Health Risk Management

1
Health Risk Management

• Understanding Health Reimbursement Arrangements
  and Health Savings Accounts
• Presented by Michael Mead
• Regional Sales Director
• Total Administrative
  Services Corporation

2
Todays Agenda

• What is the problem?
• What are the obstacles?
• What is a Health Reimbursement Arrangement?
• How is it applied?
• What is a Health Savings Account?

3
The Gathering Storm

• Employees wanting more for less
• Employers getting double-digit health insurance
  premium increases
• Limited budgets
• Taxpayers wanting more for less
• Something HAS to give

4
Old Habits Die Hard

• Employees have grown dependent on insurance
• Employees resist change

5
Thinking Outside the Box

• Current premium increase rates are unsustainable
• The role of managing health risk with insurance
  companies must be re-thought
• DO WE HAVE TOO MUCH INSURANCE?

6
Health Reimbursement Arrangements

• Employer buys less insurance
• Higher co-pays and/or deductibles
• Employer then funds some degree of the difference
  back to the employee (based on usage)
• Employer and employee enjoy premium advantages
• Employee still enjoys basically the same level of
  coverage
• Employer gets a tax break on the expense

7
Health Reimbursement Arrangements

• Defined Contribution Plan
• Authorized under IRC Section 105
• 100 Employer funded
• Defines maximum Employer risk
• Medical Dental expenses defined by Section 213
  are eligible and tax deductible under Section 162
• Funds are not subject to use it or lose it

8
Health Reimbursement Arrangements

• Employer Keeps Control
• Employer sets eligibility
• Part time or seasonal
• Years of age
• Probationary period
• Current employee inclusion

9
Health Reimbursement Arrangements

• Employer Keeps Control
• Flexible Payment Rules
• Build in coinsurance and deductibles
• Employee and/or family coverage
• Maximum benefit definition
• Carryover option of unused benefits

10
Health Reimbursement Arrangements

• Employer Keeps Control
• Choice of Covered Expenses
• Co-pays and/or deductibles
• Uninsured medical expenses
• Dental and/or orthodontics
• Prescription drugs and/or vision

11
Health Reimbursement Arrangements

• Employer Keeps Control
• Reimbursement Priority
• 1st Insurance (can be self-insured)
• 2nd HRA
• 3rd Flexible spending account
• 4th Employee out-of-pocket

12
HRA Illustration

• 32 Employees
• Current Plan 500 Deductible and the Employers
  pays 80
• HRA Plan 1,500 Deductible with the HRA funding
  1,000 back to participating employees with
  qualifying expenses

13
HRA Illustration

• Adding up the Employers Savings
• Current Plan Premiums 6,587
• HRA Plan Premiums 4,706
• Monthly Savings 1,881
• Annual Savings 22,572

14
HRA Illustration

• In this case, the employer is offering a dual
  option. Employees staying with the current plan
  must buy up on the premium difference.
• 16 Employees Decide to buy up
• 16 Employees move to the HRA plan

15
HRA Illustration

• Where does this leave us?
• Annual Premium Savings 22,572
• HRA Utilization (16,000)
• TPA Fees (1,225)
• Employer Guaranteed Savings 5,347

16
HRA Illustration

• The 5,347 in savings assumes that ALL 16
  participants utilize HRA funds
• At 80 Utilization the savings are 8,892
• At 60 Utilization the savings are 12,096
• At 40 Utilization the savings are 15,300
• What does our experience tell you?

17
Health Savings Accounts

• Created to mimic the Contributory IRA
• Status Defined under IRC Section 220
• IRC 213 defines eligible expenses
• Can be funded by either Employer or Employee
• Assets belong to the Employee
• No use it or lose it

18
HSA

• Only for Employees who have Qualified
  High-Deductible Health Plan at work
• Single coverage deductible is 1,000
• Family coverage deductible is 2,000
• Funding maximums are the lesser of the
  out-of-pocket expenses or 2,600for individual
  and 5,150 for family

19
HSA

• Contributions are pre-tax (solo vs. Sect. 125)
• Interest accrues tax free
• Accounts are portable
• Distributions taken for non-qualified expenses
  are subject to an additional 15 tax
• Assets held in custodial accounts

20
HSA

• IRS is the only oversight
• Bank fees will dampen benefit for those
  constantly draining the account
• Ideal users are the ones who dont need it
• Excellent option in the right place

21
Questions?

• Thank You for Your Time.