Transcript Understanding the Healthcare Reform Bill

Introducing CDHP Solutions
for a Successful Renewal
PrimeFlex Administrative Services, LLC
2 Hour Continuing Education Credit
GWAHU
October 20, 2010
Agenda
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•
•
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Health Care Law Update
CDHP Trends
Review of CDHP Solutions
5 Steps to a Successful Renewal
Wellness – presented by Wellness
Corporate Solutions
07/01/10
The New Health Care Law
• 2010
– Age 26 Eligibility Rules
– Non-Discrimination Rules – 105(h)
• 2011
– OTC changes
– Penalty Increase for Non-qualified Distributions
for HSAs
– Simple Cafeteria Plan
– W-2 Health Insurance Reporting Requirements
• 2013
– FSA Limit $2,500
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CDHP Trends
Kaiser Foundation Study, 2010
• Overall, enrollment in HSA/HDHP coverage in the group
market rose to 8.0 million in January 2010, up from 6.2
million in January 2009.
• Average Annual Deductible* $2,329 single / $4,418 family
• Average Annual Out-of-Pocket Limit $2,641 single /
$5,064 family
• Percentage of Policies with Unlimited Lifetime Maximum
Benefit 33%
Watson Wyatt, 2009
• 4 in 10 employers will raise deductibles, copayments
and out-of-pocket expenses
• More employers will add ADHP as an option, not full
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replacement
Flexible Spending Accounts
An FSA is: (IRC Section 125)
•
A Voluntary, Employee Benefit Program which
allows for Pre-Tax Deductions of Qualified Expenses
(Un-reimbursed Medical and Dependent Care
Expenses) reducing the employee’s taxable income
for a higher bottom line take home pay
–
–
–
–
Premium Only Plan - POP
Un-Reimbursed Medical - HFSA
Dependent Care Account - DCA
Premium Reimbursement Account - PRA
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FSA, cont.
• Employee Pre-tax Payroll Deduction
• Employer Contribution – tax-free
• Two risks you must consider
– Use it or Lose it – Employee Risk
• IRS rules do not allow unused $$ in the account to
be returned to the participant at the end of the
Plan year
– Uniform Coverage Rule – Employer Risk
• Requires the employer to have some risk in order
to save on reduced social security taxes
• Requires the employer to front the employee
allocation if a legitimate medical expense occurs
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Health Reimbursement Account
• Health Reimbursement Arrangements HRA
• A HRA is: (IRC Section 105)
→ Unfunded employer responsibility – risk
retention
→ Partially/Fully self funding of Section 213
expense
→ Analyze the ‘true’ value of Health
Insurance
→Owner decides on plan year exposure
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HRA, cont.
• HRA Maximum Employer Flexibility
• No restriction on Plan Design!!!
• Choice of covered expenses to reimburse:
→ Premiums and/or Deductibles
→ Uninsured Medical Expenses/section 213d
→ Dental and/or Orthodontics
→ Prescription Drugs and/or Vision
Expenses are only reimbursed when an expense is incurred!
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Health Savings Account
• Health Savings Accounts originate from the
Medicare Prescription Drug Improvement and
Modernization Act of 2003 (the “Medicare Bill”)
• IRA-like accounts providing for tax-deductible
contributions, accumulations and distributions for
qualified medical expenses
– The Purpose?
• To encourage savings for retiree medical
costs
• Encourage growth of “Consumer Driven
Health Plans”
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HSA, cont.
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•
•
•
•
Employer contributions to HSA are excluded from
income – can be pre-tax under Section 125
Employee contributions to HSA are 100% deductible
above the line
HSA account is completely portable
Distributions for qualified medical expenses are
excluded from income
Distributions for other than qualified medical
expenses are permitted but are included in income
and generally subject to an excise tax (exception for
excise tax for death, disability or post-65 distribution)
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5 Steps to a Successful Renewal
• Step 1: Basic Guidelines for Proper Plan
Design
• Step 2: Develop a “Big Picture” Renewal
Strategy
• Step 3: Deliver the Renewal with
Attainable Solutions
• Step 4: Combination Plans
• Step 5: Implementation – Common Issues
to Avoid
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Step 1: Basic Guidelines
Proper Plan Design Options:
• FSA (ER & EE contributions)
– Least restrictive
– Most convenient
– Annual election is available from 1st day
• HRA (ER funded only)
– Extremely flexible in Plan design
– Liability defined – exposure known upfront
– Reimbursed when incurred
• HSA (ER & EE contributions)
– Most restrictive
– Triple-tax exempt
– Retiree medical account
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Step 2: The Big Picture
• What is your belief in CDHP?
• Introduce cost savings ideas with a 3
year strategy in mind
• Determine employers goals – ask
important questions
• Align plan years based on your strategy
and future plan implementations
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Step 3: Deliver the Renewal
Attainable Solutions based on:
• Behavioral Motivations
• Financial Motivations
Let’s Take A Closure Look at Each…
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Behaviorally Motivated
• Seeking financial relief; and changing
how the employees think:
– HDHP Plans (2nd dollar HRA with FSA)
– Even Higher HDHP (% split HRA with FSA)
– QHDHP (HSA)
– QHDHP (1st dollar HSA with 2nd dollar
HRA)
– Paying employee, not Provider, directly
(HRA)
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Financially Motivated
• Seeking the quick fix in premiums with:
– HDHP Plans (HRA & FSA)
– Higher copayments (FSA)
– Adding coinsurance (HRA)
– Increasing payroll deductions (IRC 125 &
FSA)
– Removal of the group plan or individual
medical premiums exist (PRA and/or HRA)
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Step 4: Combining Plans
• FSA & HRA – perfect match
– Ordering Rules Apply
• FSA & HSA
– Ltd-use FSA: dental, vision & preventative care
only
• HRA & HSA
– Ltd-use or Post-deductible HRA
• FSA, HRA & HSA
– Ltd-use FSA/HRA, Post-deductible HRA/FSA
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FSA-HRA Plans
•Employer
reimburses the first
$1,500 of the Innetwork deductible
•Employee is
responsible for the
next $500
•HRA could pick up
co-insurance after
deductible is met.
FSA - Employee is responsible for
next $500
HRA - Employer Reimburses 1st
$1,500
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HRA - HSA
• This HRA replaces
the ability to
contribute to an
HSA altogether.
• A first dollar HRA
with QHDHP can
start the “consumer
driven” philosophy.
QHDHP –
HRA for a portion or all of
the HSA deductible
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Percentage Split HRA with FSA
• Example is a $2,000
deductible
(traditional or
QHDHP)
• ER will reimburse
80% throughout
the deductible
• FSA can pay
employee
responsibility of
20%
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HSA with Post Deductible HRA
• $3,000 / $6,000
deductible, 100%
co-insurance.
• HSA must meet the
statutory minimum
($1,200/$2,400 for
2010)
• HRA provides
catastrophic
coverage after the
HSA deductible
HRA –
Employer Reimburses $1,800
HSA –
Employee/Employer
Contributions: $1,200
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Step 5: Implementation
 Employer, do you have an FSA or HRA?
 Does your FSA/HRA renew at the same as your health plan
renewal?
 Did you amend your Section 125 plan to include the HSA
language?
 Will you fund the EEs accounts right away or through payroll?
Consequences?
 Will the owners be able to participate with pre-tax
contributions?
 Do your employees have a spouse that has “other” coverage,
like an FSA?
 How can we best communicate our message to the employees?
 Would the employer like to adopt a new or more
comprehensive wellness initiative?
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For More Information:
Lisa Collins | Area Sales Manager, Benefit Services
PrimePay | 14150 Parkeast Circle,
Suite 140 | Chantilly, VA 20151
Phone: 703-286-1831
Cell: 703-220-8750 | Fax: 484.323.1531
[email protected] | www.primepay.com
07/01/10