Health Savings Accounts for YOU

Transcription

1 Better Health. 2015/2016 Plan Year Updates Health Savings Accounts for YOU

2 2 Your 2015/2016 Health Savings Account Information The last year brought more changes to health care and medical insurance in the United States. There is one thing that did not change, however. The Diocese is pleased to continue to offer medical benefits that meet the needs of participants and wants to continue to share in the responsibility for your medical coverage. Unfortunately, the cost of healthcare has continued to rise. The Diocese spent over $54 million last year on health care for participants and that cost is forecasted to grow by as much as 6-7% annually for the next several years. When viewing the changes to the Diocesan Health Care Plans, it s important to keep this external environment in mind. Diocesan entities continue to help employees by paying approximately 70% of the cost of the plans. Last year, the Diocese introduced a new medical plan: the Medical Mutual PPO/Health Savings Account (MMO PPO/ HSA). Over a thousand employees and family members are covered by the MMO PPO/HSA plan. This year the Diocese will continue to contribute to your Health Savings Account (HSA) and have also added a new benefit to the MMO PPO/ HSA plan: Critical Illness Insurance. We will continue to provide extra communication so that you understand your options and how to make the best choices. This booklet is designed to describe some of the ways the MMO PPO/HSA may be the best medical insurance option for you and your family. Your well-being and financial security are very important to the Diocese. We believe that the MMO PPO/HSA health plan option and a Health Savings Account should be carefully considered as a potential way to reduce the cost of providing health insurance for you and your family. Table of Contents Your Health Savings Account Option...3 Critical Illness Insurance...3 Deciding If An HSA Is Right For You...4 Are You Eligible for an HSA?...5 Did You Elect an FSA Last Year?...5 Does an HSA Fit Your Lifestyle?...6 HSA Funding Tip...6 Five Myths About HSAs...7 Use Your HSA Wisely...7 Upcoming Town Hall Meetings...8

3 Your Health Savings Account Option: Updated For the 2015/2016 Plan Year The introduction of the MMO PPO/HSA and the Health Savings Account (HSA) last year offered you an option that provides money-saving benefits, puts you in control of your health care spending and helps you pay or save for qualified medical expenses now and in the future. This year the Diocese will continue to contribute to your HSA and has also added an exciting new benefit to the PPO/HSA plan: Critical Illness Insurance. See the article below for more information. The Diocese is also pleased to continue to contribute to your HSA in the 2015/2016 plan year. If you have single coverage, the Diocese will deposit $1,000 into your HSA ($250 each quarter) during the 2015/2016 benefit year. If you elect family coverage, the Diocese will deposit $2,000 into your account ($500 each quarter) during the 2015/2016 benefit year. These contributions will be automatically deposited into your HSA. Remember: the money in your HSA is yours! You own it, you control it and you decide how it is spent and any money in the account at year end rolls over into the next year. Critical Illness Insurance: A Valuable New Benefit From the Diocese In the 2015/2016 plan year, the Diocese will package Critical Illness Insurance with the MMO PPO/HSA plan. There is no added charge to you as this coverage has been embedded into the design of the MMO PPO/HSA plan. While the money can be used for ANY purpose, and does not have to be deposited into your HSA, this important new benefit may reduce the need to withdraw money from your HSA if you are stricken by a covered medical condition, many of which can be very costly. The Critical Illness Insurance will pay a lump sum of up to $12,000 to individuals (employees or covered family members) in the event of a covered serious, costly medical event such as a heart attack, kidney failure or major organ transplant, among others. Here s a chart that shows how it works: Covered Conditions Initial Benefit (1st Occurrence After Effective Date) Recurrence Benefit Full Benefit Cancer 100% of $12,000 Benefit Amount 100% Partial Benefit Cancer 25% of $12,000 Benefit Amount 25% Heart Attack 100% of $12,000 Benefit Amount 100% Stroke 100% of $12,000 Benefit Amount 100% Coronary Artery Bypass Graft 100% of $12,000 Benefit Amount 100% Kidney Failure 100% of $12,000 Benefit Amount NONE Alzheimer s Disease 100% of $12,000 Benefit Amount NONE Major Organ Transplant 100% of $12,000 Benefit Amount NONE 22 Additional Listed Conditions (see 25% of $12,000 Benefit Amount NONE NOTE: There is a $36,000 lifetime maximum benefit per person. The Critical Illness Insurance Also Has These Important Features: Guaranteed Acceptance When you enroll in the MMO PPO/HSA plan you and your eligible family members are covered no health questions, no medical exams and no hassle. Portable Your critical illness insurance will be made available on a direct bill basis if your employment terminates or you retire. You can take it with you at the same low group rate that was available when you were covered under the Diocesan plan. Coverage for Spouse and Children When enrolled in the MMO PPO/HSA plan your spouse and children who are covered by the health plan are also covered by the critical illness insurance. Payments Made Directly to You You decide how to spend the money for medical expenses not covered by your medical plan like deductibles or for non-medical expenses like extra household bills, childcare, or home modifications that might have resulted from your illness. The critical illness insurance is underwritten by Metropolitan Life Insurance Company, New York, New York. Like most insurance this policy contains certain exclusions and limitations. In this limited space we have only been able to provide a summary of the critical illness plan. Please visit the Diocese health benefits website at for a copy of all of the policy provisions. 3

4 4 Deciding If An HSA Is Right For You While the MMO PPO/HSA offers lower premiums and an HSA to save money for qualified medical expenses, the Diocese understands that everyone s situation is unique. Premium cost isn t the only consideration to use when selecting the best plan for you and for your family. You should also consider your past medical insurance usage and your expectations for future medical needs, and then compare the Diocesan plans available for the 2015/2016 plan year. You may want to compare out-of-pocket limits, deductibles, co-pays and prescription costs, as well as think about how to best manage your expected medical needs and costs over the next year and beyond. We encourage you to take the time to understand how the MMO PPO/ HSA works before making your decision. In addition to newsletters, this booklet and Town Hall meetings, the Diocesan website ( has the 2015/2016 Benefits Handbook with side-by-side plan details to aid you in your evaluation of the various medical plans. You can use the chart below to help calculate what you might be able to save if you select the MMO PPO/HSA option. We provided a few examples and you can add up the figures based on your individual situation. If you are in good health you probably don t need much medical care each year. For many people just the annual preventive care physical is all that may be needed. If that s you then you can save a lot of money by selecting the MMO PPO/HSA health plan. Consider this: Over 40% of our health plan participants spend less than $500 annually and over 90% spend less than $2,000 annually on out-of-pocket medical expenses. Most participants will not need to select the lower deductible and out-of-pocket maximums of the more expensive PPO plan. Check How Much YOU Can Save with the PPO/HSA Option Calculate YOUR Savings Single Examples (2 incentives) 3 Person 2 Person Family Family Monthly PPO Premium $83 $355 $355 Monthly PPO/HSA Premium - $32 $177 $177 Monthly Premium Savings = $51 $178 $178 Total Yearly Premium Savings x12 = $612 $2,136 $2, /2016 Diocesan HSA Contribution + $1,000 $2,000 $2,000 Cash Savings = $1,612 $4,136 $4,136 Less Estimated Medical Costs ($500 per person) - ($500) ($1,500) ($1,000) Potential Savings = $1,112 $2,636 $3,136 Opening Your HSA The Diocese has selected PNC Bank to hold and administer the HSAs for Diocesan MMO PPO/HSA participants. Upon enrolling in the MMO PPO/HSA plan, you will also complete an HSA enrollment form for PNC who will open an account in your name and contact you with the required forms, signature cards and provide a debit card for access to the account. The accountholder will also be able to designate one or more beneficiaries to whom distribution of their HSA funds will be made upon their death. In the absence of a valid beneficiary designation, the assets in the HSA will be distributed to the accountholder s estate upon their death. PNC also has a website dedicated to HSAs where you will be able to monitor and access your account and make investment selections. Spouses age 55 or older who wish to open an HSA to accommodate the additional catch-up contribution provided in the law can contact PNC directly (or any other financial institution that offers HSAs) to open an individual account.

5 Are You Eligible for an HSA? 5 The Diocese is pleased to offer the HSA as a savings option when you elect the MMO PPO/HSA. However, the federal government regulates who is eligible for the account. Please check the following rules to determine if you can open a Health Savings Account: You must elect the MMO PPO/HSA plan. Only coverage by this special medical insurance plan allows you to qualify to open an HSA. You cannot be enrolled in Medicare. If you are enrolled in Medicare then you are not eligible to open an HSA. However, if you have already opened an HSA before you enrolled in Medicare then you are allowed to use the money in your HSA, but you are not allowed to contribute any more money to your HSA. You cannot be covered under Tricare, and cannot have received any health benefits from the Veterans Administration or one of their facilities, including prescription drugs, in the three months prior to opening your HSA. You must not be covered under any other medical insurance, such as a spouse s plan, unless the other coverage is also a special HSA-qualified medical insurance plan. You must not have a Flexible Spending Account (FSA). Please see the article below for more information or visit the Diocesan website ( If you need more information feel free to call the Diocese Employee Benefits Office at , Ext Did You Elect an FSA Last Year? This Important Transition Information Is For You For individuals who have an existing Flexible Spending Account (FSA) and wish to enroll in the new MMO PPO/ HSA plan, there are careful transitional items that must be considered. You may enroll in the plan on July 1, 2015, but you may need to defer the opening of the HSA with PNC. Certain employers that utilize the Diocesan medical plans offer FSAs and will continue to do so for the 2015/2016 benefit year. The FSAs are still a valuable tool for people who do NOT participate in the new MMO PPO/HSA medical plan. However, if you are presently covered under an FSA, you cannot open an HSA, even if you meet the other eligibility requirements, until the participation in the FSA expires at the end of the plan year, or upon the expiration of the grace period (if applicable). The Diocese is pleased to be able to provide special arrangements to help you open your HSA after depleting the balance in your FSA. The easiest way to manage the transition is to spend all money in the FSA before the end of the plan year ( June 30 for most participants). If you still have money in your FSA on June 30 (for FSAs with a June 30 Please see the publication entitled Important Information Regarding the Interaction of Flexible Spending and Health Savings Accounts on the Diocesan website ( for further information or call the Employee Benefits Office at , Ext for assistance. fiscal year), on October 1, the HSA can be opened and the Diocese will catch up your contribution by depositing the quarterly amounts that were deferred ($250 for single coverage or $500 for family coverage) in addition to the second quarter contribution. You can also begin depositing into your HSA at this time. For calendar year FSA plans, participation and the catch-up adjustment for all missed Diocesan contributions will occur similarly on January 1 or April 1, 2016.

6 6 Does an HSA Fit Your Lifestyle? Here Are Some Possible Scenarios Age 42, Family Coverage My wife is a CPA so maybe we looked at this differently than other families. But with the money that the Diocese is putting into the HSA it just seemed like a smart choice to select the MMO PPO/HSA plan. Chances are that we won t need more than that to pay our regular medical bills anyway. No one can say for certain whether they will have any type of serious health condition but between the lower contribution costs and the money put in the account it looks like we ll come out thousands of dollars ahead. So, it was the right choice for our family. Age 22, Single Coverage I m just starting out and this was my first real job. I don t have a lot of extra money to spend so I picked the MMO PPO/HSA since the premiums were a lot cheaper. I probably would not have enrolled in a health insurance plan at all except my parents said if I didn t then there s a fine when I pay my taxes. It turns out the premium cost was less than $10 a week so I figured it was the right thing to do. Age 56, Family Coverage Now that my husband and I are in our fifties we can see where retirement is on the horizon. We are both truly blessed to be in good health so we didn t feel like we needed to buy a lot of insurance we wouldn t use. We plan to put as much as we can into our HSA so we have it to spend in retirement. It seems like with an HSA you have a lot of flexibility which is good since you never know what might happen. Do you have Single coverage but your spouse or children are covered on another health plan? This tip is for you! Did you know that you can use money in your HSA to pay for qualified medical expenses of your spouse or dependent children even if they are not covered on the MMO PPO/HSA plan you elect from the Diocese? That s right! The money is there for you to use for those qualified expenses as well as your own. You can use your HSA to pay for items such as your child s eyeglasses, or contact lenses or your spouse s dental checkup. HSA Funding Tip One of the great things about your PPO/HSA option is that the monthly premium cost is a lot less than the PPO or HMO options. Another great benefit is that you do not have to pay income tax on the amounts you contribute to your Health Savings Account. Let s look at how these two advantages go great together. Many people take the premium savings and contribute that to their HSA each month. If you have Single coverage you will save $51 a month in premiums, or over $600 for an entire year, that you can contribute, tax-free, to your HSA. If you have Family coverage you will save $178 a month in premiums, or over $2,000 for an entire year, that you can contribute, tax-free, to your HSA. The money is yours to use when you incur actual out-of-pocket medical expenses if you need it. These days it s tough to find ways to put money away into a savings account, especially on a tax-free basis. Follow this tip and you ll have the inside track on building up thousands of dollars in savings. This is in addition to the $1,000 for single coverage ($250 each quarter) or $2,000 for family coverage ($500 each quarter) that the Diocese will deposit to your HSA during the 2015/2016 benefit year. You may want to consult with a tax advisor to determine your HSA contributions.

7 Five Myths About HSAs 7 Although Health Savings Accounts have been around for over ten years, there are still some misperceptions about the rules that must be followed. The Diocese has provided a lot of information so employees will be well-educated about HSAs. However, some myths still exist. Read on to get the facts so you can be a myth-buster. 1. Myth: Employees need to fund their HSA in advance of expenses to get the tax break. Fact: If the HSA was established when the account holder had a health care expense, he/she can still save 25-35% in payroll and income taxes by funding the account after the expense occurs and reimbursing themselves even years later. 2. Myth: People with single coverage can only use an HSA for their own health expenses. Fact: An HSA holder can use the account to pay for health expenses of any tax dependent (i.e., spouse, children, etc.) even if the person is not on the same health insurance plan. 3. Myth: I will forfeit the money in my account if I don t use it. Fact: The money in an HSA is yours. You own it, you control it and you decide how to spend it. You don t ever forfeit the money. 4. Myth: If I withdraw money from my HSA for anything other than medical expenses I will pay a penalty. Fact: True if you are under age 65, however, once you are age 65 you are allowed to withdraw money to be used for absolutely anything, just like an IRA or 401(k), and you are only subject to ordinary income taxes again, just like an IRA or 401(k). But remember, even after age 65, as long as the money is spent on qualified medical expenses there are no taxes. 5. Myth: I can t keep my HSA if I am no longer enrolled in a qualified health plan. Fact: While your ability to continue making tax-favored contributions is dependent on your enrollment in a qualified health plan, you can take withdrawals from your HSA until all the money is spent, even if you are no longer enrolled in a qualified health plan. Use Your HSA Wisely Understand Qualified Medical Expenses The money saved in your HSA is intended for qualified medical expenses (as defined by the IRS) or saved for future qualified medical expenses. In order to avoid extra taxes and tax penalties, you should only use the money to pay for qualified medical expenses, unless you are over age 65. tax-advantaged retirement plans. But remember, prior to age 65, on withdrawals for non-qualified medical expenses you ll get hit with a 20% penalty in addition to the normal income tax you ll owe. So, be aware of what constitutes a qualified medical expense to avoid that unpleasant surprise. The list of qualified medical expenses is quite extensive and includes vision, dental and other services such as psychologist visits, telephone equipment for the hearing-impaired or vision-impaired, physical therapy, ambulance service and other related transportation. You can find a complete list in IRS Publication 502 available on the Diocesan website ( The rules are slightly different when you reach age 65. At age 65 you can withdraw money from your HSA even for non-qualified medical expenses and the money spent is taxed as normal income with no penalty, similar to other You may want to let your HSA balance and any earnings grow over time. This ability to use your HSA dollars for future medical needs, even in retirement, is an attractive feature of HSAs and many people build their account now for future medical needs. Also, there is no specific rule as to when you need to withdraw funds from your HSA in relation to when you actually incurred the related medical expense. You could choose to leave the funds in the account earning investment returns and accumulate qualified medical expenses for several years and then reimburse yourself for those expenses at a future date.

8 Diocese of Cleveland Employee Benefits Office 1404 East Ninth Street Cleveland, OH Get More Information and Have Questions Answered at the Upcoming Town Hall Meetings April 14, 2015 (Tuesday) 4:00 PM St. Clarence Parish Pavilion Lorain Rd. North Olmsted April 16, 2015 (Thursday) 3:00 PM St. Augustine Manor The Commons 7911 Detroit Ave. Cleveland April 20, 2015 (Monday) 4:00 PM St. Francis de Sales Parish The Upper Room 4019 Manchester Rd. Akron April 21, 2015 (Tuesday) 7:00 PM Center for Pastoral Leadership Founders Room Euclid Ave. Wickliffe Better Health.