Post on 26-Dec-2015
Tax-Advantaged Account Solutions HSA, FSA, DCAP, HRA and How they
Impact the Bottom-line
2010 Amegy Bank N.A. Member FDIC.
2010 Amegy Bank N.A. Member FDIC.
Introduction
Employers face unprecedented challenges in 2011
In March 2010, comprehensive federal health care reform, called the Patient Protection and Affordable Care Act (PPACA), became law.
It is intended to expand coverage while building upon and strengthening the private, employer- based health insurance system.
Passage of PPACA will have both short and long term effects!
The PPACA has many components-from new reporting mandates, taxes and fees to major structural changes such as insurance reforms, employer and Individual Mandates, and state insurance exchanges-phasing in over many years.
Every employer-sponsored health plan will be impacted.
2010 Amegy Bank N.A. Member FDIC.
Healthcare Reform Overview
This law will have significant impact on employers and the health care market over the coming decade and beyond
• Goals of reform are embedded in the law's voluminous provisions– Expand coverage relying on many existing mechanisms, including public
programs, employers, and the private insurance market– Remove perceived barriers to coverage– Address affordability issues
• Lack of detail and unknown consequences will require ongoing interpretation, monitoring and a flexible approach
– Various government agencies must develop regulations - likely to be a long and staggered process taking many years
2010 Amegy Bank N.A. Member FDIC.
There is a Partial Solution . . .
Utilize Tax-Advantaged HealthCare Accounts• Health Savings Accounts – HSAs• Flexible Spending Accounts – FSAs• Dependant Care Assistance Plans – DCAPs• Health Reimbursement Arrangements – HRAs
They provide Employer & Employee Meaningful Savings, Robust Benefits, Are Ease to Use and Comply with HCR
2010 Amegy Bank N.A. Member FDIC.
Health Savings Account
A HSA is like a 401(k) for healthcare. The funds can be used to pay for qualified medical expenses today or can be saved for future expenses. Account Advantages
• Interest and investments• Portable – it stays with you when
you leave your company or retire
You can spend your money on today’s expenses, or save and invest your HSA funds for future expenses or for retirement!
2010 Amegy Bank N.A. Member FDIC.
Flexible Spending Account
Contributions• Employees contribute – up to a limit of $2,500• Contributions are tax free and processed through payroll
Using The Account • Use the funds for qualified medical expenses of spouse & dependents – NOT
Over The Counter• Total funds for the year are available when the plan becomes effective (even
with no current year contributions)Funds Forfeiture
Unused amounts at year-end are NOT rolled over to the next plan year
2010 Amegy Bank N.A. Member FDIC.
Dependent Care Account
Contributions• Contributions are tax free, processed through payroll up to $5,000 annual
limitUsing The Account
• Use the funds for child or dependent care -- typical expenses include day care, before and after school care
• Funds become available as contributedFunds Forfeiture
Unused amounts at year-end are NOT rolled over to the next plan year
2010 Amegy Bank N.A. Member FDIC.
Health Reimbursement Arrangement
Contributions• Employers contributes funds into this account
Using The Account • Use the funds for qualified medical expenses - (may be limited by employer)• Use the funds for spouse or dependents qualified medical expense
Funds Forfeiture• Funds may roll over to the next plan year, depending on your employer’s
plan
2010 Amegy Bank N.A. Member FDIC.
Where We Were – 2004 Benefit Plans
•8 Health Care CarriersA Variety of Self-Funded & Fully-Insured Options Offered
•12 Plan OptionsVaried by Affiliate & included diverse HMO, PPO, EPO & Rx plans
•Benefits plansCost increased annually by 19%+
2010 Amegy Bank N.A. Member FDIC.
Tipping Point – ’07 Benefits Increase
The average increase for all HMOs was over 20% greater than the average for all CDHP options.
2010 Amegy Bank N.A. Member FDIC.
CDHP vs. HMO Costs
CDHP continues to trend long-term reductions and medical cost savings.6th Annual Aetna HealthFund Study March 2010
2010 Amegy Bank N.A. Member FDIC.
Transitions To 100% CDHPs
Phase One: Intro to HDHP Option
High Deductible Health Plan Introduction
• 33% of eligible employees enrolled in HDHP option, exceeding the industry average for HDHP enrollment by 6 times!
• Zions funded a $500 dollar contribution to all HDHP participant Health Savings Accounts.
2010 Amegy Bank N.A. Member FDIC.
CDHPs BRING DOWN PLAN COSTS
Zions & Our Employees Have Saved More Than $10 Million Since the CDHP was Introduced in 2005
From 2006-2011, the Annual Percentage Increase in Health Care Costs Fell From
Double Digit Levels to Below 5%.
Real Results . . .
2010 Amegy Bank N.A. Member FDIC.
What Could You Save?? Employer HSA Savings
Employer Information Small Mid-Size Large
Number of HSA Plan Participants 50 250 1,500
Average Cost for PPO/HMO/Month $800 $800 $800
Participant Contributions
Annual Per Participant Contribution $1,600 $1,600 $1,600
Total Annual Participant Contribution $80,000 $400,000 $2,400,000
Employer Savings
Employer Tax Savings (7.65% FICA) $6,120.00 $30,600.00 $183,600.00
Savings on Reduced Premiums $14,000.00 $70,000.00 $420,000.00
Total Savings $20,120.00 $100,600.00 $603,600.00
HSA Implementation Fee (One -time) $5 $1,500 $2,500
Annual HSA Administration Fees $2,700 $13,500 $81,000
Annual EMPLOYER Savings after HSA Fees* $ 17,420.00 $ 87,100.00 $ 522,600.00
ADDITIONAL ACCOUNTS $ 11,420.00 $ 57,100.00 $ 571,000.00
TOTAL $ 28,840.00 $ 144,200.00 $ 1,093,600.00
Assumptions
Premium Reduction % 35%
Monthly HSA Administration Fee (per acct) $ 4.50
*For Illustrative Purposes Only
For a SINGLE employee that moves from a traditional plan to a HDHP/HSA, the employer could realize a savings of over $300/year.
2010 Amegy Bank N.A. Member FDIC.
What’s It All Mean?
This is Complicated Stuff
Be Pro-active so You Can Control Costs
Find a Partner That Understands and Can Help
Even with HCR – Employers Can Still Provide Vital Benefits and Save Significant Amounts on Overall Healthcare Costs
A HDHP/HSA is One Good Mechanism