Presented By: Marty Hobbs Director of Business Development, 125Company Consumer Driven Healthcare Health Savings Accounts and Health Reimbursement Arrangements 1
Introducing Consumer Driven Healthcare (CDHC) Employer reactions to increases in health care expenses: 1) Cut costs 2) Shift more of the costs to participants 3) Eliminate health benefits altogether The result: higher deductibles, higher co pays, lower coinsurance amounts, lower employer contributions, lower satisfaction for all parties in the healthcare system 2
Introducing Consumer Driven Healthcare (CDHC) More and more, CDHC is the answer CDHC is a movement that is changing the way healthcare is received across the country CDHC is an approach to healthcare not a product CDHC liberates consumers by offering more choices CDHC is shifting costs from the employer back to the employee 3
Two Keywords for CDHC Success Integration and Information Products (high deductible health plans, Federal mandates, integrated medical and Rx benefits) Funding (HRAs, HSAs, FSAs, etc.) Consumer Support Tools (eservice tools, Fund Status, Claim Status, Health and Wellness Information, Cost Estimators) 4
CDHC Successes for Insurer, Employer and Participant Insurers see lower cost sharing, more efficient care and better disease management Employers can continue to offer benefits while controlling premiums Participants get greater savings, more funding control and premium reduction 5
What is an HSA? HSA A Health Savings Account (HSA) is a consumer oriented, tax sheltered savings account designed for medical expenses and is always combined with a high deductible health plan (HDHP). It is a true interestaccruing cash account accessible to the member. The accounts balance rolls over year after year and does not require funding every year. The limits are indexed annually by the IRS. 6
What is an HRA? HRA A health reimbursement arrangement is an employerfunded medical savings account. It allows an employer to set aside a specific pool of money to reimburse each employee s out of pocket medical expenses. These may include deductibles, copayments, prescriptions, dental services and more. The money is tax free to participants. 7
Who Can Participate? HSA Determined by IRS and includes any individual covered by an HSA compatible health plan and not covered by any impermissible plan, not enrolled in Medicare and not claimed as a dependent on another s tax return. HRA Determined by employer, but generally full time employees or retirees. 8
ERISA Requirements HRA Yes, HRAs are considered welfare benefit plans, and must: have plan documents file form 5500 annually furnish summary plan description to participants HSA No, in general not considered welfare and benefits plans. 9
Permitted and Impermissible Coverages HSA Employees cannot participate in an HSA, HRA and FSA in the same month except for: Limited Purpose FSAs Post Deductible Health FSA or HRA HRA Yes, employees can participate in HRA and FSA at the same time. 10
Funding HSA Contributions may be from the eligible individual, the employer, a family member, or any other third party person. Contributions are deductible to the extent that they would be deductible to the individual (for 2013: $3,250 for individual and $6,450 for family). HRA Funded solely by the employer. No limits, and no set times established for funding. 11
Making Withdrawals HSA Since contributions are not forfeitable, the eligible individual controls when withdrawals are made. Withdrawals for medical expenses are taxfree. However, only the amount in the account at the time can be accessed. HRA An employer decides when and what expenses are to be reimbursed. In general, the full amount is funded on the first date of the plan year. 12
Qualified Medical Expenses HSA Qualified medical expenses are defined in Section 213(d) and not reimbursed by any insurance. HRA Qualified medical expenses are determined by the employer from those identified in section 213(d). They may include co pays, deductibles, and other expenses not covered by the employer s medical plan. 13
Withdrawal Restrictions HSA There are no restrictions, other than the date of service must be after the date the account was established. Withdrawals for non medical expenses are subject to taxes and a penalty. HRA Since the employer designs the HRA, the employer can impose restrictions including what expenses can be reimbursed, when withdrawals can be made and in what amounts. 14
Documentation HSA Substantiation Documentation is not required to be reimbursed, but records should be kept for 7 years in the event of an IRS audit. HRA Substantiation Documentation (normally an Explanation of Benefits) and third party claims adjudication are required. 15
Forfeiture HRA Yes, in general unused funds are forfeited at the end of the plan year. Employer have control over the design feature and can offer things such as a spenddown feature or rollover options. HSA No, once contributions are made to the HSA trust or custodial account, the funds remain with the employee and are not forfeited. 16
COBRA HRA Yes, since HRAs are considered group health plans, they are subject to COBRA s requirements. Employers can bundle or unbundle HRAs for COBRA purposes. HSA No, HSAs are not subject to COBRA. 17
Nondiscrimination Testing HSA If only employee contributions are contained in the HSA, there are no nondiscrimination rules. If employers make contributions, nondiscrimination rules do apply. HRA Yes, there are always nondiscrimination tests for HRAs. 18
Why an employer might want to offer an HSA HDHPs have lower premiums Employees will understand the true cost of healthcare when spending their own money Employees can take an HSA with them when they leave HSAs are less costly because there s no claim substantiation required. 19
Why an employer might not want to offer an HSA HDHPs are too radical a design for their employees Employees may not have funds to contribute to an HSA Employees may spend HSA funds on non qualified expenses The employer may want more control over plan administration Can be a great recruitment tool, but is a poor retention tool 20
Why an employer might want to offer an HRA Employer has complete control in deciding what expenses to reimburse, over what period of time, etc. Employees perceive as great benefit Works with FSAs for maximum employee savings Great recruitment and retention tool 21
Why an employer might not want to offer an HRA ERISA requirements apply Nondiscrimination testing will apply Claims substantiation is required Possible funding issues COBRA applies as well 22
Presented By: Marty Hobbs Director of Business Development, 125Company Questions? 23
Marty Hobbs marty@125company.com (240) 688 0821 Full Suite of Services: FSA and Dependent Care (FSA & DCAP) Limited FSA Health Reimbursement Account (HRA) Fully Customizable Plans Health Savings Accounts (HSA) Transportation (Mass Transit, Parking, Vanpooling, Bicycle) POP Plans Custom and Up to Date legal language Cobra Administration State Continuation Compliance Services Direct Billing and Retiree Billing options VEBA Trust Wrap Documents ERISA compliance online platform Tuition Assistance Adoption Assistance 24
Marty Hobbs marty@125company.com (240) 688 0821 125Company Services include: 125Educational Webinar Series available online 24/7. Please visit www.125company.com State of the art technology with Secured Custom Messaging, Personalized Employer/Participant Portals and SaaS Secured Technology. Live Toll Free Customer Service Phone Support. Plan Document SPD Adoption Agreement POP Document and IRC Compliance Services E Signature Plan Document Cloud Delivery Secure and Accessible 24/7 365 days Plan Updates and latest IRC Amendments Cloud Delivery and Retrievable 24/7 365 days Non Discrimination Testing On Demand available upon request, throughout the Plan Year! 125Mobile Apps Our newest technology at Apple ITunes and Android Marketplace 125Desktop Upload Use your internet browser to upload your claim form and valid receipt 125Company Benefit Card Form 5500 (as required) Full Educational Services Online Claim Submission Employer/Participant and their Dependent Online Account Review Pay Your Provider Direct Co Pays and auto Reimbursement 25