IS a high-deductible medical plan your best choice?

1. IS a high-deductible medical plan your best choice? Taking the mystery out of high-deductible health plans and health savings accounts

2. Agenda • High-Deductible Health Plan With HSA • High-Deductible Health Plan Basics • Health Savings Account (HSA) Basics • IRS Says • How It Works • Scenarios • Plan Tips (How To Make It Work For You)

3. High Deductible Health Plan Basics High-Deductible Health Plan Plus HSA HIGH DEDUCTIBLE HEALTH PLAN BASICS

4. Plan Basics Health Savings Account (HSA) Purdue Health Plans Plus HSA Health Plan (HDHP)

5. Background • Created as a way to help with rising health care costs • Offer tax advantages for medical expenses • Provide HSA owners with control of where dollars are being spent • HSA owners are generally more interested in how funds are being spent when they own the account • Health care providers have incentive to lower rates due to a more competitive environment

6. Background • Intent of high-deductible health plans and HSA • Improved version of FSA with retirement savings feature • Allows unspent funds to roll over every year • Employers are not required, but are able to contribute • Account earns interest and offers investment options • Account goes with you if you leave Purdue • Able to save funds for retirement medical expenses, including premiums • Remember that funds used for non-medical expenses are fully taxable • Prevalence of plans • According to Mercer’s National Survey of Employer-Sponsored Health Plans 2012: • 36% of 2,809 employers surveyed offer an HDHP • Up from 20% in 2008

7. Plan Basics High-Deductible Health Plan (HDHP) Health Savings Account (HSA) Withdrawals Out-of-Pocket Maximum Premium Coinsurance Account Management Deductible Contributions Preventive Care

8. Plan Basics • High-Deductible Health Plan • Lowest premiums compared to more traditional health plans • Higher deductible and maximum limit on out-of-pocket covered expenses in a calendar year • Includes both medical and prescription costs • 100% coverage with in-network providers for preventive care and preventive generic medications for certain conditions • (i.e. asthma, diabetes, heart disease and stroke, prenatal vitamins, smoking cessation) High Deductible Health Plan (HDHP) Out-of-Pocket Maximum Coinsurance Deductible Preventive Care

9. Plan Basics • Preventive care 100% covered with in-network providers, includes but not limited to: • Annual exams, routine prenatal and well-child care, and child and adult immunizations • Preventive (non-diagnostic) screening services • e.g., cancer, diseases (heart and vascular, infectious) • Conditions: metabolic, nutritional, endocrine, mental health, obstetric and gynecological, and pediatric • Disorders (musculoskeletal, vision and hearing) • Eligible preventive medications • For certain conditions such as: asthma, heart disease and stroke • Prenatal vitamins, generic contraceptives approved by the FDA, smoking cessation High Deductible Health Plan (HDHP) Out-of-Pocket Maximum Coinsurance Deductible Preventive Care

10. Plan Basics • Deductible Phase: • You pay 100% of all eligible expenses up to the plan's annual deductible. Includes: • Non-preventive medical visits and services • Doctor visits, labs, diagnostics, hospitalizations • Non-preventive prescriptions High Deductible Health Plan (HDHP) Out-of-Pocket Maximum Coinsurance Deductible Preventive Care

11. Plan Basics • Coinsurance Phase: • After meeting your deductible, you pay a smaller percentage of expenses High Deductible Health Plan (HDHP) Out-of-Pocket Maximum Coinsurance Deductible Preventive Care *Member Pays the Difference program is still in effect.

12. Plan Basics • Out-of-Pocket Maximum Phase: • Plan pays 100% of eligible medical and prescription drug costs once you meet the annual maximum • This is the most you will pay for medical and prescription drugs during 2014 High Deductible Health Plan (HDHP) Out-of-Pocket Maximum Coinsurance Deductible Preventive Care

13. High-Deductible Health Plan HEALTH SAVINGS ACCOUNT (HSA) BASICS

14. Plan Basics • What Is An HSA? • A bank account – called a health savings account (HSA) • Offers tax advantages and allows savings to build over time • Available with high deductible health plans only • Administered by PayFlex • Debit card allows convenient access to funds in the account • Account access via web and mobile • File claims, view account balance, transfer funds, etc. Health Savings Account (HSA) Withdrawals Account Management Contributions

15. Plan Basics • HSA Contributions • Purdue contributes, and you have the option to contribute to the same account Health Savings Account (HSA) Withdrawals Account Management Contributions

16. Plan Basics • HSA Contributions • Contributions are deposited pre-tax and available for use on or after each pay date • Age 55 or older any time during 2014, eligible to contribute an additional $1,000 • Update contributions any time during year through EBenefits • Option to contribute after-tax Health Savings Account (HSA) Withdrawals Account Management Contributions

17. Plan Basics • HSA Funds • Remaining funds in account roll over every year, never lose contributions • Even if you separate or retire • Funds earn interest and grow tax-free with investment options available once minimum balance is met • Potential for long-term, tax-free savings • No limit on account balance • Funds available to beneficiary in the event of death Health Savings Account (HSA) Withdrawals Account Management Contributions

18. Plan Basics • HSA Withdrawals • Funds never taxed when used for eligible expenses such as: • Medical (e.g. doctor visit, hospital stay) • Prescription and Over-the-counter drugs (with doctor's prescription) • Vision (e.g. contacts, glasses) • Dental (e.g. fillings, braces) • Upon retirement , use funds tax-free for medical premiums and eligible medical expenses • Including COBRA, Medicare premiums and supplement plans, and long-term care premiums • Age 65 or older able to pay tax and withdraw funds with no tax penalty for any reason Health Savings Account (HSA) Withdrawals Account Management Contributions

19. Plan Basics • HSA Withdrawals • Pay eligible expenses of any family member who qualifies as a dependent on your tax return, even if you cover only yourself • Dependent must be covered under plan, for expenses to apply toward your plan’s deductible • Same-sex domestic partners are eligible to be covered under an employee’s HDHP • Partner must be employee’s qualified tax dependent for University’s HSA family contribution to apply • Tax-free distributions can be made from the HSA for the qualified tax dependent’s health expenses Health Savings Account (HSA) Withdrawals Account Management Contributions

20. Plan Basics • HSA Withdrawals • Flexibility to pay expenses from HSA or pay out-of-pocket and reimburse yourself • Direct deposit option available • Use funds for you, your spouse, and your tax dependents, even if you cover only yourself • Keep your receipts for expenses • If not an eligible expense: • Pay tax on purchase(s) • 20% tax penalty Health Savings Account (HSA) Withdrawals Account Management Contributions

21. Plan Basics • Limited Purpose Flexible Spending Account (LPFSA) • In addition to the HSA, you have the option to contribute pre-tax to a Limited Purpose FSA (LPFSA) • May only be used for eligible dental and vision expenses • Funds are available for use immediately • Must use funds by end of year (use it or lose it rule) • 2014 contribution limit of $2,500 per employee

22. Plan Basics • Limited Purpose Flexible Spending Account (LPFSA) • If you choose the LPFSA with your HSA, you will receive one card • PayFlex’s technology will understand which purchases should be applied to your Limited Purpose FSA before your HSA • Claim forms and direct deposit available if you choose to pay out of pocket and reimburse yourself

23. High-Deductible Health Plan Plus HSA IRS SAYS

24. IRS Says • To offer an HSA with a high-deductible health plan, certain IRS rules apply • Higher deductible and out-of-pocket maximum with lower premiums than traditional plans • Must combine medical and prescription expenses to one deductible and out-of-pocket maximum • Offer preventive care and certain preventive medications at no cost • Charge fair market value for services • (i.e., No “low or no” cost services)

25. IRS Says • To participate in an HSA, certain IRS rules apply • You must be covered under a high- deductible health plan (HDHP) • You cannot be covered under any non-HDHP plan in addition to your Purdue HDHP plan • If your spouse has non-HDHP coverage, you cannot be covered by that plan • If you elect an HSA, your spouse cannot have a health care FSA • You cannot be claimed as a dependent on someone else's tax return

26. IRS Says • To participate in an HSA, certain IRS rules apply • Insurance or accounts notallowed with an HSA: • Non-HDHP medical coverage • Health care flexible spending account (HCFSA) or a Spouse's HCFSA • Part A and/or Part B Medicare • TRICARE or TRICARE For Life • Any VA benefits used within previous 3 months • You can have additional insurance that provides benefits for the following items: • Accident • Disability • Dental care • Vision care • Long term care • Specified disease or illness • Insurance that pays a fixed amount per day for hospitalization

27. IRS Says • To participate in an HSA, certain IRS rules apply • You must keep records to show: • Funds were used exclusively to pay or reimburse qualified medical expenses, • qualified medical expenses had not been previously paid or reimbursed from another source, and • medical expenses had not been taken as an itemized deduction in any year • Expenses incurred before you establish your HSA are not qualified medical expenses

28. IRS Says • To participate in an HSA, certain IRS rules apply • If funds are withdrawn for anything other than a qualified medical expense prior to retirement, you are subject to taxes plus a 20% tax penalty

29. Purdue’s Special Rules • Special Limitation Groups • Long Term Disability • Not eligible for HSA • COBRA • Not eligible for HSA • Over 65 Active Employees • Eligible for HSA, if not covered under Medicare (including Part A) • Under 65 Retirees • Not eligible for HSA • Over 65 Retirees • Not eligible for HSA

30. High-Deductible Health Plan Plus HSA HOW IT WORKS

31. How It Works • Doctor’s office • Show your Anthem ID card • Doctor’s office processes through Anthem • Your doctor’s office will bill you for any amount owed • Amount owed will count toward your medical/prescription deductible and out-of-pocket maximum • Choose to use your HSA card or another form of payment

32. How It Works • Pharmacy • Show your Anthem ID card • Pharmacy processes through Express Scripts • Payment due at time of purchase • Choose to use your HSA card or another form of payment • Amount owed will count toward your medical/ prescription deductible and out-of-pocket maximum unless you choose a brand name prescription over generic (Member Pays The Difference)

33. How It Works • Eye care provider • Show your Purdue ID card • Choose to use your HSA/LPFSA card or another form of payment • Dentist’s office • If you are covered under a Purdue dental plan, show your Purdue ID card • Choose to use your HSA/LPFSA card or another form of payment

34. High-Deductible Health Plan Plus HSA SCENARIOS

35. Scenarios •  Sandy: Employee only with $1,000 in medical costs* • Under $44,000 annual salary $44,000 and above annual salary *Scenario assumes in-network providers are used in all cases.

36. Scenarios •  Sandy: Employee only with $5,000 in medical costs* • Under $44,000 annual salary $44,000 and above annual salary *Scenario assumes in-network providers are used in all cases.

37. Scenarios •  Sandy: Employee only with $40,000 in medical costs* • Under $44,000 annual salary $44,000 and above annual salary *Scenario assumes in-network providers are used in all cases.

38. High-Deductible Health Plan Plus HSA PLAN TIPS

39. Tips • Take advantage of your 100% covered preventive benefits, including preventive medications • Talk with your doctor or pharmacist • Be open and honest, keep the line of communication open • As the patient, you have the right to know • Ask the tough questions • Make sure to get copies of medical records and imaging to reduce duplicate services • Use Tier 1 labs for the best savings • www.purdue.edu/hr/Benefits/Medical/purdueChoiceFund.html#Tier1labs

40. Tips • Check out the Center for Healthy Living for a high quality, low cost option • $45 flat fee for center visits • No-cost health coach services • Tobacco cessation • Medication therapy management • Nutritional counseling • Employee assistance counseling • Convenient online scheduling option • Tier 1 lab location • Lower your costs for prescriptions • Use generics • Try home delivery • Check with retailers for low cost prescription programs

41. Tips • Always show your insurance information, even when you have to meet your deductible • Medical and prescription expenses • In-network provider discounts • Keep your receipts and explanations of benefits (EOBs) • Consider a Limited Purpose Flexible Spending Account • Vision/dental expenses • Check in to additional coverage with accident / critical illness insurance options

42. Tips • Benefit from the triple tax advantages • Contributions you make are pre-tax • Consider contributing what you would have paid for 2013 premiums • Add what you would typically contribute to your FSA • Funds in HSA grow with interest tax-free • You have option to allow HSA to build now, save funds for later • Funds are tax-free when used for eligible expenses  • Continue to use HSA funds tax-free on eligible expenses after retirement, including Medicare premiums

43. Tips • Choose the right level of care and save • Sample costs for established patient visit for sinus infection symptoms • Assumes 2014 cost • No labs/tests included * Based on 2013 Cigna discount

44. Tips • Use available technology • Center for Healthy Living • Schedule appointments online • Castlight • Shop around for care • Express Scripts • Price medications and order home delivery refills • PayFlex (Healthhub) • Track your expenses • EBenefits • Update HSA contributions anytime

45. Center for Healthy Living • Schedule an appointment • View lab results from your visits with the center 1 2

46. Castlight • Search personalized cost and quality information for in-network providers and services • Track how close you are to meeting your deductible • Connect seamlessly to Express Scripts for prescription pricing, ordering and more • See tips to help manage you health care 2 1 4 3

47. Castlight • View your family’s spending, including: • medical • prescription • what Purdue paid • Review past medical spending to see how much you paid and why 1 2

48. Castlight Castlight Mobile • Available for iPhone, Android and other smartphones • View personalized cost and quality information • View provider details • Check your deductible and out-of-pocket maximum status Castlight Guides By Phone • Full access over the telephone • Call toll-free 888-272-9572, Monday - Friday, 8 a.m. - 9 p.m. Castlight www.purdue.edu/castlight

49. Express Scripts Order home delivery prescriptions Make the switch from retail to home delivery Track your prescription expenses and view history 1 3 2

50. Express Scripts • Price medications and compare costs: • Retail vs. home delivery • Brand name vs. generic equivalent