, which means that all expenses apply towards both the in-network deductible and out-of-network deductible. Before the HD Care PPO will pay for non-preventive covered services, the entire deductible amount must be met. The deductible can be met by any individual covered by your plan, or by a combination of multiple plan members. Is there a limit to my out-of-pocket expenses? Yes! The HD Care PPO has both in- and out-of-network maximum-out-of-pocket limits. This is the maximum amount you will pay before the plan pays 100% of all covered benefits. You can reach the out-of-pocket maximum through the accumulation of deductible payments and copayments. What about prescriptions? The deductible applies to most prescription drugs; however, preventive drugs are excluded from the deductible and are covered after a copayment. The amount you pay for covered prescriptions will count towards satisfying your deductible. Questions on healthcare terms? Check out our glossary HSA Guide 2

6 What is a Health Savings Account? What is a Health Savings Account? A Health Savings Account (HSA) is a tax-advantaged medical savings account available to you when you enroll in a qualified high-deductible health plan, such as MITRE s HD Care PPO. The funds contributed to an HSA are not subject to federal income tax, earn interest tax-free, and are not taxed on distribution if used to pay for qualified medical expenses. HSAs are a great way to save money and efficiently pay for medical expenses. Your HSA and the money in it belong to you not your employer or the insurance company. You can use your HSA to pay for a variety of healthcare products and services for you, your spouse, and your tax dependents. The IRS determines which expenses are eligible for reimbursement. You can view a comprehensive list of qualified medical expenses here. Unused amounts are rolled into subsequent years; you keep any unspent HSA money. The rolled-over funds grow with tax-deferred investment earnings. HSA Guide 3

7 Why Consider an HDHP + HSA? Why Consider an HDHP + HSA? High deductible health plans with HSAs take a different approach to health coverage than plans with lower deductibles and higher premiums. HDHPs provide you with many benefits: flexibility, ease of savings, and help planning and paying for medical expenses and retirement. Advantages of HSAs Affordability In most cases, you can lower your monthly health insurance premiums when you choose health insurance coverage with a higher deductible, and HDHPs can be paired with an HSA to pay for healthcare costs with untaxed funds. Control You make the decisions regarding: xhow much money you contribute to the account xwhen to make contributions to the account xwhether to save the account for future expenses or pay current medical expenses xwhich expenses to pay for from the account xhow to invest the money in the account Flexibility You can use your HSA to pay for current medical expenses, including your deductible and expenses that your insurance may not cover. You can also save your funds for future medical expenses, such as: xfuture medical expenses, even if not enrolled in an HDHP xmedicare premiums, including Part B, a Medicare Advantage Plan (Part C), or a prescription drug plan (Part D). Note: HSA funds cannot be used for Medicare supplement policies (Medigap) xhealth insurance or medical expenses (if unemployed) xmedical expenses after retirement (before Medicare) xout-of-pocket expenses when covered by Medicare xlong-term care expenses and insurance Ownership Funds remain in the account from year to year, just like an IRA. It s a great way to save money for future medical expenses. Portability Accounts are completely portable, meaning you keep your HSA even if you: xchange jobs xchange your medical coverage xbecome unemployed xmove to another state Savings You can save the money in your HSA for future medical expenses, all while your account grows through tax-deferred investment earnings. Security Your HSA can provide a savings buffer for unexpected or high medical bills. Tax Savings An HSA provides you with triple tax savings: 1. Tax deductions when you contribute to your account 2. Tax-free earnings through investment 3. Tax-free withdrawals for qualified medical expenses HSA Guide 4

8 Is an HDHP + HSA Right for You Is an HDHP + HSA Right for You? HDHPs with HSAs are a growing trend in healthcare and offer many advantages, but whether it s the right choice for you depends on several factors. Comparing HDHPs with HSAs to traditional health plans can be difficult, as each offers pros and cons. Traditional health plans like the MITRE Flex Care PPO typically have higher monthly premiums, a smaller deductible, and fixed copayments. You pay less out-of-pocket costs due to the lower deductible, but you will pay more each month in premiums. HDHPs with HSAs generally have lower monthly premiums and a higher deductible. You may pay more out-of-pocket medical expenses, but you can use your HSA to cover those costs, and you pay less each month for your premium. The decision is different for everyone. If you have a reasonable idea of your annual healthcare expenses, you may want to consider MITRE s HD Care PPO option. For example, even if you have a chronic condition, this plan can be advantageous if you have a good idea of your annual expenses and budget enough money to cover cost of care. If you prefer certainty in medical costs, you may want to stick with a more traditional plan. You ll pay more in monthly premiums, but you will have a lower deductible and fixed copayments. For help comparing MITRE s plans, check out our Plan Decision Tool. Example: Traditional Plan v. HDHP with HSA Flex Care PPO HD Care PPO Put your premium savings into an HSA to pay for qualified medical expenses. Employee premium Employee premium HSA Guide 5

9 How Do HSAs Work? How Do HSAs Work? To have an HSA and make contributions to the account, you must meet several basic qualifications. Eligibility requirements xyou must be covered under an HSA-qualified, highdeductible health plan, like MITRE s HD Care PPO. xyou cannot be covered by any other health insurance plan, including a Flexible Spending Account (FSA). If you or your spouse have a full-purpose FSA, you are not eligible for an HSA. (This exclusion, however, does not apply to certain other types of insurance, such as dental, vision, disability, or long-term care coverage.) xyou cannot be enrolled in Medicare or TRICARE. xyou cannot be claimed as a dependent on someone else s tax return. You may only contribute to an HSA while covered under a qualifying HDHP, but you can continue to use your HSA if you are not enrolled in a qualifying HDHP in the future. Opening Your HSA MITRE partners with WageWorks, which allows you to open an HSA after enrolling in the HD Care PPO. You must complete all of the steps to open your HSA account with WageWorks and BNY Mellon in order to receive MITRE s contribution and your own payroll contributions. If you fail to complete set-up of your HSA account before December 31 of the plan year, you will forfeit MITRE s contribution, and your contributions made through payroll will be taxed and returned to you. To Open Your HSA: 1. Go to wageworks.com 2. Log in (if you have an account) or Register Now (if you do not have an account) 3. You will need to enter identifying information (including SSN). Setting up an HSA is equivalent to opening a new bank account; identification and security procedures must be completed. 4. Click Finish Opening Your HSA! and follow the steps given. Interested in MITRE s HD Care PPO, but not eligible for an HSA? Contact the HR Service Center to learn about your options for leveraging other tax-advantaged accounts: (x1-4700) or hrsc@mitre.org. HSA Guide 6

10 How Do HSAs Work? cont d. Contributions When you enroll in the HD Care PPO, MITRE will make a contribution to your HSA on your behalf. MITRE s annual HSA contribution is $600 for individuals or $1,200 for EE+1 or families (amounts are pro-rated based on date of hire or qualifying event). Your annual contribution amount, if applicable, will be set up through payroll deductions. HSA contributions are deducted from your wages and no federal income tax or employment tax is withheld on the contribution. You, or someone on your behalf, can make additional contributions to your HSA at any time. Contributions made outside of payroll to your HSA can be deducted when you file your income taxes, and cannot exceed the limit set by the IRS annually or you may pay tax penalties. Contribution Limits You can make a contribution to your HSA for each month that you are eligible. You can contribute no more than the designated IRS annual maximum. For 2018, the maximum is $3,450 for single coverage and $6,900 for family coverage. Individuals age 55 and older can make additional catch-up contributions of up to $1,000 annually. These maximums include MITRE s contributions. Determining your Contribution You can start contributing to your HSA on the first of the month after enrolling in an HDHP and completing the set-up procedures. You must have HDHP coverage on the first day of the month to make an HSA contribution for that month. In most instances, you can elect to contribute up to the full, annual IRS limit, even if you enroll in the plan midyear. Contributions can be made as late as April 15 of the following tax year. For 2018, the IRS contribution limit is $3,450 for single coverage and $6,900 for family coverage. Individuals who are age 55 and older can also make additional catch-up contributions of up to $1,000 annually. Who can Contribute? Contributions to your HSA can be made by anyone, including you, your employer, or a family member; the combined contributions cannot exceed the IRS HSA maximum contribution limit. Contributions to the account must stop once you enroll in Medicare. However, you can still use your HSA funds to pay for medical expenses tax-free. HSA Guide 7

11 How Do HSAs Work? cont d. Using Your HSA An HSA is managed by the account holder, giving you the choice of when to use your HSA dollars. You can use your HSA money as soon as your account is activated and contributions have been made. You can withdraw money from your HSA at any time and for any reason, including paying expenses that are not qualified medical expenses. However, you only get the tax benefits of an HSA when you use the account for qualified medical expenses. If you use it for another purpose, you will be required to pay income tax on the withdrawal, and you may also be required to pay a 20 percent tax penalty, unless the withdrawal is made after you reach age 65, become disabled, or after your death. Qualified Medical Expenses You can use money in your HSA to pay for any qualified medical expense permitted under federal tax law, which includes most medical care and services, as well as dental and vision care. HSA distributions are tax-free if they are used for qualified medical expenses incurred by you, your spouse, or dependents even if your dependents are not covered by your HDHP. Qualified medical expenses must be incurred after establishment of the HSA. Qualified medical expenses are defined in Section 213(d) of the federal tax code. You can use your HSA account to pay for your health plan deductible, your copayment or coinsurance for doctors office visits and prescription drugs, your share of the cost for dental care (such as exams and cleanings), and your costs for vision care (such as exams, eyeglasses, and contact lenses). Visit WageWorks for a full list of qualified medical expenses. Any amounts used for purposes other than qualified medical expenses are taxable as income and subject to an additional 20 percent penalty. Examples of non-qualified medical expenses that would be subject to tax and penalty are: xmedical procedures and expenses not considered qualified under federal tax law xover-the-counter drugs and medications without a prescription (except insulin) xother types of health insurance unless specifically described previously xmedicare supplement insurance premiums (Medigap) xnon health-related expenses Generally, you cannot use your HSA to pay for medical insurance premiums; however, there are some exceptions, including: xany health plan coverage while receiving federal or state unemployment benefits xcontinuation coverage under federal law (COBRA or USERRA coverage) xpremiums for Medicare Part B, a Medicare Advantage plan (Part C), or a prescription drug plan (Part D) xqualified long-term care insurance xany deductible health insurance for HSA account holders who are age 65 or older (regardless of whether or not they are entitled to Medicare) other than a Medicare supplemental policy After age 65, you can withdraw HSA funds for non-medical expenses without penalty, but you are then required to pay taxes on the money. If you become disabled (at any age), the account can be used for other purposes without paying the additional penalty. If you withdraw money from an HSA for non-medical expenses before you turn 65 (or become disabled), you must pay taxes and a 20 percent penalty. HSA Guide 8

12 Life Events Life Events Various life events may affect your HSA. Enrollment in a new health plan (non-hdhp) An HSA is an individually owned account. If you are no longer participating in an HDHP, you cannot make contributions to your HSA, but you can continue to use the money you have already saved in your HSA. Enrollment in Medicare Once you enroll in Medicare, or start taking Social Security payments (which automatically enrolls you in Medicare), you are no longer eligible to contribute to an HSA. You can, however, use your HSA account for out-of-pocket expenses. Check out the Medicare section for more information. Employment status changes Again, an HSA is an individually owned account. If you leave your current employer, the HSA money is yours. You may choose to leave your funds in the current HSA account, transfer the funds to an HSA with your new employer, or take a distribution and roll over the funds to another qualifying account within 60 days. Divorce The HSA owned by one spouse may be divided or transferred entirely to an HSA for the other spouse by court judgment in a divorce. If you transfer your HSA to your spouse as part of your divorce or separation, it is not a taxable transfer. Death You can designate a beneficiary to inherit your HSA after your death. The tax treatment of the HSA then depends on whether a spouse or non-spouse inherited the HSA account. HSA Guide 9

13 Saving with an HSA Saving with an HSA As noted, an HSA is a tax-advantaged fund that YOU control. Any funds not spent by the end of the year roll to the next year and continue to grow through the accrual of tax-free interest or investment earnings. As such, an HSA can help you with long-term retirement planning. If you start early, you can build your HSA balance by consistently making contributions. For example, if you spend $700 a year on healthcare costs, anything you contribute above that is money invested for your future. Maximum allowable contributions enhance this opportunity further, particularly for those investing at a younger age. Owners of individual retirement accounts (IRAs) or Roth IRAs who are HSA-eligible can shift IRA funds to an HSA without facing a tax penalty. The IRS allows a one-time transfer that does not exceed your maximum annual HSA contribution limit. The same types of investments permitted for IRAs are allowed for HSAs, including bank accounts, stocks, bonds, mutual funds, annuities, and certificates of deposit. Those age 55 and older can make additional contributions, or catch-up payments, to their accounts to accelerate their savings rate. Maintaining Records To protect yourself if audited by the IRS, keep records of all HSA documentation if your income tax return is considered open (subject to an audit), or as long as you maintain the HSA account, whichever is longer. Keep all insurance explanation of benefits statements that document your expenses for services covered by your HDHP. Also, when you pay an expense from your HSA and the expense is not filed with your health insurance carrier (for example, a vision or dental expense not covered by insurance), make sure you save the receipt. Anything you contribute beyond your annual healthcare expenses is money invested for your future. HSA Guide 10

14 Medicare & Health Savings Accounts Medicare & Health Savings Accounts You can only contribute to an HSA if you are covered with an HDHP. If you switch to any other health plan or have other health coverage, you will lose your eligibility to contribute to an HSA. However, you may spend the funds in your HSA even if you switch to non-hdhp coverage. When you reach age 65, your HSA eligibility changes if you enroll in Medicare, as do the rules for withdrawing funds. Effects of Medicare At age 65, you become eligible for Medicare and may be automatically enrolled. Medicare enrollment ends your HSA eligibility in one of two ways: 1. If Medicare is your only health insurance, you are no longer eligible to contribute to an HSA because Medicare is not an HDHP. Although you are only eligible to contribute for the months preceding your 65th birthday and Medicare enrollment, you typically have until April 15 of the following year (the tax filing deadline) to put the money in your HSA. 2. If you have Medicare as secondary coverage in addition to an employer-sponsored HDHP, you lose HSA eligibility because you have other coverage. When your Medicare coverage begins on your 65th birthday, you lose HSA eligibility on the first day of that month. For example, if your birthday is April 19, you are no longer eligible to contribute to an HSA as of April 1. For the months prior to your birthday, you are still eligible for an HSA (assuming you have an HDHP). Your maximum contribution is determined by adjusting the HSA maximum in accordance with how many months of the year that you were eligible. For example, if you turn 65 in April, you were eligible for the first three months of the year. You can then contribute 3/12 of the HSA annual contribution maximum. If you file an application to receive Medicare or Social Security benefits more than six months after turning 65, Medicare Part A coverage is retroactive for six months. This means that if you delay applying for Medicare or Social Security and are later covered retroactively, you cannot contribute to your HSA for the period of retroactive coverage. HSA Guide 11

15 Medicare & Health Savings Accounts cont d. If you reach age 65 and have an employer-sponsored HDHP, you must delay your enrollment in Medicare to remain eligible for HSA contributions. xif you don t enroll in Medicare Parts A and B when you re first eligible, you may pay a penalty in the form of a higher Medicare premium later. This late enrollment penalty is not applicable if you enroll during a special enrollment period (the month your employment ends and you experience a loss of coverage). xif you don t enroll in Medicare Part D when you re first eligible, you will be subject to a late enrollment penalty. This penalty will be added to your monthly Part D premium for the entirety of your Medicare coverage. The cost of the late enrollment penalty is a function of how long you delay your Part D enrollment. The penalty changes each year, but is calculated as 1% of the national base beneficiary premium for each full, uncovered month you didn t have Part D or Creditable coverage. The monthly penalty is rounded to the nearest $0.10 and added to the monthly Part D premium. The national base beneficiary premium for 2017 is $ This means that for each 12-month period, the monthly penalty is: Withdrawals after Age 65 Before you are 65, the money in an HSA can be spent tax-free on qualified medical expenses. If you withdraw your HSA funds for anything else, the money will not only be taxed but you will also pay a 20 percent penalty fee on the amount withdrawn. If you enroll in Medicare, your eligibility to contribute to an HSA ends. Once you reach age 65 (regardless of whether you are enrolled in Medicare), your options expand for using the money you have saved in the account. Also, upon reaching that age, the rules for using your HSA funds change in the following ways: Health Insurance Premium You can use your HSA funds tax- and penalty-free to pay premiums for employer-sponsored health coverage or eligible Medicare plans. Nonmedical Retirement Expenses Although money used for non-medical expenses will be subject to federal and usually state income taxes, after age 65, you do not pay the 20 percent penalty fee (12% penalty) x $35.63 (base beneficiary premium for 2017) = $4.28 Rounded to the nearest $0.10 = $4.30 Looking for additional information on MITRE s HD Care PPO and HSA? Contact the HR Service Center at: (x1-4700) or hrsc@mitre.org. HSA Guide 12