Solanco School DistrictOptional Health Care PlanFall 2012

A Qualified High Deductible Health Care Plan (QHDHCP)

with a Health Savings Account (H S A)

What’s in this for......?

....ME!!??

Opportunity to grow a savings account for medical costs

A good fit for many employees

Plan (Multi- year / Multi-need) for future medical expenses...covered and not covered by plan

Extend coverage for potential costs incurred by other family members

....The District!!?? Big picture - Designed to

be cost neutral

Individual picture – Adverse selection risk

Self-Insured program

A good fit to Health Care Market Direction and Health Care Decision

Consumer Directed choice and options – [no choice on choice!!!]

Side Bar – Health Care as we Know it....PPACA....and as it will be.

Newsweek announces elimination of “print” mode...technology evolved over the past 25 years...and still is...

The Health Care Industry – 75 years - Was told to evolve now! It’s a little messy...

Exchanges - Accessible AND Affordable –W-2’s 2012

How will this Change the whole Health Insurance delivery model?

Shift to Consumerism and Empowerment and Choice “Sell” to employers and HR, CEO and CFO Folks

“Sell” to Jane sitting at her kitchen table with her i-Pad

High Deductible Health Plans

Come in two types

A Health Care plan that simply has a higher deductible – usually means a deductible of $1000 or more –

A Qualified (signified by the letter ‘Q’) plan has an upfront (before any benefits are paid) deductible and is most often offered in conjunction with an HSA

What is a “Q”HDHCP?

Must follow guidelines as laid out by the IRS...[required to obtain the tax advantages prescribed]

Annual Deductible Minimum set by the IRS

$1,200 Individual and $2,400 family (IRS)

Solanco Plan Will be a $2,000 Individual and $4,000 Family plan design

Qualified High Deductible Health Plan (QHDHP)

QHDHPs generally have:

First dollar coverage (no deductible) for preventive care

Higher out-of-pocket (copays & coinsurance) for non-network services

All covered benefits must apply to the plan deductible, including prescription drugs

Qualified High-Deductible Health Plan (QHDHP)

Preventive Care - ExamplesPPACA guidance provides list of preventive care

that QHDHP may provide as first-dollar coverage before minimum deductible is satisfied:

Periodic health evaluations (e.g., annual physicals)

Screening services (e.g., mammograms)

Routine pre-natal and well-child care

Child and adult immunizations

Tobacco cessation programs

Obesity weight loss programs

HSA Overview

A Health Savings Account (HSA) is a special account owned by an individual used to pay for current and future medical expenses

HSAs are used in conjunction with a Qualified High-Deductible Health Plan (QHDHP)

Insurance that does not cover first dollar medical expenses (except for preventive care)

Can be an HMO, PPO or indemnity plan, as long as it meets the requirements

A QHDHP can be offered by a group as an option along with other type plans OR can be a stand alone offering

What is an H S A? (1)

An employee owned bank account

Contributions can come from Employee (EE) or Employer Employer Contribution

EE Pre-tax via payroll

EE After tax contribution (out side of payroll)

EE Gifts

EE IRA transfer - 1 one per lifetime tax free

IRS annual maximum ( 2013)

$3,250 individual

$6,450 Family

$1,000 per year catch-up provisions – age 55 end of tax year.

What is an H S A? (2)

As an employee owned account, funds are rolled over every year, not taxed on interest earned or when funds are used (i.e. used within IRS guidelines). Taxed as income with a 20% penalty if funds are used for non-medical expenses

Contributions can be made generally up to April 15th ( tax return time) for the prior year….IRS rules governing contributions

HSA Contribution Rules

Contributions to HSA can be made by the employer or the individual, or both.If made by the employer, it is not taxable to

the employee (currently excluded from income and wages)

If made by the individual (or in lieu thereof), it is an “above-the-line” deduction

The maximum amount that can be contributed to an HSA from all sources

$3,250 (self-only coverage) 2013

$6,450 (family coverage) for 2013 [includes working spouses if both H S A eligible]

HSA Contribution Rules: Employee Contributions

Can be made by a salary reduction arrangement through a cafeteria plan (section 125 plan amendment)

Elections to make contributions through a cafeteria plan can change on a month-by-month basis (unlike salary reduction contributions to an FSA – flexible spending account)

Remember that contributions to the HSA through a cafeteria plan are “pretax” and not subject to individual or employment taxes

HSA Accounts

No “use it or lose it” rules like Flexible Spending Arrangements (FSAs) All Dollar amounts in the HSA are fully vested

Unspent balances in accounts remain in the account until spent and carry over year-to-year

Encourages account holders to spend their funds more effectively on their medical care

Encourages account holders to shop for the best value for their health care dollars

Accounts can grow through investment earnings, just like an IRA Same investment options and investment limitations as

IRAs

HSA Accounts

HSA trustee must report all distributions annually to the individual (Form 1099 SA).

Trustee not required to determine whether distributions are used for medical purposes; the individual does that.

Individual will report on annual tax return amount of distribution used for qualified medical expenses.

Account holders must file Form 8889 as part of their annual tax return.

HSA Distributions Distribution is tax-free if taken for “qualified

medical expenses”. Qualified medical expense must be incurred on

or after the HSA was established.

Tax-free distributions can be taken for qualified medical expenses of:

Person covered by the high deductible

Spouse of the individual (even if not covered by the HDHP)

Any dependent of the individual (even if not covered by the HDHP)

Qualified Medical Expenses

Expenses paid by the account beneficiary for his or her spouse or dependents for medical care as determined by section 213 (d) of the IRS code. (See IRS publication 502;

www.irs.gov)Expenses must not be covered by

insurance or otherwise

H S A Account Access –Features (1)

Participants have access to payment features for claim review and selection of reimbursement options

Pay the vendor, pay themselves, divide payments and save funds in the account ( i.e. just write a check)

Pay on-line, pay at the provider office

VISA Health Account Card

H S A Account Access –Features (2)

Account management on-line

Real time balance

On-line payments can be made directly to a provider

Schedule payment in advance

Electronic Fund Transfer (EFT’s) can be utilized

Access to history of claims and spending

H S A Account Access –Features (3)

FDIC- Insured

No setup or activity fees

Investment options…(to be determined)…generally with no transaction fees (Health Equity H S A Bank)

Monthly account statements and annual tax statements

Employee Q Plan Eligibility

Active Full Time Staff ( i.e. own a position and currently have Health Care Benefits)

LTS and Retirees ( Current Retirees) not eligible

Employees Hired Before April 1 of each Calendar year

Employee / Board Contribution

Note: Minimum Employee Contribution (on the next slide) is a “diversion” of current employee premium share dollars

Meaning, these funds are “ALREADY” being deducted from an employees paycheck.

H S A: Board and Employee Contribution Mix and Shares

Coverage Tier

District H S A Contribution

Minimum Employee premium

share

Total Minimum

H S A

Entry Year

Single 1,600$ 500$ 2,100$ Family 3,200$ 1,000$ 4,200$

Single 1,500$ 500$ 2,000$ Family 3,000$ 1,000$ 4,000$

Single 1,250$ 500$ 1,750$ Family 2,500$ 1,000$ 3,500$

6,450.00$ 2013

District and Employee Contribution to Optional H S A QHDHCP

Year One

Year Two

Year Three

H S A : IRS Maxiumum Annual Total

Show me the money.....

Year one: 100% of Board Contribution made in January

Successive years: 65% in January --& 35% in September

Employee Payroll Contributions – After Each Payroll [No less than Monthly]

Funding Stream Example (year one Board share shown)

HSA Account

District (Yr One Numbers)

Employee (PYRL deduction; employee

Premium share)

Sub-Total

Employee Additional

PYRL deduction (employee

dollars)

Other: Direct contribution;

donations; IRA (1

Lifetime transfer)

Total HSAAnnual

IRS Maximum

Single 1,600$ 500$ 2,100$ 1,125$ -$ 3,225$ 3,250$ Family 3,200$ 1,000$ 4,200$ 725$ 1,500$ 6,425$ 6,450$

HSA Funding Streams

December 7, 2012 Decision: For January 1, 2013

Choose the ‘Q ‘plan with H S A (Options on H S A $ amounts, No FSA)

Stay with the current PPO plan (FSA option, no H S A)

Spousal Rule certifications – Everyone; H S A context (Surcharge is $1,463.96 for 2013)

Dual Coverage issues impact H S A selections ( i.e. you are “covered” by your spouses plan too)