High Deductible Health Plans (HDHP’s) and Health Savings Accounts (HSA’s)

Do the Math Before You Sign!

The 2012 legislature passed ESSB 5940 which, among other changes, requires every school district in the state to offer their employees the option of enrolling in a High Deductible Health Plan (HDHP) combined with a Health Savings Account (HSA). An HDHP will have lower monthly premiums, but its benefits are considerably different than the plans typically offered by school districts. For example:

·  The annual deductible (the amount that must be paid by the insured person for services incurred before benefits are payable by the insurance company) is $ 1,500 for an employee only, or $ 3,000 for an employee with dependent(s). If you cover one or more dependents you must meet the entire $ 3,000 family deductible before benefits will be paid for any family member enrolled in your plan.

·  All benefits – including prescription drugs – are subject to the deductible. You will need to be prepared to cover 100% of your healthcare expenses until the deductible is met (the only exception is in-network preventive care, which is covered at 100%). As such, these plans are paired with a Health Savings Account (HSA) which acts as a savings account to help pay for the cost of deductibles and coinsurance.

·  An HSA is similar to a Flexible Spending Account or Medical Reimbursement Account through a Section 125 Plan. Contributions to an HSA are pre-tax and are able to roll forward year after year; however they are highly regulated by the Internal Revenue Service. This includes strict rules, which you must meet in order to be eligible to contribute to an HSA (i.e. you can’t be double covered, etc.) Additionally, Medical Reimbursement Accounts allow participants to use the full annual contribution at the beginning of the year even if the contributions have not been met. Withdrawals from an HSA account are available up to the amount funded in the HSA account only.

·  These plans shift the financial risk from the insurance company to the enrolled subscriber (you and your family). While the monthly premiums may be lower than the other available plans, it is important to understand the financial risk you would be assuming should you enroll in one of these plans.

HDHP Annual Deductible and Out-of-Pocket Maximums:

·  Once the deductible has been met for the year, the enrollee will continue to share in the costs of receiving benefits until reaching the plan’s out-of-pocket maximum amounts. These amounts are determined by the IRS.

·  The WEA Select Qualified HDHP out-of-pocket maximum for Individual enrollees is $4,000 per year.

·  For those who enroll their families the maximum is $8,000 per year.

·  Clearly, someone who enrolls in the high deductible health plan must be prepared to use their own funds to cover their deductible or cover any shortfalls if they don’t have enough money in their HSA to cover the costs for covered charges.

How likely is it that someone will experience this deficit in coverage? Here are some sample costs for several relatively common medical procedures that are frequently experienced by families.

Some Sample Medical Procedure Costs:

·  Emergency Room Visit (broken leg): $1,400

·  Generic Pain Medication (3 refills): $135

·  Orthopedic surgery and 4 office visits with surgeon: $7,000

·  Durable Medical Equipment (leg scooter, brace): $750

·  12 Physical Therapy Visits: $1,500

·  Childbirth (includes 8 office visits, 2 ultrasounds, normal delivery, hospital services) : $6,700

·  Office visit for cold/flu symptoms: $140

·  Office visit for ear infection $75

·  Generic eardrops (30 day supply) $25

*These are estimated allowed amounts - not billed charges, since most QHDHPs use a network and the member does benefit from the plan's negotiated reimbursement rates as well as no balance billing. Also, these could vary based on the actual provider used.

Limit on Annual Contribution to the Health Savings Account:

·  The IRS also determines the maximum amount that can be contributed to an HSA.

·  $3,100 total combined contribution (employee and employer) for individual enrollees.

·  $6,250 total combined contribution for those who enroll their family in coverage.

·  In most situations, employers will be making little or no contribution into an HSA, so all of that money will be employee out-of-pocket dollars (aside from the advantage of tax sheltering, which could have been accomplished through a Flexible Savings Account).