Solanco School District
Optional Health Care Plan
Fall 2013
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 announced last year the 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 and
beyond
• How will this Change the whole Health Insurance delivery
model?....Don’t know all...but it will change.
• 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 (2014)
– $1,250 Individual and $2,500 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 - Examples
– PPACA 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 (2014)
• $3,300 individual
• $6,550 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
• $3,300 (self-only coverage) 2014
• $6,550 (family coverage) for 2014 [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 not eligible – PPO plan
• 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
District and Employee Contribution to Optional H S A QHDHCP
Coverage
Tier
District H S A
Contribution
Minimum
Employee
premium
share
Total
Minimum
HSA
Entry
Year
Year One
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
Year Two
Single
Family
$
$
1,250
2,500
$
$
500
1,000
$
$
1,750
3,500
Year
Three
$
3,300.00
$
6,550.00
H S A : IRS Maxiumum Annual Total
2014
Funding Stream Example (year one
Board share shown)
Maxium for 2014
IRS Annual
IRS Max
IRS:+55
Dist + EE Optional Max: All
w/+55 Catchcatch-up
sources
up
Single yr 1 $ 2,100 $ 1,200 $
Per Pay examples:
$ 50.00
3,300 $ 1,000 $
$ 41.67
4,300
Family yr 1 $ 4,200 $ 2,350 $
Per Pay examples:
$ 97.92
6,550 $ 1,000 $
$ 41.67
7,550
Show me the money.....
• Year one: 100% of Board Contribution made in
January
– 2014 “Class” January 2014 = $1,600 or $3,200
• Successive years: 65% in January --& 35% in
September
– 2013 Single Class : Jan 2014 = $975 & Sept 2014 = $525
– 2013 Family Class: Jan 2014 = $1,950 & Sept 2014 = $1,050
• Employee Payroll Contributions – After Each Payroll
[No less than Monthly]
• E-mail notifications----In and out.
For January 1, 2014
• Choose the ‘Q ‘plan with H S A (Options on H S A $
amounts, No FSA)
• Stay with H S A Plan.....Leave H S A Plan
• Stay with the current PPO plan (FSA option, no H S A)
• Spousal Rule certifications – Everyone; H S A context
– Surcharge is $1,523.18 for 2014
– [E + 1 Rate of $13,847.16 x 11%]
• Dual Coverage issues impact H S A selections ( i.e. you
are “covered” by your spouses plan too)