HSA communication plan

Reduce Premiums. Savings Vehicle. Tax Savings.By MyHealthQuoter.comYour HSA PartnerBy combining Health Savings Account (HSAs) with a high deductible health plan, you will reduce your premiums, lower the fixed costs of your health insurance plan, deliver more benefit dollars to your employees, provide an incentive to your employees to get involved in their health care decisions and achieve tax savings.

Stay Virtually ConnectedWe deliver documents on command, all from the convenience of your unique Web-based client portal. These tools allow you to access and share valuable resources, including employee-facing flyers, posters and answers to frequently asked questions.

MyHealthQuoter.com ■ 555 MetroPlace North, Suite 150 Dublin, Ohio 43017 ■ Phone (866) 577-3620 Website: MyHealthQuoter.com]

Our Tools for Your SuccessOur agency can provide custom communications materials for you and your employees to assist in understanding an HSA and all that it has to offer.

HSA AdvantagesSince an HSA can be a bit confusing, we have all the information that you need to fully understand this plan option. Our educational materials will help you determine whether an HSA is the right choice for your organization.

Legal ComplianceDon’t worry about being legally compliant when offering an HSA plan. We have all the information that you need to remain compliant with federal regulations as they relate to these consumer-directed plans.

HSA Adoption Game PlanTo help you roll out a new HSA to your employees, we have a game plan for you to follow, including preparation suggestions, sample announcements, educational materials and communications for use during open enrollment.

Employee CommunicationsThe key to successful implementation is communication. Our posters, presentations, emails, flyers and newsletters are all geared toward your employees and their questions.

ABC COMPANY- TABLE OF CONTENTS

Plan Designs: Health Savings Accounts.........................................…………….3-10

Comparison of Tax-Advantaged Accounts.................................................11-12

Key HSA Decision Points.............................................................................13

Tips for Successful HSA Adoption.................................................................14

Consumer-Directed Health Care: Employee Communication Timeline: HSAs..................................................................................................15-16

Sample Employee CommunicationsHSA Announcement Letter.................................................................17HSA E-mail #3: HSA Facts.................................................................18Frequently Asked Questions about HSA Plan Usage...........................19-21

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Brought to you by the insurance specialists at

Health Savings AccountsIn an effort to respond to the rising cost of health insurance, many employers have made use of tax-favored accounts such as health flexible spending accounts (health FSAs), health reimbursement arrangements (HRAs) and health savings accounts (HSAs) to offer consumer-driven health plans.

This article will provide answers to commonly asked questions related to HSAs. It highlights guidance issued by the Treasury Department and Internal Revenue Service (IRS), as well as recent legislation, from 2003 through 2011.

What is a Health Savings Account (HSA)?

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An HSA is a tax-exempt trust or custodial account established for the purpose of paying qualified medical expenses. HSAs are much like Archer Medical Savings Accounts (MSAs)1, but the rules applicable to HSAs are less restrictive.

An HSA can be a powerful tax savings tool for paying qualified medical expenses. In general, HSA contributions made by an eligible individual are deductible and employer HSA contributions made on behalf of an eligible employee are excluded from the employee’s gross income. Interest and other earnings on HSA contributions accumulate tax-free. Amounts distributed from an HSA for qualified medical expenses are generally tax-free as well.

However, keep in mind that some states define income differently than the IRS. As a result, HSAs that are tax-exempt at the federal level may not be tax-exempt at the state level.

Who can establish an HSA?An individual may contribute to an HSA in any month in which he or she is: Covered under a high deductible health plan (HDHP) on the first day of the

month; Not also covered by another health plan that is not an HDHP (with certain

exceptions);2

Not entitled to benefits under Medicare;3 and Not eligible to be claimed as a dependent on another person’s tax return.

Self-employed individuals can be eligible to establish an HSA.

What expenses are eligible for tax-free reimbursement from an HSA?An HSA may reimburse qualified medical expenses incurred by the account beneficiary and his or her spouse and dependents.

Effective for plan years beginning on or after Sept. 23, 2010, group health plans and health insurance issuers providing dependent coverage of children must make coverage available for adult children up to age 26. The federal tax laws were changed, effective March 30, 2010, to allow an employee participating in a group health plan, cafeteria plan, FSA or HRA to exclude from his or her gross income the value of coverage and reimbursements provided for an adult child who is under age 27 at the end of the employee’s tax year. This change does not apply to HSAs. Thus, to qualify as a dependent child for HSA tax-free reimbursement purposes, the age limit is generally 19, unless the dependent is a full-time student.

1 Because the Archer MSA pilot program terminated at the end of 2007, the current availability of Archer MSAs is limited. Effective Jan. 1, 2008, Archer MSA contributions may be made or received only by eligible employees who previously made or received MSA contributions or by eligible employees of certain Archer MSA participating employers.

2 For example, accident, dental, vision, long-term care, specific conditions (i.e., cancer only policies), and hospital indemnity plans.

3 Mere eligibility for Medicare does not make an individual ineligible to contribute to an HSA. An employee who continues to work after attaining age 65 may continue to contribute to an HSA so long as he or she has not enrolled in Medicare. IRS Notice 2004-50

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Distributions made from an HSA to reimburse the account beneficiary for qualified medical expenses are excluded from gross income for federal tax purposes. Qualified medical expenses are defined within IRC Sec. 213(d).

In addition to qualified medical expenses, the following insurance premiums may be reimbursed from an HSA: COBRA premiums; Health insurance premiums while receiving unemployment benefits; Qualified long-term care premiums;4 and Any health insurance premiums paid, other than for a Medicare supplemental

policy, by individuals age 65 and over.

What expenses are not eligible for tax-free reimbursement from an HSA?The following expenses may not be reimbursed from an HSA on a tax-advantaged basis: Premiums for Medicare supplemental policies; Expenses covered by another insurance plan; Expenses incurred prior to the date the HSA was established; or Any expenses other than qualified medical expenses and the HSA reimbursable

premiums described above. Beginning Jan. 1, 2011, over-the-counter drugs purchased without a prescription will no longer be a qualified medical expense for reimbursement from an HSA (except insulin).

Can ineligible expenses be reimbursed from an HSA?Yes. The trustee is not required to determine if a claim submitted for reimbursement is a qualifying medical expense. The amount withdrawn from an HSA for a non-qualifying medical expense is added to the account beneficiary’s income and subject to a 20 percent penalty (10 percent penalty for distributions before Jan. 1, 2011). Where funds are distributed as a result of the account beneficiary’s death, disability or after he or she is eligible for Medicare, the 20 percent penalty does not apply.

What is a high deductible health plan (HDHP)? As explained above, to be HSA-eligible, an individual must be covered under an HDHP and not have any other type of impermissible health coverage. An HDHP is a plan that satisfies the applicable minimum annual deductible and maximum annual out-of-pocket requirements noted below.

High Deductible Health Plan (HDHP)4 HSAs may reimburse expenses for qualified long-term care premiums, even where contributions are made by employees with pre-tax dollars through a cafeteria plan. While HSAs may pay or reimburse qualified long-term care premiums, the exclusion from gross income is limited to the adjusted amounts under IRC 213(d)(10).

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Type of Coverage

Minimum Annual Deductible Maximum Annual Out of Pocket Expenses

Individual $1,200/$1,200 $5,950/$6,050Family $2,400/$2,400 $11,900/$12,100

Amounts for 2011/2012

As an exception to the minimum annual deductible requirement, an HDHP may provide coverage for preventive care (as defined by the IRS) subject to a lower deductible or no deductible.How must an HDHP administer the deductible under a family plan? In addition to establishing minimum annual deductibles for HDHPs, the IRS has also set forth rules governing how the deductible is to be administered.

Many health plans that are not HDHPs administer family coverage in a way that includes “stacking the deductible” or an “embedded deductible.” A plan that stacks deductibles or has an embedded deductible pays claims for a specific individual if he or she has met the individual deductible, even if the family as a whole has not met the family deductible.

Example: Susan, Bob and their dependent elected family coverage under an HDHP. The plan year begins on Jan. 1 and includes a $1,200 individual deductible and a $2,400 family deductible. Susan incurs $2,000 in medical expenses on Jan. 15. Since the plan has an embedded deductible, Susan is required to pay $1,200 and the plan pays the remaining $800. Although the family deductible was not met, the plan will pay claims for Susan after she has met the individual deductible.Under the IRS rules, this plan does not qualify as an HDHP since claims were paid before the $2,400 HSA-required family deductible was met.

Example: Susan, Bob and their dependent elected family coverage under an HDHP. The plan year begins on Jan. 1 and includes a $2,400 individual deductible and a $5,200 family deductible. Susan incurs $3,000 in medical expenses on Jan. 15. Since the plan has an embedded deductible, Susan is required to pay $2,400 and the plan pays the remaining $600. Although the plan’s family deductible was not met, the plan will pay claims for Susan after she has met the individual deductible.

In this example, the plan complies with the IRS rules and qualifies as an HDHP. The plan includes an embedded deductible, but its minimum individual deductible is equal to the minimum HSA-required family deductible.

An HDHP is not required to include, or prohibited from including, an embedded or stacked deductible. If it does, however, it must comply with the minimum annual deductible requirements explained here.

What is preventive care? On March 30, 2004, the IRS clarified that preventive care includes, but is not limited to, the following:

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Periodic health examinations, including tests and diagnostic procedures ordered in connection with routine examinations, such as annual physicals;

Routine prenatal and well-child care; Child and adult immunizations; Obesity weight loss programs; Screening services5; and Tobacco cessation.

However, preventive care does not generally include any service or benefit intended to treat an existing illness, injury or condition.

The IRS provided temporary transitional relief for individuals in states where HDHPs were not available because state laws required fully-insured health plans to provide certain benefits at levels not permitted under an HDHP. For example, some state laws define preventive care more broadly than the IRS. IRS guidance clarified that for purposes of HSAs and corresponding HDHPs, the IRS (not the state) definition of preventive care governs. In order to provide states with time to modify their laws to accommodate HDHPs, the IRS only began enforcing its definition requirement after Dec. 31, 2006.

According to America’s Health Insurance Plan’s (AHIP) Center for Policy and Research 2007 survey, “100 percent [of HSA/HDHP plans offering first-dollar coverage for preventive care outside plan deductibles] cover adult and child immunizations, well-baby and well-child care, mammography, Pap tests and annual physical exams. Nearly 90 percent of policies purchased first-dollar coverage for prostate cancer screenings and more than 80 percent offered this coverage for colonoscopies.” Preventive screenings may also include newborn screenings, children’s vision tests, adult blood pressure and cholesterol tests, women’s bone density testing, colorectal cancer screening, prostate cancer screening for men over 50 and adult screening for depression.

Under health care reform, non-grandfathered group health plans and health insurance issuers are required to provide coverage for preventive care on a “first dollar basis” (that is, without any co-pays, deductibles or other cost sharing), effective for plan years beginning on or after Sept. 23, 2010. Health care reform’s definition of “preventive care” is different from the IRS’s definition of “preventive care” for HSA eligibility purposes. It seems likely, however, that the IRS will interpret “preventive care” for HSA eligibility purposes to include health care reform’s preventive care mandate.

Can preventive care include prescription drugs? Yes. Prescription drugs or medication are preventive care when taken by a person who has risk factors for a disease but is asymptomatic or to prevent the reoccurrence of a disease from which a person has recovered. While HDHPs may cover some

5 IRS Rev. Ruling 2004-23 clarifies that the screening services for the following conditions are included within the definition of preventive care: cancer, heart and vascular diseases, infectious diseases, mental health conditions and substance abuse, metabolic, nutritional, and endocrine conditions, musculoskeletal disorders, obstetric and gynecologic conditions, pediatric conditions, and vision and hearing disorders.

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prescription drugs like any other preventive care or service, determining on a case-by-case basis whether a prescription drug is taken preventively or to treat an existing condition may be problematic for processors of claims. The IRS also does not consider drugs to be preventive if they “treat an existing illness, injury or condition.” Since it is not always decipherable if medication is taken as a preventive measure, most HSA/HDHP plans do not include prescription drugs as a preventive benefit.

Must prescription drug benefits be subject to the deductible? Yes. Except for prescription drugs that are preventive care, prescription drug benefits covered under an HDHP must be subject to the overall plan deductible. An individual that is covered by an HDHP and a separate prescription drug plan that provides prescription drug benefits after a small copayment is not eligible to contribute to an HSA.

Who can contribute to an HSA? As clarified in IRS Notice 2004-50, any person, including but not limited to the account holder, an employer or a family member, may make contributions to an HSA on behalf of an eligible individual.

Unlike MSAs, the employer and employee may both contribute to the HSA in the same year, subject to annual contribution limits. However, if an employer makes contributions to any employee’s HSA, the employer must make comparable contributions (that is, the same dollar amount or the same percentage of the HDHP deductible) to the HSAs of all comparable participating employees. “Comparable participating employees” are eligible individuals who are in the same category of employees (current full time, current part time or former employees) and who have the same category of HDHP coverage (self only, self plus one, self plus two or self plus three or more). For the purposes of making a contribution to the HSA of an employee who is not a highly compensated employee (as defined by the IRS), however, highly compensated employees are not treated as comparable participating employees.

An employer may allow employees to contribute pre-tax dollars to the HSA through a Section 125 plan. IRS Notice 2004-50 clarifies that matching contributions made by an employer through a cafeteria plan are not subject to the comparability rule. However, the employer’s contributions are subject to the nondiscrimination rules governing cafeteria plans (i.e., eligibility rules, contributions and benefits tests, and key employee concentration tests). An employer considering matching employee contributions should consult with its cafeteria plan administrator or legal counsel to ensure compliance with these nondiscrimination rules.

Can an individual make contributions to an HSA when they are also covered under an FSA or HRA? It depends on the type of FSA or HRA. IRS guidance released on May 11, 2004, clarifies how an individual’s participation in an HSA can be coordinated with coverage under an FSA or HRA. The IRS sets forth four examples of acceptable plans in which an individual can participate and still contribute to an HSA: Limited-purpose FSA or HRA; Post-deductible FSA or HRA;

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Suspended HRA; and Retirement HRA.

What is a Limited-purpose FSA or HRA? A Limited-purpose FSA or HRA pays or reimburses Section 213(d) medical expenses that are “permitted coverage” (e.g., dental, vision). For example, an individual that is covered under an HDHP and a Limited Purpose FSA continues to be eligible to contribute to an HSA where the FSA only pays or reimburses expenses for dental or vision care not reimbursed by any other source. What is a Post-deductible FSA or HRA? A Post-deductible FSA or HRA pays or reimburses medical expenses incurred after the individual has met the minimum annual deductible within the HDHP. For example, an individual may seek reimbursement for amounts paid as copayments or coinsurance, after he or she has met the deductible. Note, however, that funds within an FSA are subject to the use-it-or-lose-it rule. Therefore, in general, an individual will forfeit contributions made to their FSA if they do not meet the deductible during the year.

What is a Suspended HRA? A Suspended HRA, pursuant to an election made before the beginning of the HRA coverage period, does not pay or reimburse at any time, any medical expenses incurred during the suspension period, except preventive care or “permitted coverage.” Once the suspension period ends, the individual is no longer eligible to contribute to an HSA because he or she is entitled to receive Section 213(d) medical expenses from the HRA.

What is a Retirement HRA? A Retirement HRA pays or reimburses medical expenses incurred after the individual retires. After retirement, the individual is no longer eligible to contribute to an HSA.

Can an individual be eligible to contribute to an HSA if they are also covered under an Employee Assistance Plan (EAP)? Yes. An individual will not fail to be eligible to contribute to an HSA merely because the individual is also covered under an EAP, disease management program or wellness program if the program does not provide significant benefits in the nature of medical care or treatment. An example within IRS Notice 2004-50 clarifies that the availability of short-term counseling, including but not limited to substance abuse, alcoholism, mental health or emotional disorders, does not provide significant benefits in the nature of medical care or treatment.

Can an individual be eligible to contribute to an HSA if they also purchase a discount card? Yes. On July 23, 2004, the IRS clarified that an individual’s purchase of a discount card does not disqualify him or her from being eligible to contribute to an HSA. The individual must be required to pay for the cost of the services, less the discount, until the deductible is met. For example, an individual may purchase a discount card to purchase prescription drugs or vision care or services.

Can an individual be eligible to contribute to an HSA if he or she participates in an FSA with a grace period?

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It depends. In IRS Notice 2005-86, the IRS clarified the interaction between the FSA grace period and eligibility to contribute to an HSA. Later legislation and IRS Notice 2007-22 amended this relationship further. In general, coverage by a general purpose health FSA with a grace period would disqualify an individual from contributing to an HSA during the FSA’s grace period, unless the employee had a zero balance in the FSA at the end of the plan year. An FSA can also be amended to allow HSA contributions. Notices 2005-86, 2007-22 and statutory changes made at the end of 2006 provide further guidance regarding participants’ HSA eligibility during the cafeteria plan grace period.

How much can an individual contribute to an HSA?For each month an eligible individual is covered under an HDHP, he or she may contribute one-twelfth of $3,050 for individual coverage or $6,150 for family coverage for calendar year 2011 (2012 limits are $3,100/$6,250). Nonetheless, an eligible individual who enrolls in an HSA after the beginning of the plan year is permitted to make a full year’s contribution provided the individual remains covered by the HDHP for at least the 12-month period following that year, except for death or disability.

Further, HSA contributions do not have to be made in equal amounts each month. An eligible individual can contribute in a lump sum or in any amounts or frequency he or she wishes. However, an account trustee/custodian (bank, credit union, insurer, etc.) can impose minimum deposit and balance requirements.

The HSA contribution limit is reduced by any contributions made to an MSA in the same year. Rollover contributions from another HSA or MSA can be accepted. These rollover contributions are not subject to the annual contribution limit. Additionally, certain one-time rollover contributions from an FSA, HRA or IRA may also be made under statutorily specified conditions.

Individuals who are age 55 or older by the end of the tax year are permitted to make “catch-up contributions.” An additional $1,000 may be contributed to the HSA in 2010 and thereafter.

Who can administer an HSA? On Aug. 10, 2004, the IRS revised Notice 2004-50 to clarify that insurance companies, banks, or similar financial institutions that have received IRS approval to be a trustee or custodian may administer HSAs. In addition, any other person or organization already approved by the IRS to be a trustee or custodian of IRAs or MSAs is automatically approved to be an HSA trustee or custodian. Unless an employer applies for IRS approval, it may not self-administer an HSA.

Notice 2008-59 further clarifies that any administrative and maintenance fees charged by a trustee or custodian and withdrawn from the HSA are not to be reported as distributions from such HSA. The fair market value of the HSA at the end of the taxable year should also be reduced by the amount of such withdrawn fees.

What are the differences among an HSA, HRA, FSA and MSA?The attached chart provides a comparison among these tax-favored accounts.

Where can I find more information on HSAs?10

To find consumer-friendly information released by the IRS on HSAs, please visit: www.irs.gov/publications/p969/ar02.html.

HSAs may not be the right solution for all employers or individuals. Please contact your MyHealthQuoter.com representative for assistance in determining what tax-advantaged account will best meet your goals.

MyHealthQuoter.com welcomes the opportunity to help your organization examine its plan design(s) and make recommendations for improvement.

This copy of MyHealthQuoter.com Plan Designs is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.

© 2004-2011 Zywave, Inc. All rights reserved.

3/04; EEM 2/11, 5/11

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http://www.irs.gov/publications/p969/ar02.html

Comparison of Tax-Advantaged AccountsHSA MSA HRA FSA

Name of account Health Savings Account Medical Savings Account Health Reimbursement Arrangement

Health Flexible Spending Account

Who owns the account? Individual/employee Individual/employee Employer Individual/employee

Who may fund the account?

Employer or employee, can be both in the same year

Employee can contribute pre-tax dollars through Section 125 plan

Employer or employee, but not both in the same year

Must be small employer or self-employed individual

Employer* Employer/employee*

Typically the employee contributes pre-tax dollars through a Section 125 plan

What plans may be offered with the tax-

advantaged account?

An HDHP as follows:

Min. Deductible

$1,200 I $2,400 F**

$1,200 I $2,400 F***

OPM

$5,950 I $11,900 F**

$6,050 I $12,100 F***

An HDHP as follows:

Min. Deductible

$2,050 I $4,100 F****

Max. Deductible

$3,050 I $6,150 F****

OPM

$4,100 I $7,500 F****

Any or no health plan Any or no health plan

Is there a limit on the amount that can be

contributed per year?

$3,050 I $6,150 F**

$3,100 I $6,250 F***

Catch-up contributions:

$1,000/year– age 55 by end of tax year

Reduced by MSA contributions in same year

65% of individual deductible

75% of family deductible

No, there is no IRS prescribed limit

Effective for taxable years beginning after Dec. 31, 2012, employees may not elect to contribute more than $2,500 per year to a health FSA offered thorough a cafeteria plan. This amount will increase in future years to reflect cost-of-living increases.

Does the uniform No No No Yes

This HSA Benefits Insights is not intended to be exhaustive nor should any discussion or opinions be construed as professional advice. © 2007-2009, 2011 Zywave, Inc. All rights reserved.

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Comparison of Tax-Advantaged AccountsHSA MSA HRA FSA

Can unused funds be rolled over from year to

year?

Yes Yes Yes, subject to COBRA No, but in some cases employee may elect COBRA through end of plan year. Unused amounts in FSA may be used for expenses incurred during grace period of two and one half months after end of plan year.

What expenses are eligible for

reimbursement?

Section 213(d) medical expensesEffective 12/31/10, OTC medicine or drug expenses cannot be reimbursed unless they are prescribed or are insulin.-COBRA premiums-QLTC premiums-Health premiums while receiving unemployment benefits-If Medicare eligible due to age, health insurance premiums except medical supplement policies

Section 213(d) medical expensesEffective 12/31/10, OTC medicine or drug expenses cannot be reimbursed unless they are prescribed or are insulin.-COBRA premiums-QLTC premiums-Health premiums while receiving unemployment benefits

Section 213(d) medical expensesEffective 12/31/10, OTC medicine or drug expenses cannot be reimbursed unless they are prescribed or are insulin.Health insurance premiums for current employees, retirees, and qualified beneficiaries, and QLTC premiumsEmployer can define “eligible medical expenses”

Section 213(d) medical expensesEffective 12/31/10, OTC medicine or drug expenses cannot be reimbursed unless they are prescribed or are insulin.Expenses for insurance premiums are not reimbursableEmployer can define “eligible medical expenses”

Must claims submitted for reimbursement be

substantiated?

No Yes Yes Yes

May account reimburse non-medical expenses?

Yes, but taxed as income and 20 percent penalty (no penalty if distributed after death, disability, or eligible for Medicare)

Yes, but taxed as income and 20 percent penalty; no penalty if after age 65

No No

Is interest earned on Yes, accrues tax-free Yes, accrues tax-free Yes, paid to the employer No


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Key HSA Decision Points

Here are key questions an employer considering HDHP/HSAs should think about:

Employer Considerations

• Is your primary goal to save money on health costs or to move toward employee-driven health care decisions?

• What is your strategic timeline for making these changes?

• How much ground have you covered with employees in helping them understand the magnitude of the health premium costs’ effect on your business – and ultimately on employees’ financial security?

• How will your choice of health care plans affect the recruiting and retaining of talent?

• What is your corporate culture today and how well does your organization embrace change? Company characteristics that influence the ability to introduce HSAs include paternalistic culture, high turnover, communication ability and recent major changes in workforce or benefits.

• What characteristics of employees would tend to make them more interested in one approach or another? Age, gender, time at company, personal situations, number of dependents, salary?

How well do you know what your employees want?

Questions on Plan Design

• Should you replace an existing traditional plan or do a side-by-side? How would you position HDHP/HSA relative to other health coverage?

• How would you integrate an HSA into your plan?

• Where will you set the deductible?

• Will you contribute to employee savings accounts, and if so, how much?

• How much will you, the employer, be charged in administrative fees, and how much of that will you pass on to employees?

Pros:

• Greater individual control over health care dollars

• Increased consumer decision-making, potentially leading to healthier lifestyle

• Incentives for individuals to save for health care expenses they will encounter in retirement

• Better tools (online and through dedicated phone support) for making more informed health care choices

• Debit cards and checking accounts to speed reimbursement for employees, save paperwork

for employers

• Savings for employer on HDHP premiums. Companies often save enough through the higher deductible that they are able to contribute to the savings accounts.

• For employers, HDHP design preserves distance from first-dollar coverage.

Cons:

• Tremendous communication challenges in shifting costs, risks and responsibilities to employees

• Time-consuming effort for a company to implement


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Considering implementing a high-deductible health plan (HDHP) paired with an HSA? Here are several key questions to consider.

Brought to you by the insurance specialists atMyHealthQuoter.com

• Continuing administrative hassles and some state laws to be addressed

Content © 2007-2009 Zywave, Inc. All rights reserved.

Tips for Successful HSA Adoption

Do not move forward with an HSA program without a commitment from management.

Define your goals. Are they offering a premium savings amount, achieving a certain enrollment percentage or increasing employee satisfaction? Plan your campaign around your goals.

Enlist the help of your broker and health care vendor. They can provide valuable information and helpful tips.

Use pre-enrollment buzz campaigns and other promotional materials to create interest.

Provide a pre-enrollment kit.

Hold enrollment meetings with management (which shows management commitment) – either one-on-one or in a large group, depending on what

is most feasible for your organization.

Bring the program down to the individual level – offer personal examples of the benefits of an HSA and use language that is easily understandable to all your employees.

Provide a “take-home” campaign – it allows individuals to discuss with family and friends.

Consider an employer contribution to the employee HSAs. It adds an extra incentive for employees to participate, especially in the first year.

Conduct a post-enrollment survey and evaluation. How successful was the campaign? What did

people think of it? How are your enrollment numbers? Did you satisfy your original goals?

Continually monitor and evaluate your program, and make changes as needed.

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This HSA Benefits Insights is not intended to be exhaustive nor should any discussion or opinions be construed as professional advice. © 2007-2011 Zywave, Inc. All rights reserved.


Use pre-enrollment buzz campaigns and other promotional materials to create interest in your HSA.

Consumer-Directed Health Care – Employee Communication Timeline: HSAs

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WEEK 1 WEEKS 3 & 4WEEK 22

Preparation Phase

1 – Check with vendor and see if minimum participation level is required.

2 – Train the Trainer: Present to HR and senior leadership.

All About HSAsPowerPoint Presentation

Announcement / Awareness Phase

3 – Communication from leadership to all employees on new benefits strategy; send out HSA Announcement Letter.

4 – Present to key management, opinion leaders and early adopters.

5 – Brainstorm with company leaders, HR, payroll and work team leaders on the best ways to promote HSA to employees.

6 – Determine employee groups.

HSA Announcement Letter

Education Phase

7 – Use email announcements, poster series and employee pieces to educate employees on HSA features.

Employees will generally fall into one of the following groups:

1) Single, young, no dependents, in good health, medical expenses tend to be low

2) Families, married with or without children, people with poor health histories, their biggest fear being a medical catastrophe equaling a financial one

3) Higher income, financial stability, less concerned on a day-to-day basis about health costs; looking to maximize retirement investments

Related Templates:Understanding an HSAConsumer-Driven Health Care –

Creating Choices For YouInvest in Your Future: HSAsFAQs About HSA Plan Usage10 Reasons to Love an HSA

18This HSA Benefits Insights is not intended to be exhaustive nor should any discussion or opinions be construed as professional advice.


WEEKS 5 & 6 WEEKS 7 & 8 2 WEEKS PRIOR TO GOING LIVE MONTHLY

Employee Buy-In Phase

One-on-one is bestPresentationsSell from the bottom up

8 - Market Key Selling Points:

Money saver (Groups 1 & 2)

Tax saver (all groups, especially 3)

Money in their pocket (all groups)

Improved retirement account (Groups 2 & 3)

Portable (Groups 1 & 3)

Build Your HSA Balance

HSA Poster Series

HSA Email Series

Open Enrollment Period

9 - Set up enrollment deadline

HSA Election Form

Vendor to provide new customer

“Getting Started” guide

Tips for HSA Users Related Templates:

HSA Eligible Expenses

HSA Ineligible Expenses

Baby Boomers Face Their Medical Future

HSA Regulatory Limits

HSA Examples

HSA Case Studies

Reduction in Federal Income Tax From HSAs – Illustrative Examples

5 Tips to Maximize Your HSA

Dear Lane Venture/Great Clips Employees:It’s no secret that health care costs are getting less affordable every day. And the cost to provide health care coverage continues to escalate. Like many companies, we need to control these costs to stay competitive. At the same time, we want to be sure that our health benefits do what they are intended to do, which is to help you and your family achieve and maintain your health potential. Fortunately, good health can actually cost less. Over the long-term, if our health benefits program can help you maintain or improve your health, we all win. That’s why we are excited to offer an innovative new plan option called a Health Savings Account (HSA). An HSA is an example of a consumer-driven health plan that is designed to empower you to take control of your health and the dollars you spend on your care. An HSA is an account that accumulates funds to cover your health care expenses. It comes with a high-deductible health plan that protects you from large health care expenses. HSAs offer you the following advantages:• Tax Savings. You contribute pre-tax dollars to the HSA. Lane Venture/Great Clips will also

make an annual contribution to your HSA. Interest accumulates tax-free and funds are tax-free to withdraw for medical expenses.

• Reduce your out-of-pocket costs. You can use the money in your HSA to pay for eligible medical expenses and prescriptions. The HSA funds you use can help you satisfy your plan’s annual deductible.

• Invest the funds and take them with you. Unused account dollars are yours to keep even if you retire or leave the company. Additionally, you can invest your HSA funds, so your available health care dollars can grow over time.

• The benefits of preventive care, without the cost. Receive 100 percent coverage for nationally recommended preventive care, with no deduction from your HSA or out-of-pocket costs for you when you see an in-network provider.

• The opportunity for long-term savings. Save unused HSA funds from year to year – money you can use to reduce future out-of-pocket health expenses. You can even save HSA dollars to use after you retire.

You will receive more information about the HSA plan as we get closer to our annual open enrollment period. We are pleased to be able to offer you this exciting new alternative for our employee health benefits plan.

Sincerely,

[Insert name]

[Insert title]

19© 2007-2011 Zywave, Inc. All rights reserved.

Brought to you by the insurance specialists at MyHealthQuoter.com

ABC Company is pleased to now offer you the option of a Health Savings Account (HSA) in conjunction with a High-Deductible Health Plan (HDHP)!

HSA Facts:• HSAs give you more control over health care decisions.• HSAs allow you to shop around for care based on quality and cost.• 73% of the population spends less than $500 per year on health care.• You contribute pre-tax dollars into an HSA and funds accumulate tax-free.• HSAs carry over year to year, and can even be saved to use after your retire. • HSA funds are yours to keep (or invest!) even if you leave the company.

For more details about Health Savings Accounts, contact Matthew Byrne today at MyHealthQuoter.com, (614) 336-3636.

© 2007-2009, 2011 Zywave, Inc. All rights reserved. The information contained herein, including its attachments, contains proprietary and confidential information. Any distribution of these materials to third parties is strictly prohibited.

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Frequently Asked Questions about HSA Plan Usage

How do I manage my HSA?Your Health Savings Account (HSA) is your account; the HSA dollars are your dollars. Since you are the account holder or HSA beneficiary, you manage your HSA account. You may choose when to use your HSA dollars or when not to use your HSA dollars. HSA dollars pay for any eligible expense. Most commonly, the HSA account holder will use HSA dollars to pay the out-of-pocket expenses (i.e., deductible and coinsurance) associated with their high-deductible health plan.

What expenses are eligible for reimbursement from my HSA?HSA dollars may be used for qualified medical expenses incurred by the account holder and his or her spouse and dependents. Qualified medical expenses are outlined within IRS Section 213(d). In summary, the IRS Section 213(d) states that “the expense has to be primarily for the prevention or alleviation of a physical or mental defect or illness.”

In addition to qualified medical expenses, the following insurance premiums may be reimbursed from an HSA:

- COBRA premiums- Health insurance premiums while receiving unemployment benefits- Qualified long-term care premiums*- Any health insurance premiums paid, other than for a Medicare supplemental policy, by individuals

ages 65 and over

Are dental and vision care qualified medical expenses under an HSA?Yes, as long as these are deductible under the current rules. For example, cosmetic procedures, like cosmetic dentistry, would not be considered qualified medical expenses.

What expenses are NOT eligible for reimbursement from my HSA?The following expenses may not be reimbursed from an HSA:

- Premiums for Medicare supplemental policies- Expenses covered by another insurance plan- Expenses incurred prior to the date the HSA was established- Over-the-counter drugs purchased without a prescription (except insulin)

What is a coverage gap?This is the gap between total out-of-pocket expenses associated with your high-deductible health plan and your HSA dollars. For example, assume that you have a $2,000 deductible, a $4,000 maximum out-of-pocket, and either you or your employer has contributed $2,000 to your HSA account. If your medical costs incurred exceed $4,000 for the year, then you are financially obligated to pay the difference between your total maximum out-of-pocket ($4,000) and your HSA balance ($2,000) - ($4,000 - $2,000 = $2,000).*

What happens when my HSA funds run out?You may be financially responsible for any eligible medical expenses that fall within the coverage gap.

Can I use my HSA dollars for non-eligible expenses?

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Brought to you by the insurance specialists at

MyHealthQuoter.com

Money withdrawn from an HSA account to reimburse non-eligible medical expenses is taxable income to the account holder and is subject to a 20 percent tax penalty - unless over age 65, disabled or upon death of the account holder.

When can I start using my HSA dollars?You can use your HSA dollars immediately following your HSA account activation and once contributions have been made.

When do I contribute to my HSA account, and how often can I?You, your employer or others can contribute to your HSA account through payroll deductions or as a lump sum deposit.* You can contribute as often as you like, provided your (and your employer’s) total annual contributions do not exceed these limits:

- 2011:o $3,050 for individual coverage o $6,150 for family coverage

- 2012:o $3,100 for individual coverageo $6,250 for family coverage

Individuals who are age 55 or older are eligible to make “catch-up” contributions up to $1,000.

How do I pay my physician or network facility at time of service with my HSA dollars?You may request that the network provider submit your claim to your health plan. You should make sure that your provider has your most up-to-date insurance information. Once the medical claim has been processed, if applicable, out-of-pocket expenses will be billed. At this time you may choose to use your HSA debit card or HSA check* to pay for any out-of-pocket expenses, or you may choose to pay with your own money and receive reimbursement at a later date. You should always ask that your medical claim be submitted to the health plan before you seek reimbursement from your HSA. This procedure will ensure that provider discounts are applied. Also, remember to keep all medical receipts and Explanation of Benefits (EOBs).

What if I have HSA dollars left in my account at year-end?The money is yours to keep. It will continue to earn interest and will be available for you and your health care costs next year.

How do my remaining HSA dollars rollover at year-end?Any dollars left in your HSA account at year-end will automatically roll over into next year’s HSA account.*

What happens to my HSA dollars if I leave my employer?The funds are yours to keep. You may elect one of the following options:

- Leave your funds in the current HSA account- Transfer your funds to an HSA with your new employer- Transfer your funds to another qualifying account within 60 days

Can my HSA dollars be used for retirement health care costs?Yes, only for expenses eligible for reimbursement.

Can I use the money in my account to pay for my dependents’ medical expenses?You can use the money in the account to pay for medical expenses of yourself, your spouse or your dependent children. You can pay for expenses of your spouse and dependent children even if they are not covered by your HDHP.

Can couples establish a “joint” account and both make contributions to the account, including “catch-up” contributions?“Joint” HSA accounts are not permitted. Each spouse should consider establishing an account in his or her own name. This allows you to both make catch-up contributions when you are 55 or older.

My employer offers an FSA – can I have both an FSA and an HSA?You can have both types of accounts, but only under certain circumstances. General Flexible Spending Accounts (FSAs) will probably make you ineligible for an HSA. If your employer offers a “limited-purpose”

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(limited to dental, vision or preventive care) or “post-deductible” (pay for medical expenses after the plan deductible is met) FSA, then you can still be eligible for an HSA.

Can I shift my IRA funds to my HSA?Owners of individual retirement accounts who are enrolled in a high-deductible health plan can shift IRA funds to an HSA without facing a tax penalty. The IRS allows a one-time transfer that does not exceed your maximum HSA contribution limit.

Can I borrow against the money in my HSA?No. You may not borrow against it or pledge the funds in it. For more information on prohibited activities, see Section 4975 of the Internal Revenue Code.

Can the funds in an HSA be invested?Yes, you can invest the funds in your HSA. The same types of investments permitted for IRAs are allowed for HSAs, including stocks, bonds, mutual funds and certificates of deposit.

* May vary depending on HSA plan design and benefit plan design. Refer to your Summary Plan Description or HR administrator for specifics pertaining to your plan.


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Documents

HSA communication plan