Frequently Asked Questions on Consumer-Driven Health Plan and Health Savings Accounts

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1 Frequently Asked Questions on Consumer-Driven Health Plan and Health Savings Accounts In 2007, Dow Corning implemented a Consumer-Driven Health Plan (CDHP) option that includes a Health Savings Account (HSA). This FAQ will help you learn what you need to know in order to make the best choice for you and your family. If you have any additional questions, please contact the HR Service Center at (989) or toll-free at (800) What is a Consumer-Driven Health Plan? The Consumer-Driven Health Plan, or CDHP option, is the newest addition to Dow Corning s benefits offerings. The CDHP option includes a $1,200 deductible for single coverage and $2,400 deductible for family coverage if you complete the Health Risk Appraisal. If you do not complete the Health Risk Appraisal, Dow Corning will contribute $500 single/$1100 family into your HSA. To help you stay healthy and identify problems early, the CDHP option covers preventive care services at 100 percent. Once you meet the deductible, each time you need care you pay a portion of the cost (or coinsurance) of covered services. If you choose in-network providers, the plan pays 90 percent and you pay 10 percent of eligible expenses. The amount you pay in coinsurance and prescription co-pays accumulate toward your out-of-pocket maximum, which is $1,200 for single coverage and $2,400 for family coverage. In addition to your deductible, this is the maximum amount you will pay for expenses in a year. Once you ve met the out-of-pocket maximum, the plan covers medical and prescription costs at 100 percent with no additional co-pays.

2 Why choose the CDHP option over the other Dow Corning health plans? The CDHP option is designed to be a viable option for any Dow Corning employee. The plan has no premium for In addition, you ll be eligible to open an HSA, administered through Wells Fargo. This year, Dow Corning will contribute $600 (single) and $1,200 (family) to your HSA if you complete the Health Risk Appraisal. You may also choose to contribute up to $2,250 (single) or $4,450 (family) to your HSA tax-free. In the next few years, Dow Corning will phase out its PPO health plan and eventually all U.S. employees will be defaulted into the CDHP option with the HSA. If you join the plan now, you ll be able to open your HSA and start accumulating funds, tax-free, with the added help of Dow Corning s contributions. What is covered under preventive care? Similar to Dow Corning s PPO plan, preventive care includes annual physicals, wellbaby check-ups, mammograms, pap smears, prostate specific antigen (PSA) tests, colon cancer screenings, and immunizations. In addition, the CDHP option includes antihypertensive and cholesterol-lowering medication at 100 percent. What exactly is a Health Savings Account? Health Savings Accounts (HSAs) were created by the Medicare Prescription Drug Improvement and Modernization Act of They are designed to help individuals save for qualified medical and retiree health expenses on a tax-free basis. How does an HSA benefit me? Contributions go into your account tax-free, earn interest or investment returns tax-free, and are distributed from your account tax-free from federal income taxes if spent on qualified health care expenses. Money not used by the end of the year will rollover to the next year and can earn interest. Similar to your 401(k), you may invest the money in a variety of investment options. This enables you to save for long-term health care needs. HSAs are portable. You can take the money with you when you leave or retire from Dow Corning. HSAs can be passed on to a named beneficiary after your death. How does an HSA work? First, you must be covered under the CDHP option to qualify for an HSA. You can use the HSA to pay for qualified medical expenses with tax-free dollars. Once you meet the deductible ($1,200 for single and $2,400 for family), the CDHP option pays 90 percent of health care costs. However, any money left over at the end of the year is yours to keep in your HSA for future health expenses.

3 How do I contribute? You can contribute up to $2,250 (single) or $4,450 (family) annually on a pre-tax basis. You enter the amount on a per-pay-period basis in ESS and can change your contribution amount at any time throughout the year. Is the money available at the start of the year? HSA funds are not available at the start of the year unless you previously had money in the account (from the year before, for instance), just like a regular checking or savings account. Money will be available in the account as funds are deducted from your paycheck. What is a qualified medical expense? Or in other words, what can I spend my HSA dollars on? An HSA-qualified medical expense is any health care cost paid on behalf of an individual or his or her spouse or dependents as defined in the Internal Revenue Code (IRS Section 213[d]). These are the same as for a Health Care Flexible Spending Account (FSA). Can I use the HSA funds for non-health care expenses? If funds are used for non-qualified health care expenses before age 65, you ll have to pay taxes and a 10 percent penalty. If HSA funds are used for non-qualified expenses after age 65, you pay only the taxes. What if I want to choose the CDHP option but my spouse is covered under a nonhigh-deductible plan? HSA eligibility to contribute is based on the employee only. An employee cannot also be covered under a spouse s plan unless the spouse s plan is also a high-deductible plan. If you enroll in an HSA, your spouse cannot have an FSA. The spouse and the family members can be covered under both the employee s CDHP coverage and the spouse s plan. Also, if an employee has family coverage, he or she does not have to have everyone in the family listed as covered under the CDHP to be able to use the HSA funds. On a related note, if the spouse s company offers a high-deductible plan, both the employee and spouse can enroll and contribute to their individual HSAs. However, the maximum contribution of the combined must be less than the highest deductible plan, per IRS rules.

4 If my spouse and I both work at Dow Corning, what are our CDHP/HSA enrollment options? One of you must choose family coverage under the CDHP option, and the other must waive medical coverage. Dow Corning will then contribute $1,200 into your HSA. Please note that you may enroll only in a limited FSA. What are the differences between a FSA and an HSA? The most important difference between the FSA and the HSA is that you keep any remaining year-end balance in the HSA, whereas you lose any remaining balance in your FSA at the end of the year. If you enroll in the HSA, you can still contribute to an FSA. However, when you participate in the HSA you are then eligible to participate only in a limited FSA. A limited FSA will only reimburse you for dental and vision costs. You cannot submit medical or prescription expenses for reimbursement from your limited FSA. Also, you must submit documentation for your expenses when you want reimbursement from your FSA. You don t need to provide any documentation to make a withdrawal from the HSA, simply use your debit card provided by Wells Fargo. However, the IRS requires that you maintain appropriate documentation to demonstrate that the items being reimbursed under the HSA are qualified medical expenses. I m enrolled in the CDHP with an HSA, but I also have a limited FSA. Will I have two separates debit cards? No. You will have one debit card for both accounts. If you have a limited FSA, the dental or vision charges will automatically be deducted from your limited FSA first. If you do not have any money in the limited FSA, the dental charges will automatically be deducted from your HSA. Can the funds in an HSA be invested? Yes, you can invest the funds in your HSA. The same types of investments permitted for IRAs are allowed for HSAs, including stocks, bonds, mutual funds and certificates of deposit. Visit the Wells Fargo Web site for more information about investment opportunities.

5 Where can I find more information about the CDHP option and HSAs? If you have Internet access, you can visit to watch a 20-minute presentation, which was recently mailed to your home, all about Dow Corning s CDHP option and HSAs. For more information about HSAs please visit the U.S. Treasury website: For more information about HSAs and related investment opportunities, please contact Wells Fargo at