High Deductible Health Plan (HDHP) Health Savings Account (HSA

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High Deductible Health Plan (HDHP) Health Savings Account (HSA Powered By Docstoc
					 High Deductible Health Plan
           (HDHP)
              &
Health Savings Account (HSA)
Monroe County Community School Corporation
                 2009




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                                                       What is an HSA?
Qualified High Deductible Health Plan                                        Health Savings Account

                               Example Plan - In Network Coverage
                                 Lifetime Maximum - $5,000,000
                                      Health Plan Pays
Health Care Expenses




                           After you reach the out-of-pocket
                         maximum, the health plan pays 100% of
                                   covered charges
                                            You Pay                        HSA funds can be used for
                                 100% of the deductible                    qualified medical expenses
                             $3,000 - Single / $6,000 - Family
                             Preventive Care covered at 100%

                       • Intended to cover serious illness or injury   • Tax free growth
                       • IRS sets parameters on plan design            • Tax free distributions (for qualified expenses)
                           Examples: Minimum deductible levels;
                            no copayments for office visits
                       • Preventive care can be covered at 100%
   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
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
                 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
            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
        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)
                     What expenses can be paid by an HSA?
Your HSA covers a wide variety of medical expenses. These medical expenses must be necessary for the treatment or alleviation of a
specific illness or injury. They may include hospital or clinic services, prescription drugs and medications, certain over-the-counter drugs,
and many other health related expenses as defined by Section 213(d) of the Internal Revenue Code. Medical expenses covered under the
HSA can include expenses that are not covered under the high deductible health plan such as chiropractic, dental, orthodontia, or vision
expenses. For more information about eligible expenses, please consult Publication 502 available at your local IRS office or from the IRS
website: www.irs.qov.

Your HSA can also be used to pay premiums for COBRA, Medicare, long-term care insurance (federal limits apply), and health plan
coverage you may have while receiving unemployment compensation.

The following are examples of qualified medical expenses:

   Acupuncture                         Dentures                         Learning Disability                Psychiatric Care
   Alcoholism Treatment                Diabetic Supplies                Medical Records Charge             Psychoanalysis
   Ambulance                           Diagnostic Services              Medical Services                   Psychologist
   Artificial Limbs/Teeth              Drug Treatment                   Medications/Drugs                  Reading Glasses
   Aspirin                             Drugs/Medicines                  Nursing Services                   Screening Tests
   Bandages                            Egg Donor Fees                   Obstetrical Expenses               Sleep Deprivation Treatment
   Birth Control Pills                 Eye Exams/Glasses                Occlusal Guards                    Smoking Cessation Programs
   Blood Pressure Monitoring Devices   Fertility Treatment              Operations                         Sterilization Procedures
   Blood Sugar Test Kit                Flu Shots                        Optometrist                        Supplies for Medical Condition
   Body Scan                           Glucose Monitoring Devices       Organ Donors                       Surgery
   Chelation (EDTA) Therapy            Guide Dog                        Orthodontia                        Therapy
   Chiropractors                       Hearing Aids                     Osteopath                          Transplants
   Circumcision                        Home Care                        Over-the-counter Drugs/Medicines   Vaccines
   Copays/Deductibles                  Hormone Replacement Therapy      Ovulation Monitor                  Vasectomy
   Condoms                             Hospital Services                Oxygen                             Vision Correction Procedures
   Contact Lenses/Related Material     Immunizations                    Physical Exams                     Wheelchair
   Contraceptives                      lnclinator                       Physical Therapy                   X-Ray Fees
   Counseling (excludes marriage)      Insulin                          Pregnancy Test
   Crutches                            Laboratory Fees                  Prescription Drugs
   Dental Treatment                    Laser Eye Surgery                Prosthesis
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.
         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
          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
                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
                    Flow Chart for HSA Process
                    Qualified High Deductible Plan 3 + HSA


      Pre-Tax Payroll                              Filing of Medical/Dental Claims
        Deductions                                     and Use of HSA account

                                                            Employee goes to Dr
Premium for            HSA Employee
                        Contribution               Provider files the claim with Anthem as
   Plan 3                                                           normal
                   *Any elected amount by
                   employee up to the max of          Anthem processes with in-network
                   $3050 for single plan and                     discount
                     $6150 for family plan

                                                    Employee receives EOB explaining their
  There must be funds available through                         responsibility
your contributions to pay for the qualified
             medical expenses                   *Which is 100% after Anthem discount up to the
                                               deductible: $3,000 single plan and $6,000 for the
 *You only have available what you have                           family plan
contributed – very different from a FSA
                                                    Employee receives bill from provider

                                                 Employee pays bill through HSA funds (Debit
                                                 card or checks) *Just like personal checking
                                                                    account
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!
           Questions?
For more information, please refer to the
 United States Department of Treasury
 website:
 http://www.ustreas.gov/offices/ public-
 affairs/hsa/