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Oxy Health Plans— New Medical Options for 2006 Fall 2005. What Are the New Options?. A Glimpse at Plans for 2006. Basic POS ($300 deductible) plan remains. HMO and other regional plans remain, pending sufficient plan enrollment.
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A Glimpse at Plans for 2006 • Basic POS ($300 deductible) plan remains. • HMO and other regional plans remain, pending sufficient plan enrollment. • Two new high-deductible plans (with HSAs) replace the POS 1000 ($1000 deductible) plan. This presentation focuses on the new HSA options.
Alphabet Soup • EFT: Electronic Funds Transfer • EOB: Explanation of Benefits • FSA:Flexible Spending Account • HDHP: High Deductible Health Plan • HMO:Health Maintenance Organization medical plan • HSA:Health Savings Account • IRA: Individual Retirement Account • OOP:Out-of-Pocket maximum • POS:Point-of-Service medical plan
Contributions for the Aetna Medical Plans New Options
New Medical Plan Options • Two Health Savings Account (HSA) options: • HealthFund Plus • HealthFund Saver • The new options have both a medical plan and a savings account component.
POS Refresher: How Deductibles Work OOP Limit (includes deductible) You pay 100% up to deductible, then 10-20% until your out-of-pocket limit, then Plan pays 100% Plan Pays You Pay Deductible
Deductibles • Basic POS: • $300 individual • $600 family • New Plans: • Basic POS has a separate individual deductible for Employee + 1 and Family coverage. The new plans do not.
OOP Maximums • Basic POS: Separate individual and family OOP maximums. • New Plans: No individual OOP maximum. • Based on salary for all plans. • Remember, OOP max includes the deductible under Aetna plans. Under the new options, there are no individual deductibles or out-of-pocket maximums. This means that if you enroll for Employee + 1 or Family coverage, your family must meet the entire deductible before coinsurance applies and meet the entire OOP max before the plan pays 100%.
OOP Maxes (cont.) Differences between Basic POS and HealthFund options are highlighted in red.
Medical Coverage for New Plans • What’s the same? • Works like current Aetna POS plans with deductibles, coinsurance, and medical claim forms. • Same network: Aetna Open Access/Choice II POS. • What’s different? • No in-network lifetime benefit maximum. (Max under Basic POS increases to $3 million, effective 01/01/06.) • Most preventive services covered at 100%.
Preventive Coverage • New Plans: 100% coverage before deductible for these in-network preventive services: • Colonoscopies • Sigmoidoscopies • PSA tests • Mammograms • Pap smears • Well baby care • Child immunizations • Basic POS: 80% coverage after deductible, in network. Note: Subject to age and frequency schedule (posted on OxyLink).
Drug Coverage for New Plans • Similar to current drug coverage under Basic POS & POS 1000 plans. • Differences: • Provided through Aetna instead of Medco. (One ID card!) • Combined medical/drug deductible, per IRS rules. • Must meet combined deductible before coinsurance applies. • No separate out-of-pocket maximum for drugs.
What is a Health Savings Account? • Tax-advantaged savings account that’s available only with a high-deductible health plan. • New way of saving for health expenses and retirement. • Before age 65, use it tax-free for health care expenses. • After age 65, still use it tax-free for health care but also use it like an IRA for other expenses. • Like an IRA, only better. • Never taxed if used for medical expenses. • No income limits; employees at all salary levels may participate. • Pretax payroll deductions available. • The account is held at JPMorganChase. It’s yours, even if you change health plans or jobs.
You and/or Oxy Fund the Account • Contributions allowed up to the amount of your medical plan deductible every year. • Employee contributions to an HSA are optional. • Oxy pays the basic administrative fee while you are an active employee and enrolled in an Oxy HDHP; you pay when you disenroll, terminate or retire.
Oxy Contributions • Applies to HealthFund Plus option. • In 2006, Oxy will make contribution at the beginning of the year, so money is immediately available. • You own the funds once deposited. • No Oxy contributions to HealthFund Saver option, but significantly lower employee contributions for medical coverage.
Employee Contributions: Pretax • Payroll deduction made before federal and state taxes (in most states) are taken from paycheck. • Some states do not allow tax-free treatment of HSAs: Alabama, California, Maine, Massachusetts, New Jersey, Pennsylvania, and Wisconsin. • Maximum monthly contribution via payroll deduction is 1/12 of your annual limit. • Your contributions will be credited in your HSA twice per month.
Employee Contributions: After-Tax • Send directly to Aetna via check or electronic funds transfer (EFT) from your bank account. • “Above-the-line” deduction on tax return: • Reduces your taxable income by the amount of your after-tax contribution. • Do not have to itemize to claim deduction. • Contribute up to April 15 of the following year. • Your responsibility not to exceed maximum contribution limit.
Employee Contributions: Catch-Up • Catch-up contributions for age 55+. • Send directly to Aetna via check or electronic funds transfer (EFT) from your bank account. • Both employee & spouse may contribute. • Spouse must also be 55+ and covered under HDHP. • Separate account and application for spouse; separate fees also apply and will be deducted from account. • Up to $700 per person in 2006; eventually $1,000 by 2009. • Separate from catch-up contributions to Oxy’s Personal Savings Account (the PSA). • In addition to annual contribution limits shown earlier.
HSA Specifics • Unlike health care FSA: • No “use it or lose it” rule; funds roll over each year. • You cannot draw money that is not in the account. It’s like a bank account. • Tax free when spent on “qualified expenses.”
Sample “Qualified Expenses” under HSA • Medical deductibles and coinsurance • Diagnostic services • Dental and orthodontia • Routine physicals • LASIK surgery, contact lenses and eyeglasses • Non-covered prescriptions such as birth control pills, drugs for sexual dysfunction, plus most over-the-counter drugs • Chiropractic services • Hearing aids • Medicare and Medicare Advantage premiums • COBRA premiums • Qualified long-term care premiums • Certain retiree medical premiums/contributions See IRS Publication 502 for details Items in black may be reimbursed from Regular FSA or HSA. Items in red may only be reimbursed from HSA.
Accessing Your HSA Funds • Use Aetna HSA debit card or Aetna-issued checks at pharmacy, provider’s office or ATM to access HSA funds. • No fee to use debit card at provider’s office or pharmacy. Fee for use at ATM. • HSA checks available upon request. $10 for book of 25. • Process: • Pharmacies: You can use your VISA debit card at time of purchase. • Physician services: • Submit medical claim for network discounts and credit toward deductible. • Generally, network providers file medical claims on your behalf and will not require payment in advance. • Pay doctor’s bill after claim has been processed. • No claim forms to obtain reimbursement from HSA.
Accessing Your HSA Funds (cont.) • You must have funds in your account to obtain reimbursement. • Keep all your receipts and documentation in case they are requested by the IRS. • Remember, you don’t have to use your HSA funds for current expenses. • Details are in your Aetna Welcome Kit.
Triple Tax Savings! Tax Advantages • Contributions tax free. • Investment earnings tax free. • Withdrawals tax free if used for qualified expenses. • Notes: • If HSA funds are used for other than qualified medical expenses, the expenditure will be taxed and, for individuals who are not disabled or not over age 65, subject to a 10% penalty tax. • Some states do not allow tax-free treatment of HSAs. (See slide 19.)
Investment Options • If account balance < $2,000: • Interest-bearing, FDIC-insured account at JPMorganChase Bank. • Cash account earning 3.09% as of October 2005. • If account balance > $2,000: • Access to 8 JPMorgan mutual fund options: • 3 Asset Allocation funds • 2 Fixed Income funds • 2 US Equity funds • 1 International Equity fund • $2.50/month investment fee applies if you invest in mutual funds. • Mutual funds are not FDIC-insured and expose investors to the risk of loss of principal, but provide the opportunity to earn higher returns than might be available in the HSA cash account. • More information will be sent when your balance hits $2,000.
HSA Fees NOTE: Fees deducted from account balance.
Benefits of Long-Term Saving • Assumes 5% rate of return.
Sample EmployeeOxy Salary = $40k, Family Coverage • Claims shown on the bottom axis, employee’s expenses (including medical contributions) on the side. Lines show employee expenses at different claims levels. This graph shows that: • Below $2k in claims, this family has the lowest out-of-pocket expenses in the HealthFund Saver plan. • Above $3k in claims, this family has the lowest out-of-pocket expenses in the HealthFund Plus plan. • Use the Plan Cost Estimator to choose the right plan for you. EE Spend = Oxy medical contributions + coinsurance/deductible – HSA seed
Sample EmployeeOxy Salary = $75k, Family Coverage • Claims shown on the bottom axis, employee’s expenses (including medical contributions) on the side. Lines show employee expenses at different claims levels. This graph shows that: • Below $2k in claims, this family has the lowest out-of-pocket expenses in the HealthFund Saver plan. • Above $3k in claims, this family has the lowest out-of-pocket expenses in the HealthFund Plus plan. • Use the Plan Cost Estimator to choose the right plan for you. EE Spend = Oxy medical contributions + coinsurance/deductible – HSA seed
Sample Expenses $2,560
PROS Tax advantages and interest/ investment earnings. No “use it or lose it” rule. Portable. Most preventive services covered at 100%. Unlike IRAs, no income limits. CONS Additional complexity. Higher deductible. Limited purpose FSA (discussed on slide 37). Risk of principal loss in optional mutual fund investments. HSA Pros/Cons • Employees have more ownership/accountability. • Incentive to constrain unnecessary utilization.
HSA FSA “Limited Purpose” FSA • If you enroll in an HSA and a health care FSA, you may only obtain reimbursements under the FSA for limited purposes: • Dental • Vision • Preventive care drugs and services • Expenses after your medical deductible • “Use it or lose it” rule still applies. • Consider maximizing contribution to HSA before contributing to Limited Purpose FSA.
Who Can Enroll? • To enroll in an HSA, you must: • Be covered by a High-Deductible Health Plan (HDHP), as defined by IRS. (Both of Oxy’s HSA plans meet the requirements.) • Not be covered by another health plan (e.g., your spouse’s medical plan) that is not a high-deductible health plan and/or FSA plan.
Spouses with Medical/FSA Coverage Note: This chart is not intended to be all-inclusive or to address unique circumstances. Seek guidance from a qualified tax expert as needed.
Can I Take the HDHP Without the HSA? • You may enroll in an Oxy HDHP plan and decide: • Not to make a contribution to the savings account. • To make a contribution to an HSA account with another insurer or financial institution.
What Else? • Prescription drug issues: • Refill information will not pass from Medco to Aetna. • Get new prescriptions to set up mail order with Aetna. • If you terminate, retire, or disenroll from an Oxy HDHP, you keep the account but you must pay basic account administrative fee. • Aetna/JPMorganChase will send the necessary tax forms showing your prior year’s contributions & withdrawals. • Aetna will send Welcome Kit with more information to enrollees.
Plan Cost Estimator • Tool that allows you to enter expected office visits, drug expenses, etc. • Shows expected OOP expenses for all plans so that you can pick most cost-effective plan.
