Introduction to the High Deductible Health Plan and Health Savings Account
2 Why are we introducing a new health plan? DID YOU KNOW? About 70% of employers offer an HDHP option HDHPs have become increasingly popular since 2006 HSA tax savings and investment opportunities benefit employees HDHP+HSAs provide high flexibility to manage your long-term healthcare needs
: The Basics
4 The Basics High Deductible Health Plan (HDHP) + Health Savings Account (HSA) Comprehensive medical insurance Same [Carrier] network of providers Lower monthly premiums Higher deductible Funded by you Pays for healthcare expenses Save on taxes Account balance rolls over every year
5 Health Savings Account (HSA) Triple Tax Advantages TAX-FREE* Contributions Withdrawals for eligible healthcare expenses Interest and earnings Uses Pay for out-of-pocket healthcare expenses for you and your family Build a nest egg for future healthcare expenses Retirement savings strategy for both healthcare and living expenses Features Medical, dental and vision expenses No use it or lose it rule account balance rolls over year after year Portable account is yours if you change plans, retire or change jobs Account balance earns interest * Federally tax-free. AL, CA and NJ tax HSA contributions. NH and TN tax HSA interest and earnings.
6 Sample Qualified HSA Expenses Deductibles, coinsurance and copayments Prescription drugs Dental treatment such as fillings, braces, extractions Eye exams, eyeglasses and contacts Acupuncture COBRA and Medicare premiums Hearing aids including batteries Premiums for qualified long term care insurance (dollar limits may apply) Find a detailed list of qualified expenses on HSA Bank (HSAbank.com)
7 Sample Non-Qualified HSA Expenses Teeth whitening Cosmetic surgery Most over-thecounter medicines (except with Rx) Nutritional supplements Health club membership Maternity clothes Toothpaste Toothbrushes Electrolysis Find a detailed list of qualified expenses on HSA Bank (HSAbank.com)
8 Are you eligible for an HSA? Must currently be enrolled in an HDHP May not have a general purpose flexible spending account (FSA) or be eligible to use one (such as spouse s FSA) Limited purpose FSA (dental and vision only) allowed (not setting one up) Cannot be claimed as another person s tax dependent May not be enrolled in Medicare, Medicaid or Tricare May not be enrolled in any other non-hdhp health coverage*
9 *Insurance Allowed with an HSA Accident Disability Dental Vision Long-Term Care Specified disease or illness Insurance that pays a fixed amount per day of hospitalization Limited-use or Limited-purpose Health Care FSA
10 Dependent and Domestic Partner Eligibility Adult Children ELIGIBLE for health plan coverage up to age 26 NOT ELIGIBLE for HSA reimbursement if they are not your legal tax dependent Domestic Partners If both you and your Domestic Partner are enrolled in the HDHP, you may each contribute up to the individual HSA limit You may not use your HSA for your partner s expenses, and vice versa
How Does the HDHP Work?
12 High Deductible Health Plan 1 YOU PAY $0 PREVENTIVE CARE is covered at 100% 2 3 YOU PAY 100% UNTIL YOU MEET PLAN DEDUCTIBLE THEN YOU PAY A PERCENTAGE COINSURANCE AFTER DEDUCTIBLE HSA PAY OUT-OF- POCKET COSTS FROM TAX-FREE HEALTH SAVINGS ACCOUNT 4 YOU PAY $0 AFTER MEETING OUT-OF-POCKET MAXIMUM
13 Side-by-Side: Deductible and HSA Limits Employee Only Family $3,400 (plus $1,000 Catch up after 55) $6,750 (plus $1,000 Catch up after 55) $2,000 $4,000 IN-NETWORK DEDUCTIBLE MAX HSA CONTRIBUTIONS IN-NETWORK DEDUCTIBLE MAX HSA CONTRIBUTIONS
14 3 Easy Ways to Grow Your HSA Contribute premium savings towards HSA Contribute to HSA instead of FSA Set aside part of a pay increase or bonus After your HSA balance reaches a certain balance, you can invest it in HSA Banks investment options, just like an IRA or 401(k). Similar investment risks & rewards apply.
15 It s your responsibility! Maintaining Records Keep records of medical expenses: in case you want to request reimbursement later the IRS requests them Self Substantiation Your HSA custodian is not required to determine whether HSA distributions are used for qualified medical expenses Non-Qualified Withdrawals Before age 65 Income tax on non-qualified expense PLUS 20% penalty After age 65 Ordinary income tax applies to nonhealthcare withdrawals No penalty
16 Frequently Asked Questions When can I use funds in my HSA? There is no time limit as long as the expense was incurred after the HSA was established. Can I rollover unused balances? Yes. Any unused funds at the end of the year will rollover into the next year. Is there a limit on how large my account can grow? No, there is no limit to your total account balance. What happens to my HSA if my employment terminates? You keep your HSA. An HSA is an individual bank account and is portable.
17 Frequently Asked Questions Can I use my HSA if I am no longer in an HDHP? Yes, but you cannot continue to make new contributions. Is there a time limit for requesting reimbursement? No, as long as you have records, you can request reimbursement any time, even if it s 3 months or 3 years from the date incurred. Do I have to spend my HSA funds? No. Some people like to use their personal finances for small healthcare expenses to keep growing their HSA for a rainy day.
Sample Scenarios
19 Employee Only Low Expenses HSA Contributions Medical Expenses Paid Towards Deductible Paid by Insurance $0 $1,500 $500 $500 (paid from HSA) Example 1 A few doctors office visits and prescriptions totaling $500 Preventive Care - $0 copay Deductible not met Year-End HSA Balance $1,000 Things to Consider: How healthy are you, and how frequently do you need medical care? How much can you cover from your personal finances if you don t put enough in your HSA?
20 Employee Only High Expenses HSA Contributions Medical Expenses Plan Deductible Additional Out-of-Pocket Costs $1,500 $4,000 Additional coinsurance $400 Year-End HSA Balance $0 $2,000 ($1,500 paid from HSA) $500 (paid from personal finances) Example 2 Carpal tunnel surgery on the hand, totaling $4,000 Used in-network services to obtain carrier discounts Met deductible Met $2,400 out of pocket Things to Consider: If you don t have enough in your HSA and haven t maxed out the annual contribution, add what you owe to your HSA directly before paying providers to get the tax benefit.
21 Family Coverage Low Expenses HSA Contributions Medical Expenses Paid Towards Deductible $0 Other HSA-Eligible Expenses $4,500 $600 Year-End HSA Balance $3,900 $600 (paid from HSA) Example 3 Preventive care visits for husband and wife (covered at 100% in-network, no deductible) No additional medical care needed Two pairs of prescription eyeglasses (HSA-eligible expense) Things to Consider: You may have higher healthcare expenses next year. Good thing your HSA balance rolls over!
22 Family Coverage High Expenses HSA Contributions Medical Expenses Plan Deductible Additional Out-of-Pocket Costs until Max OOP $6,750 (first year of participation) $50,000 $4,000 (paid from HSA) $8,000* Paid by Insurance $38,000 Year-End HSA Balance $0 ($2,750 paid from HSA, $5,250 paid from personal finances) *each individual within a family will pay no more than $7,150, but collectively as a family $8,000 Example 4 A long-term serious illness involving surgery and multiple therapies, totaling $50,000 Used in-network services Met deductible Things to Consider: If you haven t maxed out HSA contribution, make a deposit to your HSA before paying medical bills to get the tax benefit. Let s look at this same example in Year 3 of participating
23 Family Coverage High Expenses HSA Balance Medical Expenses Plan Deductible Additional Out-of-Pocket Costs until Max OOP $17,000 $50,000 $4,000 (paid from HSA) $8,000 (paid from HSA) Example 5 Family HSA maximum set aside for 3 years Medium healthcare expenses, leaving an HSA balance of $17,000 at the time of serious illness Paid by Insurance $38,000 Year-End HSA Balance $5,000
Using Your HSA 24
25 I went to the doctor. Now what? Visit in-network doctor Show ID card to obtain [Carrier] discounted rates Doctor bills [Carrier] [Carrier] processes claim and applies discounted rates [Carrier] provides Explanation of Benefits (EOB) showing what was paid and what you owe Doctor bills you (unless it was a preventive care visit) Compare bill to EOB to make sure the amount you owe matches Pay provider from your HSA or personal finances Don t pay that bill yet!
26 What about prescriptions? You pay the full cost of prescription drugs until you meet your deductible. Show ID card at the pharmacy to obtain [Carrier] discounted rates Pharmacy can see your plan details and determine the amount due at the time of sale You pay pharmacy from HSA or personal finances If using mail order pharmacy, you can set up automatic payment from your HSA
27 4 Ways to Access Your HSA Debit Card You automatically receive a debit card after HSA is set up Bill Pay & Electronic Fund Transfer Checks Automated Claims Forwarding* Pay expenses directly from your HSA You may elect to receive a checkbook You may elect this feature when setting up HSA Use the card at the pharmacy, doctor s office, or to pay provider bills Monitor, manage and schedule payments online, anytime Pay providers that don t accept debit card Medical claims to be paid automatically from HSA after claim has been processed Use at merchant ATM (may be addition charges at ATM) Payments can be scheduled on a one-time or recurring basis Reimburse yourself for payments made out-of-pocket *many not be available
Comparing the HDHP to Our Other Plans 28
29 Medical Plan Choices PPO (Plan A - Final) HSA (Plan B) MEDICAL PLAN Network Non-Network Network Non-Network Deductible (Ind / Fam) $500 / $1,000 $700 / $1,400 $2,000 / $4,000 $2,000 / $4,000 Deductible Type Embedded Aggregate HSA Compatible No Yes OOP Max (Ind / Fam) $2,250 / $6,750 $4,000 / $8,000 3 $8,000 / $16,000 Includes Deductible Yes Yes Office Visit 15% 50% 20% 50% Live Health Online 15% Not Covered 20% Not Covered Lab/Xray 15% 50% 20% 50% MRI, CT/PET Scan, etc. 15% 50% 20% 50% Inpatient Hosp 15% 2 50% 2 20% 2 50% 2 Outpatient (Surgery Center) 15% 50% ($1,500 max) 20% 50% ($1,500 max) Emergency Room $150 copay + 15% ($150 copay waived if admitted) $150 copay + 20% ($150 copay waived if admitted) Chiropractic 15% 50% 20% 50% Acupuncture 15% 50% 20% 50% PINNACLE (MEXICO PPO) Mexico PPO Network Mexico PPO Network Deductible None Included in Medical Deductible OOPM None Included in Medical OOPM Coinsurance No Charge up to allowed Fee Schedule Amount No Charge up to allowed Fee Schedule Amount PHARMACY PLAN Retail Mail Order Retail Mail Order Deductible None Included in Medical Deductible OOPM $4,600 / $6,950 Included in Medical OOPM Generic $5 $10 $10 $20 Brand - Formulary 50% to a Max of $30 50% to a Max of $60 50% to a Max of $40 50% to a Max of $80 Brand - Non-Formulary 50% to a Max of $80 50% to a Max of $160 50% to a Max of $100 50% to a Max of $200 Specialty 50% to a Max of $100 50% to a Max of $200 50% to a Max of $120 50% to a Max of $240 Plan B Deductible applies to prescription drugs Plan B - Pinnacle Mexico PPO claims will now apply to deductible and out of pocket maximum Embedded Deductible - When a health plan has embedded deductibles, it just means that a single member of a family doesn't have to meet the full family deductible in order for after-deductible benefits to kick in. Aggregate Deductible - With an aggregate family deductible, the health plan doesn t begin paying for the health care expenses of anyone in the family until the entire family deductible has been met. However, an individual in a family will not exceed more than $7,150 before expenses will begin to paid at 100% Out of network expenses the difference in the billed versus allowed will continue to be the members responsibility
30 Bi-Weekly Employee Contributions [HDHP Plan B] [Plan A] Employee Only $6.18 $39.72 Employee + One $11.01 $70.76 Employee + Two or Three $12.37 $79.51 Employee + Four or more $18.55 $119.26
31 Plan Choice Considerations How important is access to your providers of choice? How many office visits and/or Rx does your family have in a year? Are lower biweekly contributions important to you?
32 Pros and Cons of the Significant tax savings Use HSA for any qualified healthcare expense, not just insurer-approved medical benefits Build assets for healthcare or retirement Increased responsibility for managing healthcare spending Additional financial account to manage HSAs are taxable in AL, CA, NJ, NH and TN HSA balance rolls over year after year HSA is portable
Mid-Year Enrollment
34 Contribution Rules for Mid-Year Enrollees If you enroll mid-year you may contribute up to the annual HSA contribution limit, provided you Are HSA-eligible on December 1 of the calendar year you are making the full contribution If you terminate HDHP coverage or become otherwise ineligible The maximum contribution will be prorated for the number of months you were eligible to contribute and Remain HSA-eligible until December 31 of the following calendar year
35 Partial-Year Scenarios: HSA Contributions Scenario 1 Employee enrolls in HDHP 1/1/16 Re-enrolls 1/1/17 2016: 100% $3,350 / $6,750 2017: 100% $3,400 / $6,750 Scenario 2 Employee enrolls 8/1/16 to 12/31/16 Does not enroll in HDHP for year 2 Scenario 3 New hire enrolls 12/2/16 (after 12/1 cutoff) Re-enrolls for the following plan year starting 1/1/17 2016: 42% $1,407 / $2,835 2016 0% 2017: 0% $0 2017: 100% $3,400 / $6,750
Resources
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38 General Overview of Process with HSA bank Waiting to schedule call to review materials and understand member set-up HSA Maintenance Fee - $4 per participating member per month HSA Banking Fee - $1.75 per participating member per month (USUALLY CHARGED TO THE MEMBER)
QUESTIONS?