Health Savings Accounts:

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Health Savings Accounts
Great
One Way to Stop Breaking the Bank on Health
Insurance
Presented by Barbara Hostetler, LUTCF, CPIA Life
and Health Division Manager Hostetler Insurance
Associates, Inc.
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INTRODUCTION

• Barbara Hostetler, LUTCF, CPIA
• Life and Health Division Manager
• 10 years of experience in Employee Benefits
  Planning
• Serving the community through involvement with

• The BIA of Lancaster County
• Junior Achievement
• The Lancaster Building Industry Foundation
• The Pennsylvania and Lancaster Associations of
  Insurance and Financial Advisors
• Lancaster County Bible Church (LCBC)

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INTRODUCTION

• Hostetler Insurance Associates, Inc.
• Doing business in Central PA since 2003
• Family owned and operated
• Full Service Agency, offering

Auto Insurance Homeowners Insurance Motorcycle
Insurance Church Insurance Tradesman
Coverage Commercial Auto Coverage Farm
Insurance Small Business Insurance Employee
Benefits Health Insurance Life Insurance Disabili
ty Insurance Voluntary Benefits Long Term Care
Insurance
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LETS JUMP RIGHT IN

• Health Savings Accounts
• Information provided by
• First H S A, Inc.
• www.1hsa.com
• and
• The United States Department of the Treasury
• www.ustreas.gov

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H S A History

• Part of the Medicare Reform Bill of 2003
• Became a Permanent Federal Law on January 1, 2004
• Signed into law by President George W. Bush on
  December 8, 2003

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WHAT IS AN H S A?

• H S A Health Savings Account
• Coupled with a Qualified High Deductible Health
  Plan (HDHP), it is meant to reduce premiums,
  allowing for additional savings to fund the high
  deductible
• The actual savings account allows for tax-free
  savings that may be used for qualified medical
  expenses

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IT LOOKS LIKE THIS
H S A Program
Qualified High Deductible Health Plan
Savings Account
Premium Savings from a High Deductible Plan vs. a
Traditional Low Deductible Plan go into the
Savings Account to help to pay for the deductible
if you need medical care
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SO WHAT MAKES THE HDHP SPECIAL?

• For 2008, Deductibles must be between 1,100 and
  5,600 for an Individual or 2,200 and 11,200
  for a Family
• Those Deductibles apply for In-Network Benefits
  under a PPO or POS Plan
• There may be NO Office Visit Copays or
  Prescription Drug Copays until AFTER the
  Deductible is met under the plan

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SO WHAT MAKES THE HDHP SPECIAL?

• All qualified medical expenses go toward the
  Deductible until it is met
• Wellness benefits may be paid first-dollar, not
  subject to the deductible, to encourage healthy
  behavior
• Coinsurance after the deductible may be at 100,
  90, 80, etc.
• The In-Network maximum out of pocket may not
  exceed 5,500 for Individuals and 11,000 for
  Families including ALL covered expenses

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SO WHAT MAKES THE SAVINGS ACCOUNT SPECIAL?

• NOTHING! You may use any bank and any account
  that you like
• We generally recommend First HSA Bank because
  they have expertise in HSAs that regular banks
  lack
• Each plan participant is responsible for correct
  use and reporting of the HSA dollars

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EMPLOYER RESPONSIBILITIES

• If the employer chooses to fund or partially-fund
  the HSA Account, they must understand that once
  given, the money is no longer under their control
• Employers have no fiduciary responsibility for
  the use or management of the HSA Account
• Employers may designate a bank that they will
  make deposits to, but they may not dictate where
  employees will have their HSA Accounts

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EMPLOYER RESPONSIBILITIES

• Employers may allow employees to use Direct
  Deposit to make voluntary payroll contributions
  to their HSAs
• Employers may NOT discriminate between employees
  for the purpose of HSA funding
• Single Employees
• Employee 1, 2, 3, etc.
• Percentage-based
• Total Account Balance may NOT be applied

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EMPLOYER RESPONSIBILITIES

• Employers are NOT required to contribute to an
  HSA account for the employees
• Employer contributions to an HSA account may vary
  year-to-year

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SO, WHO CAN HAVE AN HSA?

• Almost everyone
• Employers / Employees
• Unemployed
• Self-Employed
• Individuals
• Families
• Exceptions
• Anyone claimed as a dependent on another persons
  tax return
• Medicare Participants
• Anyone not covered by a High Deductible Health
  Plan

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WHO CAN CONTRIBUTE TO THE SAVINGS ACCOUNT?

• Any combination of individuals, family members
  and employers
• Contributions made by individuals and family
  members are tax deductible, even if they dont
  itemize
• Employer contributions are made pre-tax and not
  taxable to the employee
• HSAs may be part of a Cafeteria Plan

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HOW MUCH MONEY MAY GO INTO THE SAVINGS ACCOUNT?

• In 2008
• Individuals may save up to 2,900 regardless of
  their actual deductible
• Families may save up to 5,800 regardless of
  their actual deductible
• Contributions are NOT pro-rated based on the
  months left in the health plan year
• There is no limit on Savings Account Growth

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HOW MUCH MONEY MAY GO INTO THE SAVINGS ACCOUNT?

• Catch-up Provisions
• For individuals Age 55 65
• Additional 900 per individual may be saved in
  2008
• Pro-rated by effective date of the insurance plan
• Will increase by 100 per year to a maximum of
  1,000 per individual

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TAX BENEFITS TO THE SAVINGS ACCOUNT

• Contributions are tax-deductible going in
• Interest income grows tax-free
• Qualified withdrawals are tax-free coming out

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WHAT ARE THE QUALIFIED MEDICAL EXPENSES FOR AN
HSA?

• In General
• Deductibles / Coinsurance for Health Plans
• Copays, where applicable
• Expenses that would be covered by the Health Plan
• Also
• Dental Expenses
• Vision Expenses
• Prescribed Over-the-Counter Drugs
• Long Term Care Premiums
• COBRA Premiums
• Medicare Expenses (Not Medigap Premiums)

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GENERAL NOTICE

• HSAs can be used to pay for medical expenses not
  covered by the employees health plan. Typical
  expenses include vision, dental and
  over-the-counter medications as long as
  prescribed by a physician. Employees must
  remember that even though they are able to use
  the HSA for these expenses, they will not be
  applied to the medical insurance deductible.
• Employees must keep a copy of all receipts in
  case of an IRS Audit.

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NON-QUALIFIED USE OF THE SAVINGS ACCOUNT

• If the HSA participant uses their Health Savings
  Account for non-qualified expenses, they will
• Be responsible to pay income tax on the
  non-qualified distribution
• Be responsible for a 10 penalty on the
  non-qualified distribution

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WHAT HAPPENS AT AN OFFICE VISIT?

• If your plan utilizes a PPO network, your doctor
  will likely not know their negotiated fee
  schedule
• You may pay nothing at the time of service or you
  may be asked to make a deposit toward the
  eventual bill
• You will be billed by the provider at a later
  date, after the claim is processed by your
  insurance company
• Outside of the network you will be asked to pay
  in-full at the time of service

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WHAT HAPPENS AT THE PHARMACY?

• Prescriptions are paid at the time of service
• Pharmacy discounts are applied at purchase,
  therefore immediate payment will be required
• Pharmacy expenses will be added toward deductible
  and paid subject to co-pays after deductible has
  been satisfied

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WHAT HAPPENS IF THERE IS MONEY LEFT IN THE
SAVINGS ACCOUNT AT THE END OF THE YEAR?

• It rolls over to accumulate for future years
• At Age 65 it may be used as retirement income,
  subject to income tax but no penalty
• It may continue to be used for qualified medical
  expenses, not subject to taxation
• When the participant reaches Age 65
• When the participant no longer has an HDHP

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PLEASE REMEMBER

• The money in the HSA Savings Account belongs to
  the EMPLOYEE
• The account will remain open until funds are
  exhausted and the account is closed
• Additional contributions may be made to the
  account as long as the participant has a
  qualified HDHP

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WHAT HAPPENS AT TAX TIME?

• HSA participant will receive a 1099-SA and a
  5489-SA from the bank
• Participant must file a form 8889 with their
  income taxes, using the information supplied on
  the 1099-SA and 5489-SA

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HOW DOES AN HSA AND AN FSA MIX?

• Your FSA can still be used for expenses not
  covered under your HDHP i.e. Dental, Vision and
  Childcare. It is now a Limited FSA. Once your
  deductible has been satisfied, FSA funds may be
  used to pay for expenses incurred under the
  medical plan.

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HOW DO I GET MY EMPLOYEES TO BUY INTO THIS PLAN?

• Tips
• Do NOT offer an HSA Plan next to a traditional
  PPO Plan
• Fund as much of the Deductible as possible in
  Year 1, but let employees know that you make NO
  promises for Year 2 and beyond
• Hold employee meetings after hours for both
  employees and spouses provide child care if
  necessary

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HOW DO I GET MY EMPLOYEES TO BUY INTO THIS PLAN?

• Tips
• Rely on your broker to present the HSA
  Information and explain the new plan
• Tell employees how much you are/were paying for a
  traditional insurance plan
• Use a service like First HSA Bank to provide
  ongoing support as employees learn to use the HSA
  concept

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HOW DO I GET MY EMPLOYEES TO BUY INTO THIS PLAN?

• Tips
• Offer to assist employees with early savings
  account funding, if they meet their deductible
  early in the year
• Allow your employees to get to know your broker
  so that they are more comfortable when they need
  claims assistance later

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HOW DO I MAXIMIZE MY SAVINGS IN AN HSA PLAN?

• Tips
• Look at all available health insurance companies
  for the HDHP
• Look at all plan options and ask your broker to
  show you the risks and rewards of each one
• Dont assume that a higher or lower HDHP
  deductible is better until you consider the cost
  differences

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HOW DO I MAXIMIZE MY SAVINGS IN AN HSA PLAN?

• Tips
• Use a separate administrator for your HDHP and
  your HSA
• Do not integrate your HDHP and your HSA
• Use a debit card and/or checks to make HSA use
  fast and easy
• Get rid of your old FSA in favor of
  over-funding an HSA

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HOW DO I MAXIMIZE MY SAVINGS IN AN HSA PLAN?

• Tips
• Review your plan options every year and make
  changes as needed to maximize savings
• Help employees to be better consumers of health
  care by reminding them of available tools

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Questions?
Send your questions by email to
brh_at_hostetlerinsurance.com or feel free to call
[phone], ext. 105 to speak with Barbara
Hostetler.
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Thank you!