Solanco School District
Optional Health Care Plan
Fall 2012
A Qualified High Deductible Health Care Plan
(QHDHCP)
with a Health Savings Account (H S A)
What’s in this for......?
....ME!!??
....The District!!??
 Opportunity to grow a
savings account for
medical costs
 Big picture - Designed to
be cost neutral
 A good fit for many
employees
 Plan (Multi- year / Multineed) for future medical
expenses...covered and
not covered by plan
 Extend coverage for
potential costs incurred by
other family members
 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 - 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 HighDeductible 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
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
Single
Family
$
$
1,600
3,200
$
$
500
1,000
$
$
2,100
Year One
4,200
Single
Family
$
$
1,500
3,000
$
$
500
1,000
$
$
2,000
4,000 Year Two
Single
Family
$
$
1,250
2,500
$
$
500
1,000
$
$
1,750
3,500
H S A : IRS Maxiumum Annual Total
$
6,450.00
Year
Three
2013
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 Funding Streams
Employee (PYRL
HSA District (Yr One deduction;
Sub-Total
Account Numbers)
employee
Premium share)
Single $
Family $
1,600 $
3,200 $
500 $
1,000 $
Employee Other: Direct
Additional contribution;
Annual
PYRL
donations;
Total HSA IRS
deduction
IRA (1
Maximum
(employee Lifetime
dollars)
transfer)
2,100 $
4,200 $
1,125 $
- $ 3,225 $ 3,250
725 $ 1,500 $ 6,425 $ 6,450
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)