Transcript Introducing HSAs HEALTH SAVINGS ACCOUNTS from FIC|Fortis

HSAs
Introducing
HSAs
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Health Savings Account Plans
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from
HSAs
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Today’s Health Insurance Market is in an
Affordability Crisis
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HSAs
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“Most people don’t
have a clue
what they’re paying for and
don’t much care”
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U.S. News & World Report
October 27, 2003
HSAs
Affordability Crisis for Small Groups
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• Over 40% of businesses with 10 employees
or less do not offer health insurance.
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Sources: Kaiser/HRET Survey of Employer-Sponsored
Health Benefits, 2002, Statistics of U.S. Business, 2000;
Joint Committee on Taxation.
HSAs
Affordability Crisis for Small Groups
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Current Expensive Insurance
Plan Designs
• The consumer is insulated from the true cost of
healthcare by low deductibles and copays.
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HSAs
Affordability Crisis for Small Groups
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• Once, medical insurance was a
responsibility.
• Today, many consider it an entitlement.
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This, coupled with perceived lower cost
due to office visit and Rx copays is
driving health insurance premiums into
the stratosphere.
HSAs
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It’s time to reverse the trend
of expensive copays
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HSAs
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The true purpose
of major
medical insurance is to
protect people from financial
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hardship due to unforeseen
illness and injury.
HSAs
0 clients
Sell your
what they need
(protection from serious loss)
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Not what they think they need
(100% coverage)
HSAs
New Opportunity
0 Plan Designs
New Affordable Insurance
• Most dramatic change in health insurance since HMOs.
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• The consumer must have greater
financial responsibility
for healthcare purchases to serve as an incentive to
make prudent decisions.
HSAs
New Opportunity
Health Savings Accounts0 (HSAs) – the newest
Consumer Choice Health Plan option – are:
•
•
•
•
Tax free
Tax deductible
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Permanent
Portable
John Alden makes selling HSA Plans
simple and easy!
HSAs
New Opportunity
HSAs are:
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• Part of a permanent, federally
approved
program effective January 1, 2004.
• Available with a qualified high-deductible
health plan.
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• Tax-favored accounts that allow funds to be
accumulated to pay qualified healthcare
expenses.
• Similar in concept to an IRA – but
substantially more powerful.
HSAs
New Opportunity
Moving Employees to New Plans
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• Show substantial premium and tax savings that
employer and employees will receive.
• Align consumer habits with a realistic
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understanding of the cost
of healthcare services.
• Reverse consumer trends away from expensive
premiums for copays and other offerings that
increase price without delivering benefit.
HSAs
New Opportunity
Consumer Choice Health Plans
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• Address affordability by providing:
– Significant premium savings
– Substantial tax savings
– Solid protection from1 catastrophic financial loss
• Include a funding program to help employees pay
for their medical expenses
• Feature simple plan designs
HSAs
John Alden HSA Plans
Clients choose one of John Alden’s
premium-saving high-deductible
plans:
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Single
Deductibles
$1,200
$2,000
$2,500
$3,000
$3,500
$4,000
$5,000
Family
Deductibles
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$2,400
$4,000
$5,000
$6,000
$7,000
$8,000
$10,000
Varies by state.
HSAs
John Alden HSA Plans
Benefit Percentage: John Alden’s HSA Plans are
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available in the following combinations:
Benefit %
100%
Deductibles Available
$2,000, $2,500, $3,000, $3,500,
$4,000, $5,000
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80%
$2,000, $2,500, $3,000, $3,500, $4,000
50%
$1,200, $2,000, $2,500, $3,000,
$3,500, $4,000
Varies by state.
HSAs
John Alden HSA Plans
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Benefit Percentage: Benefit
percentages for
John Alden HSA PPO Plans are:
Network
100%
80%
50%
Varies by state.
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Non-Network
70%
60%
50%
HSAs
John Alden HSA Plans
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Family Deductible Accumulation
• Common Family Deductible – the entire family
deductible must be satisfied before benefits are
paid for any family member.
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HSAs
Premium Savings
John Alden’s high-deductible HSA Plans
offer significant premium
savings over
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lower-deductible plans.
up to
50%
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Premium Savings
based on deductible
HSAs
Premium Savings
The amount of premium savings depends on the
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John Alden plan deductible
Current plan: Copay plan, $500 deductible, 80/60 coinsurance, $2,000 out-of-pocket
Plan Deductible
Coinsurance
Approx
Savings
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$1,200 single/$2,400 family
$2,500 single/$5,000 family
$3,000 single/$6,000 family
$5,000 single/$10,000 family
50/50
80/60
50/50
100
Based on John Alden rates. Actual amounts will vary.
29%
44%
57%
57%
HSAs
John Alden HSA Plans
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John Alden HSA Plans are:
• Affordable – premium savings of up to 50%
depending on deductible.
• Secure – John Alden has
1 more than more than
40 years’ experience selling and servicing
health plans.
• Easy to choose and use – specially
designed plans and expert services.
HSAs
John Alden HSA Plans
Help your clients realize0the maximum
benefits that HSAs offer:
Selection – clients choose from several
premium-saving high-deductible plans.
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Simplicity – 100%, 80% or 50% coverage
after deductible.
Flexibility – multiple medical plans.
HSAs
John Alden HSA Plans
Multiple Medical Plans –0Employee Choice
• Many groups have diverse health insurance needs
• Offer up to four plans including combinations of:
– HSA, PPO and Indemnity
Plans
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• Mix and match HSA and copays to meet specific
needs of each employee
HSAs
John Alden Consumer Choice Health Plans
John Alden offers several0 Consumer Choice
Health Plan options:
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•
•
•
Health Savings Accounts (HSAs)
Health Reimbursement Arrangements (HRAs)
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Flexible Spending Accounts (FSAs)
Premium Only Plans (POPs)
HSAs
Investment Opportunities
Ownership
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• The funds in the HSA belong to the employee
whether contributed by the employer, the
employee or both.
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• The funds are also portable, so if an employee
leaves, he/she takes the funds along.
HSAs
HSA Contributions
First-year contributions depend on when a qualified
high-deductible health plan
0 was in force:
– If a high-deductible health plan is in force as of
January 1st, the maximum HSA contribution is
$2,600 singles/$5,150 families or an amount equal
to the deductible – whichever
is less.
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– If a high-deductible plan starts after January 1st, the
maximum HSA contribution is prorated based on the
number of months the plan will be in force during the
calendar year.
HSAs
HSA Contributions
• Anyone can contribute0 – employers,
employees or both
• Maximum contributions for 2004 are limited to
the lesser of:
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— An amount equal to the deductible, or
— $2,600 for singles or $5,150 for families
• Contribution limits are indexed for inflation
so they will change annually on January 1st
HSAs
HSA Contributions
Account Contributions
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• Lump sum or smaller deposits
• Employer contributions must meet
comparability rules
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• Can contribute up to April 15th of the
following year
HSAs
HSA Contributions
Catch-Up Contributions
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People age 55 and older can make additional
annual contributions
Year
Additional Amount
2004
$ 500
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2005
$ 600
2006
$ 700
2007
$ 800
2008
$ 900
2009 & thereafter
$1,000
HSAs
Tax Advantages
Tax-Free Withdrawals for Qualified Medical Expenses:
As defined under Section 213(d) of the IRS Code
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• Deductibles and coinsurance
• Over-the-counter medications
• Glasses, contacts or Lasik eye surgery
• Dental services including
orthodontic work
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• COBRA continuation premiums
• Long-Term Care premiums
• Medicare premiums
• Much more!
HSAs
HSA Account Administrator
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MSAver Resources L.L.C.
John Alden-Endorsed HSA Administrator
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• Toll-free number: 866-889-8578
• Web site: www.nstarmsa.com
HSAs
HSA Account Administrator
MSAver provides:
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Convenient ways to pay for expenses with
HSA funds
• Checkbook
• Debit Card
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Easy ways to save and build HSA funds
• Earn interest tax free
• Keep money in the savings account
• Move money into an investment account
HSAs
HSA Account Administrator
0 investment choices
MSAver offers an array of
• Money market funds
• Stocks and bonds
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• Over 8,000 mutual funds
HSAs
HSA Account Administrator
MSAver makes investing0 easy for your clients:
• Helps employee open a brokerage account
• No large balance required
• HSA funds can be traded online
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• Money can be moved back and forth between
the investment and savings accounts
• Access to the brokerage account is available
24 hours a day through internet trading
HSAs
Investment Opportunities
0 from year to year so
• Unused funds accumulate
the employee has several good choices:
— Use the money to pay for qualified expenses
tax free as they occur
— Save money tax free1 for future
medical expenses
— Build savings and establish a tax-sheltered
nest egg for retirement
HSAs
Investment Opportunities
An employee who wants0to build savings
has options
• Keep the money in the savings account
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• Invest funds in money market funds,
mutual funds, stocks, bonds, etc.
HSAs
HSA vs. IRA
HSA
• Contributions are tax
deductible to everyone with
a qualified high-deductible
health plan
• Tax deduction does not fade
out with income
• Qualified withdrawals are
tax free
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IRA
• Tax deduction is limited to
certain individuals
• Tax deduction fades out with
income
• Qualified withdrawals taxed
as ordinary income
HSAs
Seize the Opportunity!
0 with 10 employees
• Over 40% of businesses
or less do not offer health insurance.
• Congressional analysts estimate that up to
40 million HSAs will be established in the
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next decade.
Sources: Kaiser/HRET Survey of Employer-Sponsored
Health Benefits, 2002, Statistics of U.S. Business, 2000;
Joint Committee on Taxation.
HSAs
Seize the Opportunity!
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• The ease and flexibility HSAs
bring to the health
insurance market has broad appeal.
• HSAs are especially appealing to any employer who
wants to provide employees with the opportunity to
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save and accumulate funds for future medical
expenses or supplement their retirement.
• There are several types of small groups for which
an HSA Plan may be particularly advantageous.
HSAs
Seize the Opportunity!
Target Small Groups
0 coverage because of
• Groups that have dropped
high premiums
• Smaller, family-owned-and-operated businesses
• Groups with employees who want to better control
tax responsibility
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• Employers who want different plans for
themselves than for employees
• Employers only able to provide limited benefits
• Employers not eligible for an HRA
HSAs
Seize the Opportunity!
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HSAs are available to everyone with a qualified
high-deductible health plan*. They provide:
 Premium Savings
 Tax Advantages 1
 Investment Opportunities
* Certain exceptions apply, including people receiving Medicare benefits.
HSAs
Seize the Opportunity!
 Potential Premium Savings – up to 50%
 Tax Advantages
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— Tax-free contributions
— Tax-free earnings
— Tax-free withdrawals for qualified medical
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expenses
 Investment Opportunities
 Bonus Program
 Security with John Alden
— More than 40 years of commitment and quality
HSAs
Seize the Opportunity!
Consumer Choice Health Plans (CCHPs)
The market potential for CCHPs0is sizable. The current $2.5B
market is projected to grow 142% annually to reach $88B by 2007.
CCHP Premiums
(Billions)
$500
$400
$300
$200
Consumer Choice Health Plans
will account for $88 billion in 2007,
a sixfold increase over 2005.
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$100
$0
2000
2002
Sources: Forrester Brief, Conning Research
& Consulting, Fortis – Health Affairs.
2004
2006
2008
2010
HSAs
Seize the Opportunity!
“Contributions, investment0growth and withdrawals
for health-related expenses are all free from
taxation.”
“That makes HSA tax benefits superior even to
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IRAs. With IRAs, the money is taxed either before it
goes into the account, or as it is taken out.”
USA Today
December 29, 2003
HSAs
HSA Employer Savings: Example #1 – First Year
Traditional low deductible, copay plan
HSA Plan
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Savings – Before Employer HSA Contribution (30%)
$73,732
$51,612
$22,120 a
Maximum allowed HSA contribution – single
Employer HSA contribution percentage
(2500 x .25 X 9)
Number of employees with single coverage
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$2,500
25%
9
$ 5,625 b
Maximum allowed HSA contribution – family
Employer HSA contribution percentage
Number of employees with family coverage (5000 x .25 X 3)
$5,000
25%
3
$ 3,750 c
Savings – After Employer HSA Contribution (17%)
(a - b - c)
$12,745 d
HSAs
HSA Employer Savings: Example #2 – First Year
Traditional low deductible, copay plan
HSA Plan
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Savings – Before Employer HSA Contribution (30%)
$73,732
$51,612
$22,120 a
Maximum allowed HSA contribution – single
Employer HSA contribution
(500 x 9)
Number of employees with single coverage
1
$2,500
$500
9
$ 4,500 b
Maximum allowed HSA contribution – family
Employer HSA contribution
Number of employees with family coverage (500 x 3)
$5,000
$500
3
$ 1,500 c
Savings – After Employer HSA Contribution (22%)
(a - b - c)
$ 16,120 d
HSAs
HSA Employer Savings: Example #3 – Renewal Years
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Year
Current
Premium
HSA Plan
Premium
Year 1
$ 78,732
$51,612
$6,000
$16,120
Year 2
$ 84,792
$59,3541
$6,000
$35,558
Year 3
$ 97,511
$68,257
$6,000
$58,812
Year 4
$112,137
$78,495
$6,000
$86,453
Assuming identical rate increases.
HSA
Contribution
Cumulative
Savings
HSAs
Selling John Alden HSA Plans
Simple and Smart Benefit Design Strategy
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Example 1
 Employer pays all of the health insurance premiums
— Funded by the premium savings
— Employer maximizes the tax deduction
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 Employee funds the HSA
— Controls amount going into the HSA
— Controls amount spent from HSA
— Employee gets tax deduction
— Pays self — not the insurance company
— Saves for the future
HSAs
Selling John Alden HSA Plans
Simple and Smart Benefit Design Strategy
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Example 2
 Employer already pays all of the health
insurance premium
 Employer shares contributions
to the HSA
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with employees
— Employer provides a generous benefit
and still earns tax deductions
— Employee has a financial commitment
that encourages consumerism and
allows for long-term savings
HSAs
Alternative Consumer Choice Health Plans: HRAs
John Alden’s Health Reimbursement Arrangement
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(HRA) Plan may be a better choice if the
employer wants:
• Greater control over cash flow and
fund ownership
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• A prescription drug copay program
• The ability to save up to 45% in premium
(depending on deductible)
HSAs
Consumer Choice Health Plans: The Best of Both
0 an HSA and an HRA.
An employer can offer both
This combination is best for employers who:
• Are not eligible for an HRA based on company
ownership type
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• Want to offer an enhanced benefit for
themselves and/or other highly compensated
staff, and a more basic plan for others
HSAs
Bonus Program
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Take advantage of
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John Alden’s
HSA Plan
Bonus Campaign!
HSAs
Presentation Disclaimer
This presentation includes0information regarding
HSAs. Information is provided with the understanding
that John Alden and its subsidiaries are not engaged
in rendering tax or legal advice. John Alden disclaims
any and all liability for creation
or administration of
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an HSA. Examples are presented for illustrative
purposes only.
If tax or legal advice is required for an HSA, seek
the services of your professional advisor.