1. Consumer Driven Healthcare
Health Savings Accounts
Tax-Advantaged Health Care Funding
Presented by Matt Holzemer
Savage & Associates

2. What is a Health Savings Account (HSA)?
An account you own that you and / or your employer put money into for medical expenses now and in the future
A High Deductible Health Plan (HDHP) works in conjunction with the savings account

3. HSA & HDHP Overview Use HSA to pay for routine expenses
Once you meet deductible, your traditional, high deductible health plan (HDHP) begins to pay
Use HSA for yourself, your spouse and your children
Use HSA to save for future expenses
You decide how to save and spend on healthcare
Narration:
Your Health Savings Account (HSA) has 2 plans working together.
You have a savings account—to which you and your employer contribute. You use your account to pay for routine health expenses, such as a doctor’s visit or prescription medication. You use the account before other resources are used.
After all your HSA funds have been used, you may have to pay out of pocket for any additional costs up to the deductible. But once your eligible expenses meet the deductible, you have a traditional, high deductible health insurance plan, that pays its share of costs. Your insurance plan gives you protection when you need it—for major items like surgery or childbirth.
And you have a full set of educational programs, services and tools to help you make the best decisions for you and your family.
You use your HSA to pay for all expenses your plan does not cover. That includes expenses you incur before you meet the deductible. You also use the HSA to pay for expenses the plan may not cover, such as eyeglasses. You also use the HSA for coinsurance you have to pay under the plan.
The account can pay for your own expenses, as well as those for your wife and other dependents. You can also build up a balance in your account that you can use to pay or save for future medical expenses.
Your HSA gives you the flexibility to tailor your health care spending to fit your needs. It becomes your personalized health plan.

4. Advantages for HDHP & HSA Enrollees
Every enrollee…
receives triple tax savings on: contributions, earnings and withdrawals
makes smarter financial & healthcare decisions
is in control of personalized healthcare
is rewarded for staying healthy
has multiple resources to make informed decisions
may obtain reduced health care premiums
Narration:
Why does an employee need to be a consumer?
If you were buying a television with your own money, you’d want the best type of television to fit your family room and the best service from the store. After all, you’re paying for it.
Health care is no different. Employees buy it with their own money—or money their employer gives them—so they want the best health care for their situation and the best service from the provider. They think about the value they get for the money, and wonder if they couldn’t get a treatment cheaper—or better—elsewhere.
And with CDH, the employee is in control. It’s not just up to what the provider and employer want to cover; employees can purchase items that aren’t covered by their health plan. You avoid the trap of a “one-size-fits-all” plan.
Note that traditional healthcare, the plan is designed for when people get sick. CDH is designed to help people stay well, by providing programs and services that emphasize wellness and a healthy lifestyle. These programs & services are part of the health plan product, and may not cost anything extra to participate in. These services include employee education, fitness, sports, and recreation activities, stress management and health screenings.
And the employee has multiple decision support tools to help her make her choices. Online provider directories, provider quality data, drug information….Again, all part of the product, at no extra cost.

5. Who is eligible for an HSA?
You have a qualified high deductible health plan (HDHP)
You’re NOT:
Enrolled in Medicare
A dependent on another’s tax return
You adhere to contribution and distribution rules:
Distributions are used for IRS qualified medical expenses
Not covered by another health plan (some exceptions apply)
Coverage
Minimum HDHP Deductible
Maximum HDHP Out-of-pocket
Single
$1,200
$6,050
Family
$2,400
$12,100
Narration:
It’s easy to qualify for an HSA.
First, you must participate in a high deductible health plan (also called an HDHP). That’s the plan that goes along with your HSA. A high deductible plan has to meet these limits for 2006.
You can’t be enrolled in Medicare (so generally you must be under age 65). And you cannot be a dependent on another person’s tax return.
You can use the HSA to pay for your own expenses. And you can use it to pay for the eligible expenses of your spouse and dependent children.
What kind of expenses qualify? Examples of eligible expenses include coinsurance or deductibles you pay under group health plans. You can also use the account to pay for other qualified expenses not covered by these plans, such as eyeglasses.

6. HSA Contribution Amounts: 2012
Annual Contribution
Maximum
If age 55+, an additional:
Self-only
$3,100
+ $1,000
Family
$6,250
+ $1,000 or +$2,000(if both adults are 55+)
Narration:
These are the amounts that can be contributed to your HSA on an annual basis. They are prorated for any month in which you don’t participate in a high deductible health plan.
And remember, these amounts represent the aggregate annual amount—it includes your own contributions and any contributions made by your employer. So the total of your contributions, plus your employer’s contributions, cannot exceed these amounts.
The amount that can be contributed from all sources for 2012 is $3,100 for self-only coverage and $6,250 for family coverage, regardless of what month of the year you open your HSA account. These amounts are indexed annually.

7. How your HSA Works Enroll in your high deductible health plan (HDHP)
Establish an HSA
Choose how much to contribute to your HSA
Start receiving care
Pay via debit card or check
Keep track of your expenses for tax return
Funds roll over from year to year
Resources to assist you
Switch jobs? Take your HSA account with you.
Narration:
Here’s how coverage works when you have an HSA. First, you enroll in a traditional health plan, one that has a high deductible. It’s called a high deductible health plan, or HDHP. Next, you set up an HSA at a qualified financial institution. While you can use any institution, we are working with [Enter name of your bank here] to make it easy for our employees.
You choose how much you want to contribute to your HSA for the year. You can contribute up to the lesser of your health plan’s annual deductible or the annual HSA limit for the year. Remember, if your company also contributes, the total can’t exceed that limit.
When you receive care, you generally pay by debit card or special check. That is how you access your HSA funds. So you have access to health care dollars upfront; you don’t have to pay any coinsurance. You can take care of your health needs immediately, whether that means going to the chiropractor, or purchasing new medication.
It’s that easy. If you use up the funds in you’re account before you meet your deductible, you will have to pay those expenses out of pocket. Luckily, your plan has an out-of-pocket maximum that limits the amount you will have to pay. And once you meet your deductible, your insurance plan pays its share of the costs.
But you may very well have funds left in your account at the end of the year, either because your expenses were small, or because you also have investment earnings, and interest, accumulating in your account. Any funds left at the end of the year will roll over from year to year. In this way, you can begin to accumulate a nest egg and use the account to save for future medical expenses.
And if you need help in evaluating providers, medication or treatment options; or if you’re pregnant and are looking for maternity information and suggestions—you have resources to assist you.
Your account is 100% portable—it goes where you go. So if you change jobs, your account remains with you, and you don’t forfeit any of the funds.

8. Investing In Your Health
You invest your HSA funds
Funds roll over, allowing you to build up a balance for future expenses / self-funded amounts
Tax benefits:
Your payroll contributions are pre-tax
Investment earnings are tax free
Reimbursements are tax free
Account is easy to use
Debit cards or checks
Low or no setup fees
Easy to enroll
Narration:
You invest your HSA funds, just like you would do with an IRA. Your financial institution will provide you with investment options. You can pick whichever works best for you.
Your account grows in several ways. The unused money in your account rolls over from year to year. Plus, you receive investment earnings on the money in your account. And, you accumulate interest on the balance in your account during the year. This way, you can build up a balance to pay for unanticipated medical expenses you may incur in the future, or during retirement.
The tax benefits are obvious. Your payroll contributions are pre-tax. Your investment earnings are tax free, until you reach age 65. And your reimbursements are tax-free.
When you receive care, you generally pay by debit card or special check. That is how you access your HSA funds. Setup fees are low, and all you have to do to enroll is complete 2 short forms.

9. HSA Transaction Example
Year 1
You contribute $1,500
Your employer contributes $1,000
Your account = $2,500
Your family deductible = $2,400
Your HDHP provides 100% coinsurance
$250 Account pays for your doctor visits
$950 Account pays for child’s emergency room visit
$700 Account pays for child’s doctor visit and medications
$500 Account pays for spouse’s medication
$2,400 Total HSA Account funds used
Narration:
Let’s look at some numbers. In year 1, you have family coverage. You contribute $750 and your employer contributes $1,000, so you have $1,750 in your account. Your family deductible is $2,100, and your HDHP provides 80% coinsurance.
You have some doctor’s visits for your bad back that cost $750. That amount is paid through your account. Then, your child breaks a leg and goes to the emergency room. That costs $250 and also gets paid through your account. Another child sees the doctor and gets medications. That costs $500 and also gets paid through your account. Then your spouse needs surgery costing $250, also paid through the account. You have now exhausted the funds in your HSA.
Then, you spouse visits a specialist for eye care and tests. That costs $350. Since you have not yet met your deductible, you pay the $350 out of pocket. But once you pay it, you have met your deductible. So for your next bill, your plan pays 80% of that bill and you pay only 20%.
Now you’re at the end of your first year with an HSA.
$2,400 Met your deductible – Plan pays 100% thereafter
$100 leftover in HSA account to rollover to next year

10. HSA Transaction Example
Year 2
You contribute $1,500
Your employer contributes $1,000
Your account = $2,500
Plus rollover funds $100
Total HSA funds = $2,600
Your family deductible = $2,400
Your HDHP provides 100% coinsurance
Total year expenses = $2,100
Remaining $500 will roll over to year 3
Narration:
Now, let’s say that in year 2, you keep your family coverage. And the contribution levels are the same--$750 for you and $1,000 for your company. But this year your family is eating better and taking better care of themselves. So your total year’s expenses are only $1,000. So the remaining $750 will roll over to year 3. Plus, any interest and earnings on that amount will also roll over.
So you have begun to create a fund that saves for future medical expenses.

11. Qualified Medical Expenses Based on IRC Section 213
Health insurance plan deductibles and coinsurance
Prescription drugs
Dental services
Vision care – including glasses and lasik surgery
Psychiatric and certain psychological treatments
Long-term care services
Medically related transportation and lodging
Certain health premiums including COBRA
This is a partial listing. IRS Publication 502 gives complete list.