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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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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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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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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