HSA and HDHP Overview A Health Savings Account (HSA) is a special account owned by an individual where contributions to the account are to pay for current and future medical expenses. HSA’s are used in conjunction with a High Deductible Health Plan (HDHP) Health insurance that does not cover first dollar medical expenses (except for preventative care); deductible must be met before benefits paid Can be an HMO, PPO or indemnity plan, as long as it meets the HDHP requirements set by the Treasury Dept and IRS code
What is an HDHP? Health insurance plan with the following minimum deductibles for 2012: $1,200 (self-only coverage) $2,400 (family coverage; two or more individuals; total family deductible must be met before benefits paid) These amounts are indexed annually to inflation Annual out-of-pocket maximum (including deductible and co-insurance) cannot exceed the following for 2012: $6,050 (self-only coverage) $12,100 (family coverage) These amounts are indexed annually to inflation
Who is eligible for HSA’s? Any individual that: Is covered by an HDHP Is not covered by other health insurance Is not reimbursed for any covered medical expenses before their deductible is met through a Flexible Spending Arrangement Is not enrolled in Medicare Cannot be claimed as a dependent on someone else’s tax return Children cannot establish their own HSAs Spouses can establish their own HSAs, if both are eligible
Who is Eligible for HSAs? A person can have the following types of health coverage and still be eligible for an HSA: Specific disease or illness insurance Accident and disability insurance Dental care, vision care and long-term care insurance Employee Assistance Programs, Disease Management Programs or Wellness Programs These programs must not provide significant medical care or treatment benefits Drug discount cards Eligibility for VA benefits (but cannot have actually received VA health benefits in the last 3 months)
For 2012 : $3,100 (self-only coverage) $6,250 (family coverage) These amounts are indexed annually to inflation Individuals age 55 and older can also make additional “catch-up” contributions: 2006- $700 2007- $800 2008- $900 2009- $1,000 2010- $1,000 Maximum Contributions to an HSA
Who is Involved in Healthcare Decisions Physicians Insurance Companies Preferred Provider Networks Employers/ HR Departments Unions WHO IS MISSING IN THE PROCESS?
In the DARK! True Cost of Prescriptions Generic Alternatives Cost of an Office Visit Alternative Treatments True Cost of Lab and Diagnostic Tests Qualifications and Outcomes- Physicians and Hospitals
Why HSAs, HRAs and FSAs? Individuals become better consumers of healthcare Optimum solution to sharply rising premiums Provide rate stabilization
Individuals Become Better Consumers of Healthcare Alter treatment patterns for small claims by putting utilization in the hands of patient/insured Unleash individuals as cost-conscious patients Hospitals and doctors answer to patients individually (not insurance companies, provider networks or employers) Example: Chevrolet or Mercedes
Optimum Solution to Sharply Rising Premiums Individuals as informed consumers of healthcare will reduce utilization and claims costs PROVIDE RATE STABILIZATION
But You Can Combine the Benefits of HSA, HDHP, HRA and FSA …
HDHP with HSA and HRA HDHP Out of Pocket HSA Out of Pocket HDHP HSA HRA
Combination of Benefits A Health Reimbursement Account can be used with a HSA and HDHP combination to: Reimburse for procedures and services not covered under the medical benefit plan Reimburse for any co-pays or co-insurance after the deductible is met HRA funds are employer funds Retain control of funds Can roll over from year to year HRA funds use lower Deductible reduces draw on funds Combination may cost less
HDHP with HSA and FSA HDHP HSA FSA or O.O.P. Co-Ins.
Combination of Benefits A Flexible Spending Account can be used with a HSA and HDHP combination to: Reimburse for procedures and services not covered under the medical benefit plan Reimburse for any co-pays or co-insurance after the deductible is met
Benefits of Combination FSA funds are employee funds Reduces cost to employer Reduces taxable income Reduces payroll tax burden Combination may cost less
HDHP with HSA, HRA and FSA HDHP FSA or O.O.P. Co-Ins. HSA HDHP FSA or O.O.P. Co-Ins. HSA HRA
Combination of Benefits A Health Reimbursement Account and a Flexible Spending Account can be used with a HSA and HDHP combination to: Reimburse for procedures and services not covered under the medical benefit plan Reimburse for any co-pays or co-insurance after the deductible is met
First Year Savings Example PPO Plan vs. HDHP with HSA In Network 1 st Dollar 100% Plan with a $10 Office Visit Co-pay and $10 Rx Co-pay Vs. HDHP with $1,250 Single $2,500 Family Deductible then 100% with HSA
First Year Savings Example PPO Plan vs. HDHP with HSA HDHP with HSA provides employees 100% reimbursement of eligible medical expenses during the calendar year without the employees paying office visit and prescription drug co-pays. If the employee has money left in the HSA at the end of the calendar year, it is his/her money, not the insurance company’s money.
First Year Savings Example PPO Plan vs. HDHP with HSA 10 Singles @ $322.00= $3,220.00 13 Two-Persons @ $960.56= $12,487.28 11 Families @ $1,566.08= $17,226.88 Total 1 st Year Savings = $32, 934.16
Five Year Premium Projections PPO Plan vs. HDHP with HSA Annual Premium Savings YearPPO PlanHDHPSavings 1$378,527.76$273,093.60$105,434.16 2$423,951.09$305,864.83$118,086.26 3$474,825.22$342,568.60$132,256.62 4$531,804.24$383,676.83$148,127.41 5$595,620.74$429,718.04$165,902.70 Assumes a 12% premium increase each year
Annual Premium Savings - Maximum HSA Contribution = Net Savings YearHDHP Savings -HSA Contribution =Net Savings 1$105,434.16-$72,500.00=$32,934.16 2$118,086.26-$72,500.00=$45,586.26 3$132,256.62-$72,500.00=$59, 756.62 4$148,127.41-$72,500.00=$75,627.41 5$165,902.70-$72,500.00=$93,402.70 The fifth year savings is almost triple the first year savings
HDHP with $1250 Single/ $2500 Family Deductible then 100% with HSA vs. HDHP with $1250 Single/ $2500 Family Deductible then 20% Co-insurance to $1000 Single/ $2000 Family Out-Of-Pocket with HSA & HRA No Co-insurance HDHP$273,093.60Annual Premium 20% Co-insurance HDHP$239,523.84Annual Premium Savings from Plan Design$33,569.76 1 st Year Savings 20% Anticipated Employee Utilization $11,600.00=$21,969.76 40% Anticipated Employee Utilization $23,200.00=$10,369.76