Celebrating 75 Years

Consumer Directed Health Plans How can they Impact Retiree Health Benefits

Consumer Directed Plans Usually use a High Deductible Health Plan Have a component of participant responsibility. Empower participants to make independent decisions while providing an economic incentive. Successful plans will provide tools to help participants in their decision process.

What are Consumer Directed Health Plans? HRA’s - Health Reimbursement Arrangements HSA’s - Health Savings Accounts MSA’s (MMSA’s)- (Medicare) Medical Savings Accounts

HRA - Health Reimbursement Account Employer Benefits Do not require a qualified plan More flexibility in plan design Employer owns benefit Only portable to the extent employer allows Limited long term liability Stabilization of rising costs

Employee Benefits Direct access to providers of choice - no referrals No out of pocket expenditure for expenses under HRA balance Control over healthcare decisions Increasing benefits - rewarded for good health Stabilization of rising costs HRA - Health Reimbursement Account

Qualifeid High Deductible Plan (Required) Tax Free Savings Plan to Pay for Healthcare Expenses Available to any size Group Employee Owns Account HSA Plans

High Deductible No first Dollar Benefits except for Preventative Care Filed as a HSA Compatible Plan HSA - Qualified Medical Plan

Must use a Qualified Financial Vendor Can Fund up to $2850 (single) or $5650 (family) for 2007 Catch-up Provision – Over age 55, $800 for 2007, $900 for 2008 Employee and/or Employer can make contributions Employee owns the Account Funds are fully portable HSA - Health Savings Account

Medical expenses under IRS Code 213(d) * –Medical –Dental –Vision COBRA Premiums * Medicare Premiums * Long Term Care Premiums * Retirement Savings - Subject to State and Federal Taxes * Subject to State Taxes HSA -Use of Funds

HSA - Health Savings Account Employer Benefits Predictable Costs Employer and Employee Can Fund Usually better pricing than HRA Plans No long term liability Stabilization of rising costs

Employee Benefits Direct access to providers of choice - no referrals No out of pocket expenditure for expenses under HSA balance Control over healthcare decisions Increasing benefits - rewarded for good health Stabilization of rising costs Employee owns the account HSA - Health Savings Account

Example of Retiree Pricing Fresno County – Unblended Retiree Benefits Blue Shield $250 Ded PPO Plan including Rx, Dental, & Vision = $ per month Retiree Only Blue Shield $1500 Ded HSA Plan $4500 OoP Max including Rx, Dental, & Vision = $ per month Retiree Only Savings = $ Mth, $4264 Ann Pays almost entire liability, Plus Tax benefits for HSA account.

Why HSA’s for County Retiree’s More Affordable for Retirees Reduces GASB liability where rates are still blended Easy way to introduce to Employee Population If offered to Employees provides a way to save for Retirement Health Benefits

MSA Medical Savings Account Original Term for HSA’s Now an option for Medicare MA Plans (MA = Medicare Advantage) Still evolving, look to the future High Deductible Plan combined with a Benefit/Savings account Only Medicare can fund the account