Presentation on theme: "Welcome To Consumer Driven Health Care aka Individual Health Savings Accounts P.L. No. 108-173, section 223."— Presentation transcript:
Welcome To Consumer Driven Health Care aka Individual Health Savings Accounts P.L. No. 108-173, section 223
How HSA Came to Pass 06/27/03—H.R. 1 passes House 216-215 06/27/03—S. 1 passes Senate 76-21 07/14/03—Medicare Conference begins 11/21/03—Conferees complete work 11/22/03—House passes final bill 220-215 11/25/03—Senate passes final bill 54-44 12/08/03—President Bush signs Medicare bill into law
Definition of HSA Define HDHP Can Network Plan Qualify? Exceptions For Eligible Individuals Tax-exempt trust or custodial account To pay qualified medical expenses If covered by High-Deductible Health Plan Not covered by non-HDHP (some exceptions) Not entitled to Medicare (generally under 65) May not be covered as Dep on another’s taxes. Can Self-Insured Plan Qualify? HSA
Define HDHP Can Network Plan Qualify? Exceptions Deductible & OOP Requirements $1,000 Deductible minimum for Individuals $5,000 OOP Maximum for Individuals $2,000 Deductible Minimum for Families $10,000 OOP Maximum for Families Not including 1 st Dollar Preventive Care Can have higher deductibles and lower out- of-pocket expense caps You may not have a plan with office visit co- pays, or an Rx plan with co-pays. Can Self-Insured Plan Qualify? HSA Definition of HSA
Define HDHP Can Network Plan Qualify? Network Plans Qualify Has richer In-Network Benefits Out of Network Benefits can Exceed limits OON Benefits not used in determining Contribution Limits In-Network Deductible used in Determining Contribution Limits Exceptions Can Self-Insured Plan Qualify? HSA Definition of HSA
Define HDHP Can Network Plan Qualify? Exceptions Can Still Have: Workers Compensation Plan Coverage Automobile Insurance Coverage Other Property Insurance Tort Liability Insurance Coverage Accident Insurance Dental Insurance Vision Insurance Long Term Care Insurance Daily Hospital Fixed Amount per Day Specified Disease or Illness Coverage Can Self-Funded Plan Qualify? HSA Definition of HSA
Define HDHP Can Network Plan Qualify? Exceptions Self-Insured Plans Employer sponsored Self-Insured Plans Qualify Must meet Deductible and OOP requirements Cannot have a deductible for preventive care HSA Can Self-Insured Plans Qualify? Definition of HSA
Who Can Contribute? How to Start HSA Contributions Both Employee and Employer can Contribute Family Members may Contribute on each others behalf-if they are both eligible individuals Actual annual HSA contribution limit must be computed on a monthly basis for each month that the individual is eligible HSA contributions by employees can be made on a pre-tax basis through Section 125 of the Code (cafeteria plan) ER’s must make same dollar amount or same % of the deductible contributions on behalf of all EE’s in same coverage category There is a 35% excise tax of amount contributed for violations HSA Who is Qualified Trustee or Custodian?
Who can Contribute? How to Start HSA HSA Start-Up Begins January 1, 2004 or later Can start mid-year Same as starting IRA or Archer MSA No permission from IRS needed Can establish HSA without Employer involvement Must use Qualified Trustee or Custodian HSA Who is qualified Trustee or Custodian?
Who can Contribute? How to Start HSA Qualified Trustee/Custodian Defined in section 408(n) Any Insurance Company Any Bank or similar institution See Regulation 1.408-2(e) relating to non- bank trustees Does not have to be same institution that provides the HDHP HSA Who is Qualified Trustee or Custodian?
Maximum Contribution Earnings Requirements Distributions Maximum Contributions $2,650 (up to $220.83 per Month) $5,250 (up to $437.50 per Month) Catch-up Contribution allowed if age 55 + No earnings requirements to contribute Earnings grow tax free All HSA contributions made on behalf of individual are aggregated for limits calculation If individual begins 6/1/05 the annual limit is $1,545.81 ($220.83 x 7) Catch-up contribution limit is $600 in 2005 for individuals and spouses between ages 55 & 65 Catch-up amount will increase $100 annually until it reaches $1,000 in calendar year 2009 HSA
Maximum Contribution Distributions Earnings Requirements None Can contribute for 2005 thru April 15 th, 2006 Contributions must be made in cash-not stock or other property Contributions are “above-the line” deductible whether the individual itemizes or not If you may be claimed as a dependent you may not deduct contributions to an HSA There is a 6% penalty if you over-contribute Can make it right before deadline (skip 6%) Employer contributions not subject to FICA or FUTA or Railroad Retirement Tax Act HSA Earnings Requirements
Maximum Contribution Distributions Permitted at any time Any amount not used to pay for qualified medical expenses of the account beneficiary, spouse or dependents is includable in gross income and is subject to an additional 10% tax on amount includable—unless distributions made after account beneficiary’s death, disability, or attaining age 65 Burden of proof for proper use of distributions is on the account beneficiary not the trustee, custodian or the employer Upon death any remaining balance in HSA becomes the property of named beneficiary This does not include distributions made for final qualified medical expenses made within one year of death HSA Earnings Requirements Distributions
Other Matters Discrimination rules demand that ER contribute same amount or same percentage of the deductible for all participating EE’s HSA can be offered under a cafeteria plan thus contributions are then made on a salary- reduction basis HSA’s are not subject to COBRA, but you can pay for your COBRA with HSA dollars May use debit, credit or stored-value cards to receive distributions Rollover contributions from Archer MSA’s and other HSA’s are permitted HSA
Several Big Tax Advantages Pre-tax contributions/deposits tax-free Earnings tax-free Distributions/expenditures not taxable upon withdrawal for appropriate IRS allowed medical expenses Better treatment than a 401(k) plan
Sales Expectations? How do you feel about HSA’s? Who do you think will buy them? HSA’s
Who buys HSAs Initial Sign up Aetna Results Results to date 70% of purchasers are over are 40 77% are families with children One-third make less than $50,000/year http://press.fortishealth.us.fortis.com/fh/pr ess-release-cm/newsroom/hastert HSA
Who Buys HSAs Aetna Results Early Results 438,000 people sign up for HSAs in first 9 months. 30% were previously uninsured. www.ahip.org HSA Initial Sign up
Who Buys HSAs Early Results Use of preventive services up by 23% 5.5% decrease in Rx costs and a 7% increase in overall generic utilization 3.7% medical cost increase, compared to double-digit increases for a similar population Medical costs fell by 11% for one full- replacement plan sponsor http://www.aetna.com/news/2004/pr_2004D622.htm HSA Initial sign up Aetna Results
Watson Wyatt Booz Allen Hamilton NBGH Survey 8% of large employers surveyed now offer HSAs Another 18% plan to offer HSAs next year 47% are considering them for future 75% of employers say, “HSAs are effective vehicles to engage employees more in managing their health,” 49% “aren’t sure if they will help lower costs”. HSA
Watson Wyatt Future of HSAs HSAs will begin a new movement toward building personal financial security Expect consumers to demand “package pricing” for high cost services “CDHPs and HSAs will begin to restructure both the healthcare world and the financial services world in profound ways.” HSA Booz Allen Hamilton