Transcript Title

Wells Fargo Insurance Services
Los Angeles Community College District
Presented by:
Liliana Salazar, Esq., Vice President of Compliance
Gary Delaney, CEBS, Senior Vice President
Kristin Yokoyama, Account Director
March 17, 2009
Wells Fargo Insurance Services Confidential. © 2008 Wells Fargo Insurance Services. All rights reserved.
Wells Fargo Insurance Services
Agenda
I.
II.
Health Reimbursement Arrangements (HRAs)
●
Overview
●
Funding
Questions
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Health Reimbursement Arrangements (HRAs)

HRAs are a benefit plan funded exclusively with employer contributions for the purpose
of reimbursing employees’ present and/or future qualified health care expenses.
 General Provisions
 Eligible Participants are defined as active and former employees and their
dependents (IRS Section 152)
 HRAs cannot be funded with employee contributions
 Contributions are usually made on an annual basis and are available to
employees as of the 1st day of the plan year
 Rollover Features
 Unused amounts can be rolled over from one year to the next.
 HRA funds do not accrue interest.
 HRA funds are not portable, they are part of the employer’s general assets.
 HRAs can become available to an employee once they retire
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Wells Fargo Insurance Services
Health Reimbursement Arrangements (HRAs)

Contributions to HRAs
 Contributions are made solely by an employer.
 The employer must contribute the same amount to employees eligible for
the HRA (same contribution for all employees participating in CalPERS
Plans)
 Employer contributions into HRAs are not treated as gross income.
 Catch-up contributions are not available (regardless of employee’s age)
 No cash disbursements are allowed

Distributions (Reimbursement) from a HRA
 For Active Employees: HRA will reimburse medical, dental, and vision
deductibles and out-of-pocket expenses
 For Retired Employees: HRA will reimburse medical, dental and vision
deductibles and out-of-pocket expenses in addition to:
 Qualified Long Term Care Premiums
 Medicare Premiums (Parts A, B, D)
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Health Reimbursement Arrangements (HRAs)

Example of Annual HRA Funding Amount*:
 Annual PPO out-of-pocket maximum with PERS Choice is $3000 Individual
and $6000 Family
 Annual Deductible $500 Individual and $1000 Family
 District funds same amount for all active and early retiree enrollees (PPO or
HMO)
 Using $5,000,000 of $15,000,000 projected annual savings to fund HRA
 Hypothetical HRA contribution funded by the District-$1,000 for each active
and early retiree enrolled regardless of their tier of coverage
 Account “funded” at beginning of each plan year by LACCD
 Unused amounts rollover from one year to the next – can be used by
employees upon retirement to pay for out-of-pocket healthcare expenses
*Based on CalPERS financial analysis
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Wells Fargo Insurance Services
Health Reimbursement Arrangements (HRAs)

Hypothetical Hospital Claim with PERS Choice PPO Plan
 PERS Choice Max. Annual Out-of-Pocket
PPO Annual Deductible
$ 3,000
$ 500
 Hospital Retail Charges
$50,000
 Hospital charges after PPO discount
$15,000
 Deductible Applied to Charges
$
Balance
500
$14,500
 Employee’s copayment responsibility
$ 2,900
20% of allowable amount until max. copayment is met
 Total paid by insurance carrier
 Total paid by member
$11,500
$ 3,400
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Wells Fargo Insurance Services
Health Reimbursement Arrangements (HRAs)

Recommendations for HRA Design
 Equal contribution for employees in HMO and PPO plans (including PERS
Care)
 Equal contribution for all tiers of coverage (single/family)
 Employees retiring from the District would be allowed to access the amounts in
their HRA to pay for their out-of-pocket medical expenses as well as long term
care and Medicare premiums.
 No additional contributions would be made by the District to a retiree’s HRA once the
retiree becomes eligible for Medicare
 A third party administrator should be assigned to administer the HRA
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QUESTIONS
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