Consumer-Driven Health Plans

HSA and HDHP Overview

A Health Savings Account (HSA) is a special account owned by an individual where contributions to the account are to pay for current and future medical expenses.

HSA’s are used in conjunction with a High Deductible Health Plan (HDHP) Health insurance that does not cover first dollar

medical expenses (except for preventative care); deductible must be met before benefits paid

Can be an HMO, PPO or indemnity plan, as long as it meets the HDHP requirements set by the Treasury Dept and IRS code

What is an HDHP?

Health insurance plan with the following minimum deductibles for 2012: $1,200 (self-only coverage) $2,400 (family coverage; two or more individuals; total

family deductible must be met before benefits paid) These amounts are indexed annually to inflation

Annual out-of-pocket maximum (including deductible and co-insurance) cannot exceed the following for 2012: $6,050 (self-only coverage) $12,100 (family coverage) These amounts are indexed annually to inflation

Who is eligible for HSA’s?Any individual that:

Is covered by an HDHP Is not covered by other health insurance Is not reimbursed for any covered medical expenses

before their deductible is met through a Flexible Spending Arrangement

Is not enrolled in Medicare Cannot be claimed as a dependent on someone else’s tax

return Children cannot establish their own HSAs Spouses can establish their own HSAs, if both are

eligible

Who is Eligible for HSAs? A person can have the following types of health coverage

and still be eligible for an HSA:

Specific disease or illness insurance Accident and disability insurance Dental care, vision care and long-term care insuranceEmployee Assistance Programs, Disease Management

Programs or Wellness Programs These programs must not provide significant medical

care or treatment benefits Drug discount cardsEligibility for VA benefits (but cannot have actually

received VA health benefits in the last 3 months)

For 2012 :$3,100 (self-only coverage)$6,250 (family coverage)These amounts are indexed annually to inflation

Individuals age 55 and older can also make additional “catch-up” contributions:2006- $7002007- $8002008- $9002009- $1,0002010- $1,000

Maximum Contributions to an HSA

Who is Involved in Healthcare Decisions

PhysiciansInsurance CompaniesPreferred Provider NetworksEmployers/ HR DepartmentsUnions

WHO IS MISSING IN THE PROCESS?

Who is Missing?

THE CONSUMER!

In the DARK!

True Cost of PrescriptionsGeneric AlternativesCost of an Office VisitAlternative TreatmentsTrue Cost of Lab and Diagnostic TestsQualifications and Outcomes- Physicians and Hospitals

Why HSAs, HRAs and FSAs?

Individuals become better consumers of healthcare

Optimum solution to sharply rising premiums

Provide rate stabilization

Individuals Become Better Consumers of Healthcare

Alter treatment patterns for small claims by putting utilization in the hands of patient/insured

Unleash individuals as cost-conscious patients

Hospitals and doctors answer to patients individually (not insurance companies, provider networks or employers)

Example: Chevrolet or Mercedes

Optimum Solution to Sharply Rising Premiums

Individuals as informed consumers of healthcare will reduce utilization and claims costs

PROVIDE RATE STABILIZATION

HDHP with HSA

HDHP

Out of Pocket

HSA

But You Can Combine the Benefits of HSA, HDHP, HRA and FSA …

HDHP with HSA and HRA

HDHP

Out of Pocket

HSA

Out of Pocket

HDHP

HSA

HRA

Combination of Benefits

A Health Reimbursement Account can be used with a HSA and HDHP combination to:

Reimburse for procedures and services not covered under the medical benefit plan

Reimburse for any co-pays or co-insurance after the deductible is met

HRA funds are employer funds•Retain control of funds•Can roll over from year to year

HRA funds use lower•Deductible reduces draw on funds

Combination may cost less

HDHP with HSA and FSA

HDHP

HSA

FSA or O.O.P. Co-Ins.

Combination of Benefits

A Flexible Spending Account can be used with a HSA and HDHP combination to:• Reimburse for procedures and services not covered

under the medical benefit plan

• Reimburse for any co-pays or co-insurance after the deductible is met

Benefits of Combination

FSA funds are employee funds•Reduces cost to employer•Reduces taxable income•Reduces payroll tax burden

Combination may cost less

HDHP with HSA, HRA and FSA

HDHP

FSA or O.O.P. Co-Ins.

HSA

HDHP

FSA or O.O.P. Co-Ins.

HSA

HRA

Combination of Benefits

A Health Reimbursement Account and a Flexible Spending Account can be used with a HSA and HDHP combination to:• Reimburse for procedures and services not

covered under the medical benefit plan

• Reimburse for any co-pays or co-insurance after the deductible is met

First Year Savings Example PPO Plan vs. HDHP with HSA

In Network 1st Dollar 100% Plan with a $10 Office Visit Co-pay and $10 Rx Co-pay

Vs. HDHP with $1,250 Single $2,500 Family Deductible then

100% with HSA

Monthly Premiums

PPO Plan HDHP

Single $467.63 $336.63

Two-Person

$1,034.09 $745.71

Family $1,220.41 $881.57

Premium Savings

Monthly Annually

Single $131.00 $1,572.00

Two-Person

$288.38 $3,460.56

Family $338.84 $4,066.08

Premium Savings - HSA Contributions (Deductible amnt)

Net Annual Premium Savings

Single $1,572.00- $1,250.00

= $322.00

Two-Person $3,460.56- $2,500.00

= $960.56

Family $4,066.08- $2,500.00

= $1,566.08

First Year Savings Example PPO Plan vs. HDHP with HSA

HDHP with HSA provides employees 100% reimbursement of eligible medical expenses during the calendar year without the employees paying office visit and prescription drug co-pays. If the employee has money left in the HSA at the end of the calendar year, it is his/her money, not the insurance company’s money.

First Year Savings Example PPO Plan vs. HDHP with HSA

10 Singles @ $322.00 = $3,220.00

13 Two-Persons @ $960.56 = $12,487.28

11 Families @ $1,566.08 = $17,226.88

Total 1st Year Savings = $32, 934.16

Five Year Premium Projections PPO Plan vs. HDHP with HSA

Annual Premium Savings

Year PPO Plan HDHP Savings

1 $378,527.76 $273,093.60 $105,434.16

2 $423,951.09 $305,864.83 $118,086.26

3 $474,825.22 $342,568.60 $132,256.62

4 $531,804.24 $383,676.83 $148,127.41

5 $595,620.74 $429,718.04 $165,902.70

Assumes a 12% premium increase each year

Annual Premium Savings - Maximum HSA Contribution = Net Savings

Year

HDHP Savings

- HSA Contributio

n

= Net Savings

1 $105,434.16

- $72,500.00 = $32,934.16

2 $118,086.26

- $72,500.00 = $45,586.26

3 $132,256.62

- $72,500.00 = $59, 756.62

4 $148,127.41

- $72,500.00 = $75,627.41

5 $165,902.70

- $72,500.00 = $93,402.70

The fifth year savings is almost triple the first year savings

HDHP with $1250 Single/ $2500 Family Deductible then 100% with HSA vs. HDHP with $1250 Single/ $2500 Family Deductible then 20% Co-insurance to $1000 Single/ $2000 Family Out-Of-Pocket with HSA & HRA

No Co-insurance HDHP $273,093.60 Annual Premium

20% Co-insurance HDHP

$239,523.84 Annual Premium

Savings from Plan Design

$33,569.76

1st Year Savings

20% Anticipated Employee Utilization

$11,600.00 = $21,969.76

40% Anticipated Employee Utilization

$23,200.00 = $10,369.76

HSA Resources

www.treas.gov (click on “Health Savings Accounts)

www.HealthDecisions.orgwww.hsaresources.com

www.hsainsider.com

Questions & Answers

For additional sales support please contact Marketing Department:

Office: (800) 337-8005email: Marketing@VantageBenefits.com

web: www.VantageBenefits.com