2. High Deductible Health Plan (HDHP) & Health Savings Account (HSA) Monroe County Community School Corporation 2009 Click here for Audio on each slide

4. What are Health Savings Accounts? Congress created Health Savings Accounts (HSAs) to help individuals save for qualified medical and retiree health expenses on a tax- free basis. Pairs a qualified high deductible health plan with a savings account for eligible individuals to help pay for qualified medical expenses Combines the pre-tax treatment of a health flexible spending account, the portability and carry-over characteristics of a 401(k) plan, and the tax-free distribution of a Roth IRA

5. What are Health Savings Accounts? For eligible individuals it is: Very similar to a personal checking/savings account that is owned by you, the account holder, and used to pay for qualified medical expenses You can elect an amount to be payroll deducted pre-tax from MCCSC to fund the account The HSA is a “custodian account” held at a trustee/bank/Insurance company Account balances can be carried over year to year

6. Who is Eligible? To be eligible to contribute to an HSA you: –Must be covered by a qualified high deductible health plan (HDHP) – MCCSC Medical Plan 3 only –Cannot be enrolled in Medicare (generally age 65) –Cannot be covered by other health insurance that is not an HDHP Additional coverage for dental and vision is allowed Cannot have a broad based health Flexible Spending Account through employer or spouse’s employer –Cannot be eligible to be claimed as a dependent on another persons taxes –May not participate in both Section 125 FSA (Medical) & HSA Can participate in a Dependent Care FSA & HSA

7. How Does the HSA Work? You enroll in the qualified high deductible health plan MCCSC will have established the banking account for your HSA You make contributions to the account through payroll deduction (pre-taxed) You receive health care services You pay your out of pocket costs associated with your health plan (deductible and coinsurance) You decide whether to take money out of your HSA account to reimburse yourself for “qualified” expenses The money in your HSA account that you do not use stays with you and is available to use for future costs

8. What are “Qualified” Expenses? Qualified Medical Expenses are described in section 213(d) of the Internal Revenue Service code –Refer to IRS Publication 502 for examples Health insurance premiums are not a qualified medical expense except: –For HSAs, the following can be reimbursed tax- free: COBRA premiums Qualified long term care premiums Health insurance premiums while unemployed and receiving unemployment Medicare premiums (Part A, B, C, & D)

10. How Much Can I Contribute to an HSA? The IRS determines the annual contribution limits for HSA. These are based on either single or family enrollment. The contribution limits can change from year to year. For 2010 you may contribute up to: $3,050 Single $6,150 Family *Individuals age 55 and older can also make additional “catch-up” contributions of $1,000 per year.

11. Pros to Consider: Pros –Tax savings –Potential retirement savings –More control over how you choose to spend your health care dollars –Can help cover health expenses for periods of unemployment –Lower health plan premiums –HSA belongs to you and is portable – Employees currently contributing to Section 125 FSA could deposit that same amount in an HSA. With the HSA, there is no “use it or lose it” rule

12. Cons to Consider Cons –Employee is responsible for tracking expenses, monitoring HSA contributions/distributions –Must become better healthcare consumer –Could result in higher out-of-pocket expenses, especially if you don’t fully fund your HSA

13. In Summary Individuals must be eligible to contribute to an HSA; not required for distributions The individual is responsible for compliance with IRS rules If you don’t use your HSA money, you keep it for future years. Contributions are subject to limits determined in reference to HDHP annual deductible and statutory limits Contributions are tax free, earnings are tax free, and distributions are tax free if used for qualifying medical expenses

14. Flow Chart for HSA Process Qualified High Deductible Plan 3 + HSA Pre-Tax Payroll Deductions Premium for Plan 3 HSA Employee Contribution * Any elected amount by employee up to the max of $3050 for single plan and $6150 for family plan Filing of Medical/Dental Claims and Use of HSA account Employee goes to Dr Provider files the claim with Anthem as normal Anthem processes with in-network discount Employee receives EOB explaining their responsibility *Which is 100% after Anthem discount up to the deductible: $3,000 single plan and $6,000 for the family plan Employee receives bill from provider Employee pays bill through HSA funds (Debit card or checks) *Just like personal checking account There must be funds available through your contributions to pay for the qualified medical expenses *You only have available what you have contributed – very different from a FSA

15. By taking time to understand how each of the Group Health Plan options affect you and your family, you can make an informed choice that will best meet your healthcare and financial needs. It’s Your Money!

16. Questions? For more information, please refer to the United States Department of Treasury website: http://www.ustreas.gov/offices/ public- affairs/hsa/