1. Solanco School District Optional Health Care Plan Fall 2012 A Qualified High Deductible Health Care Plan (QHDHCP) with a Health Savings Account (H S A)

2. What’s in this for......?....ME!!??  Opportunity to grow a savings account for medical costs  A good fit for many employees  Plan (Multi- year / Multi- need) for future medical expenses...covered and not covered by plan  Extend coverage for potential costs incurred by other family members....The District!!??  Big picture - Designed to be cost neutral  Individual picture – Adverse selection risk  Self-Insured program  A good fit to Health Care Market Direction and Health Care Decision  Consumer Directed choice and options – [no choice on choice!!!]

3. Side Bar – Health Care as we Know it....PPACA....and as it will be.  Newsweek announces elimination of “print” mode...technology evolved over the past 25 years...and still is...  The Health Care Industry – 75 years - Was told to evolve now! It’s a little messy...  Exchanges - Accessible AND Affordable –W-2’s 2012  How will this Change the whole Health Insurance delivery model?  Shift to Consumerism and Empowerment and Choice  “Sell” to employers and HR, CEO and CFO Folks  “Sell” to Jane sitting at her kitchen table with her i-Pad

4. High Deductible Health Plans  Come in two types  A Health Care plan that simply has a higher deductible – usually means a deductible of $1000 or more –  A Qualified (signified by the letter ‘Q’) plan has an upfront (before any benefits are paid) deductible and is most often offered in conjunction with an HSA

5. What is a “Q”HDHCP?  Must follow guidelines as laid out by the IRS...[required to obtain the tax advantages prescribed]  Annual Deductible Minimum set by the IRS  $1,200 Individual and $2,400 family (IRS)  Solanco Plan Will be a $2,000 Individual and $4,000 Family plan design

6. Qualified High Deductible Health Plan (QHDHP)  QHDHPs generally have:  First dollar coverage (no deductible) for preventive care  Higher out-of-pocket (copays & coinsurance) for non-network services  All covered benefits must apply to the plan deductible, including prescription drugs

7. Qualified High-Deductible Health Plan (QHDHP)  Preventive Care - Examples  PPACA guidance provides list of preventive care that QHDHP may provide as first-dollar coverage before minimum deductible is satisfied:  Periodic health evaluations (e.g., annual physicals)  Screening services (e.g., mammograms)  Routine pre-natal and well-child care  Child and adult immunizations  Tobacco cessation programs  Obesity weight loss programs

8. HSA Overview  A Health Savings Account (HSA) is a special account owned by an individual used to pay for current and future medical expenses  HSAs are used in conjunction with a Qualified High- Deductible Health Plan (QHDHP)  Insurance 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  A QHDHP can be offered by a group as an option along with other type plans OR can be a stand alone offering

9. What is an H S A? (1)  An employee owned bank account  Contributions can come from Employee (EE) or Employer  Employer Contribution  EE Pre-tax via payroll  EE After tax contribution (out side of payroll)  EE Gifts  EE IRA transfer - 1 one per lifetime tax free  IRS annual maximum ( 2013)  $3,250 individual  $6,450 Family  $1,000 per year catch-up provisions – age 55 end of tax year.

10. What is an H S A? (2)  As an employee owned account, funds are rolled over every year, not taxed on interest earned or when funds are used (i.e. used within IRS guidelines). Taxed as income with a 20% penalty if funds are used for non-medical expenses  Contributions can be made generally up to April 15 th ( tax return time) for the prior year….IRS rules governing contributions

11. HSA Contribution Rules  Contributions to HSA can be made by the employer or the individual, or both.  If made by the employer, it is not taxable to the employee (currently excluded from income and wages)  If made by the individual (or in lieu thereof), it is an “above-the-line” deduction  The maximum amount that can be contributed to an HSA from all sources  $3,250 (self-only coverage) 2013  $6,450 (family coverage) for 2013 [includes working spouses if both H S A eligible]

12. HSA Contribution Rules: Employee Contributions  Can be made by a salary reduction arrangement through a cafeteria plan (section 125 plan amendment)  Elections to make contributions through a cafeteria plan can change on a month-by-month basis (unlike salary reduction contributions to an FSA – flexible spending account)  Remember that contributions to the HSA through a cafeteria plan are “pretax” and not subject to individual or employment taxes

13. HSA Accounts  No “use it or lose it” rules like Flexible Spending Arrangements (FSAs)  All Dollar amounts in the HSA are fully vested  Unspent balances in accounts remain in the account until spent and carry over year-to-year  Encourages account holders to spend their funds more effectively on their medical care  Encourages account holders to shop for the best value for their health care dollars  Accounts can grow through investment earnings, just like an IRA  Same investment options and investment limitations as IRAs

14. HSA Accounts  HSA trustee must report all distributions annually to the individual (Form 1099 SA).  Trustee not required to determine whether distributions are used for medical purposes; the individual does that.  Individual will report on annual tax return amount of distribution used for qualified medical expenses.  Account holders must file Form 8889 as part of their annual tax return.

15. HSA Distributions  Distribution is tax-free if taken for “qualified medical expenses”.  Qualified medical expense must be incurred on or after the HSA was established.  Tax-free distributions can be taken for qualified medical expenses of:  Person covered by the high deductible  Spouse of the individual (even if not covered by the HDHP)  Any dependent of the individual (even if not covered by the HDHP)

16. Qualified Medical Expenses  Expenses paid by the account beneficiary for his or her spouse or dependents for medical care as determined by section 213 (d) of the IRS code.  (See IRS publication 502; www.irs.gov)  Expenses must not be covered by insurance or otherwise

17. H S A Account Access – Features (1)  Participants have access to payment features for claim review and selection of reimbursement options  Pay the vendor, pay themselves, divide payments and save funds in the account ( i.e. just write a check)  Pay on-line, pay at the provider office  VISA Health Account Card

18. H S A Account Access – Features (2)  Account management on-line  Real time balance  On-line payments can be made directly to a provider  Schedule payment in advance  Electronic Fund Transfer (EFT’s) can be utilized  Access to history of claims and spending

19. H S A Account Access – Features (3)  FDIC- Insured  No setup or activity fees  Investment options…(to be determined)…generally with no transaction fees (Health Equity H S A Bank)  Monthly account statements and annual tax statements

20. Employee Q Plan Eligibility  Active Full Time Staff ( i.e. own a position and currently have Health Care Benefits)  LTS and Retirees ( Current Retirees) not eligible  Employees Hired Before April 1 of each Calendar year

21. Employee / Board Contribution  Note: Minimum Employee Contribution (on the next slide) is a “diversion” of current employee premium share dollars  Meaning, these funds are “ALREADY” being deducted from an employees paycheck.

22. H S A: Board and Employee Contribution Mix and Shares

23. Show me the money.....  Year one: 100% of Board Contribution made in January  Successive years: 65% in January -- & 35% in September  Employee Payroll Contributions – After Each Payroll [No less than Monthly]

24. Funding Stream Example (year one Board share shown)

25. December 7, 2012 Decision: For January 1, 2013  Choose the ‘Q ‘plan with H S A (Options on H S A $ amounts, No FSA)  Stay with the current PPO plan (FSA option, no H S A)  Spousal Rule certifications – Everyone; H S A context (Surcharge is $1,463.96 for 2013)  Dual Coverage issues impact H S A selections ( i.e. you are “covered” by your spouses plan too)