What Every Small Business Owner Should Know About the Cost of Health Insurance Debbie Stocks
#1 Shop, shop, shop • Review your current health plan – what is working, what is not • Consider other plans AND other carriers • Complete “health statements” to get accurate quotes from carriers • Run the numbers – not just monthly but annually
#2 Consider a CDHP • CDHP = Consumer Driven Health Plan • May be HMO, PPO, or other • May be an HSA qualified plan, an HRA plan, or other (FSA, defined purpose account) • A “high” deductible isn’t necessarily “high” • Education is key
What is a High Deductible Health Plan (HDHP)? • An insurance plan that does not cover first dollar medical expenses (except for preventive care) • Can be an HMO, PPO or indemnity plan, as long as it meets the requirements
Minimum Deductibles for HDHP’s(2012) • $1,200 (self-only coverage) • $2,400 (family coverage) • These amounts are indexed annually for inflation
Annual out-of-pocket maximum for HDHP’s(2012) • $6,050 (self-only coverage) • $12,100 (family coverage) • These amounts are indexed annually for inflation
What Is an HSA? • Health Savings Accounts (HSAs) were created by the Medicare bill signed by President Bush on December 8, 2003 and are designed to help individuals save for future qualified medical and retiree health expenses on a tax-free basis. • A Health Savings Account (HSA) is an account that you can put money into to save for future medical expenses. There are certain advantages to putting money into these accounts, including favorable tax treatment.
Who Can Have an HSA? Any adult can contribute to an HSA if they: • Have coverage under an HSA-qualified “high deductible health plan” (HDHP) • Have no other first-dollar medical coverage (other types of insurance like specific injury insurance or accident, disability, dental care, vision care, or long term care insurance are permitted). • Are not enrolled in Medicare. • Cannot be claimed as a dependent on someone else’s tax return.
HSA Contributions • Contributions to your HSA can be made by the individual, employer, or both. • Contributions by the employer are generally tax deductible • Maximum contributions to the HSA are limited annually to $3100 individual, $6250 family in 2011 (indexed annually). • “Catch up” contributions for those 55 and over ($1000) • Employees may make a one time rollover from a qualified IRA • Contributions to the account must stop once you are enrolled in Medicare. However, you can keep the money in your account and use it to pay for medical expenses tax-free.
HSA Accounts • Managed by a bank or TPA • Interest rates and fees vary by administrator • Funds “roll” from year to year – no “use it or lose it” rule • Most accounts include a checkbook and debit card
A New Health Insurance Plan • High Deductible Health Plan • Provides catastrophic coverage for major expenses • Includes network discounts for providers and Rx • May include preventive benefits • HSA Account • Money is deposited “tax free” • Funds are used to pay for out of pocket expenses such as doctor visits, Rx, dental, vision • Funds “roll” from year to year and are owned by the individual
Need More Information about HSAs? • The U.S. Treasury’s web site has additional information about Health Savings Accounts, including answers to frequently asked questions, related IRS forms and publications, technical guidance, and links to other helpful web sites. Treasury’s HSA website can be found through www.treas.gov (click on “Health Savings Accounts”) or directly at the following address: http://www.treas.gov/offices/public-affairs/hsa/. • Information in slides 1-7 was taken directly from the website above.
What is an HRA? • HRA = Health Reimbursement Arrangement • Utilized with a CDHC plan – must have a deductible • Fully funded by the employer – no employee contribution • A “promise to pay” • Use and limitations are defined by the employer • Claims paid are tax deductible to employer
Group Health Plan HMO plan Co-pays for office visits, prescriptions, and hospital Network discounts Monthly premium for family of 4 is $980.00 Annual premium cost is $11760.00 HDHP with HSA PPO Network $5000 deductible for family Network discounts Monthly premium for family of 4 is $270.00 Annual premium cost is $3240.00 Annual premium savings is $8520.00 A Look at the Numbers – Individual Case 1
Previous Health Plan Traditional PPO Co-pays for office visits, prescriptions, and hospital Network discounts Monthly premiums for family of 8 is $1075.00 Annual premium cost is $12,900.00 HDHP with HSA PPO Network $5400 deductible for family Network discounts Monthly premium for family of 8 is $478 Annual premium cost is $5736.00 Annual premium savings is $7164.00 A Look at the Numbers – Individual Case 3
#3 Believe in the plan • The employer must believe in the plan in order to help employees make the transition • Educate, educate, educate • Contribute to the HSA or HRA • Implement a wellness plan – can be of your own making • Take “baby” steps
Healthcare Reform Update (in brief) • Children to age 26 covered on parent’s policy, no annual limits on medically necessary benefits, enhanced preventive • Medical Loss Ratios in effect • 1099 Reporting – repealed, W2 Reporting – postponed • 2014 – Year of biggest changes • VA Suit – pending, may be combined with others