*High Deductible Health Plans (HDHP)With a Health Savings Account (HSA)

State Personnel DepartmentPrepared for Open Enrollment 2009

*Two Separate Entities 1. HDHP Health PlanProvides traditional PPO coverage (80%-20%) after deductible is metDeductible higher than in traditional plan

*Two Separate Entities (continued) HSA Savings Account

Special bank account for health expenses. Contributions tax free for eligible health care expenses Your account balance rolls over year after year

* HDHPs: How do they differ from Trad II? A traditional plan requires you to pay every pay period whether or not you use medical services; these are premiums A HDHP requires you to pay only nominal or no premiums; you will pay for services only if you use themyou will be responsible to pay for covered services until you reach the deductible; then you will pay only 20% of the discounted chargeIf/when you reach your out-of-pocket maximum, insurance will pay 100% and you will pay nothing additional. (Assumes in-network provider is used.)

*HDHP How does the deductible work?2009 deductibles for HDHP

HDHP 1single $2,500 family $5,000 HDHP 2 single $1,700family $3,400

Family must meet entire deductible before coverage applies

*

Out-of-pocket expensesThese are expenses you pay yourself toward the deductible and the co-insurance you pay after the deductible is met.The states plans put a limit on out-of-pocket expense. Once met, you receive 100% coverage.

PlanSingle FamilyHDHP 1 $4,000 $8,000 HDHP 2 $2,400 $4,800 Trad II $2,000 $4,000 Family must meet total out-of-pocket expense.

*

In-network vs. Out-of-network health care providers

In-network: Broad network contracted with Anthem andAgreed to accept certain amount as payment for specific covered services.

Out-of-network: No contract with Anthem. May charge more than in-network providers. Anthem only pays 60% of discounted feesProvider can balance bill you for difference between what Anthem pays and the full fee charged.Not bound by Anthems in-network discounted fees.Go to Provider Finder online directory at www.anthem.com

*HDHP: How does it work at a physicians office?

Seeing an in-network physician

As enrollee you will have an Anthem ID cardPresent your card at medical provider siteMay or may not pay at time of serviceProvider will file claimYou and your doctor will both receive Explanation of Benefits showing your costsProvider bills youYou pay network cost of service from HSA or other funds

HDHP: How does it work at a physicians office?

Seeing an out-of-network physician

When you make appointment, you may be asked to pay all or portion of fee at the visit. Present your Anthem ID card, but you may be required to file your own claimYou will receive an Explanation of Benefits (EOB) showing the approved or discounted fee and amount due the providerProviders will reflect provider charges minus Anthems payment --assume deductible met: (60% of discounted fee) minus any payments you may have made

HDHP: How does it work at a physicians office?How an out-of-network claim is paidEXAMPLE:

Provider charge = $110; Approved fee = $100 Your deductible has been met.

Your EOB will state: patient responsibility: $40.00, Included in the notes will be the statement that you may be billed by the provider for the full balance.

A check for $60.00 payable to you should be included with the Anthem documents -- out-of-network providers do not receive payment from Anthem. (If you had not met your deductible the patient responsibility would have read $100.00.)

You owe the provider: $40 (approved fee minus paid amount) + $60.00 (amount of check) +$10 (difference between the provider charge and the approved fee) = $110.00.

Had the deductible not been met, the check would not have been sent to you. Under deductible on the EOB it would have read: $60.00. Again, you would owe $110.00.

*HDHP: How does it work provider and other services?

Finding the costs and becoming an informed consumer!

Click on: www3.anthem.com/flashtour/AnthemCareComparison/BCBS/demo/masterMainMovieAnthem.html

Follow the tutorial to discover and to compare Anthems discounted prices for covered services.

*HDHP: How does it work - prescriptions? Filling a prescription at pharmacy:Present your Anthem card at network pharmacyPay the full network adjusted amount for your prescription either from your HSA or with other fundsShop aroundAsk for genericsIf deductible met, pay co-insurance anywhere from 10% to 40% depending on drug.

*HDHP: How does it work - prescriptions?

How can I find out what they will cost?

Go to: www.anthem.com/preenrollment/ Under the section Important Information from your Employer, it will ask you to type an ID. Please type the following:demo4u, and click login. On the next page, scroll all of the way to the bottom of the page and look under the heading Decision Support Tools. Click on Drug Cost Estimators. This will open a new page. Simply input the name of your drug or select it alphabetically, and the Estimator will give you an approximate cost for your drug.

*HDHP: How does it work - preventive services?

HDHP 1 and HDHP 2 preventive covered services meet nationally recommended preventive care guidelines.

Services are paid at 100% and not subject to deductible, if you use an in-network provider.

*Covered preventive services children

Office visits for well baby visits and annual physicalsVision screeningHearing screeningScreening for lead exposurePelvic exam, Pap test and contraceptive management for teens

(continued)

*Covered preventive services children (continued)

Immunizations:Hepatitis AHepatitis BDiphtheria, Tetanus, Pertussis (DtaP)Varicella (chicken pox)Influenza (flu shot)Pneumococcal Conjugate (pneumonia)Human Papilloma Virus (HPV)H. Influenza type bPolioMeasles, Mumps, Rubella (MMR)Meningococcal PolysaccharideRotavirus

*Covered preventive services adults

Office visits for annual physicalsScreening tests including the followingVision screeningHearing screeningCholesterol and Lipid level screeningBlood Glucose test to screen for Type II DiabetesProstate cancer screenings including Digital Rectal Exam and PSA test Breast exam and Mammography screening

*Covered preventive services adults (continued)

Pelvic exam, Pap test and contraceptive management for femalesScreening for sexually transmitted diseasesHIV testBone density test to screen for osteoporosisColorectal cancer screening including fecal occult blood test, barium enema, flexible sigmoidoscopy and screening colonoscopyRoutine blood and urine screenings

*Covered preventive services adults (continued)

ImmunizationsHepatitis AHepatitis BTetanus, Diphtheria (Td)Varicella (chicken pox)Pneumococcal Conjugate (pneumonia)Human Papilloma Virus (HPV)Measles, Mumps, Rubella (MMR)Meningococcal PolysaccharideHerpes Zoster (shingles)Influenza (flu shot)

*HSA Important facts

This is a real bank account that you open at Tower Bank.Money in the account belongs to youYou decide whether and how to spend itIf you leave state employment, it still belongs to youCan only open an HSA if you are enrolled in a qualified HDHP.

*Financial facts about your HSA

Accounts held by Tower Bank. You need to open account. It is not automatically opened for youNo monthly or setup feesAccounts earn tax-free interesteHSA Account online statements; more competitive interest ratePremium paper statements; slightly less interest than eHSA enrolleesInvestment options are available including a new HSA Certificate of Deposit SaverCan opt to receive even higher rates on HSAs, if move monies into CDs.Money in this account is yoursAccumulates year-to-year tax freeCan be rolled over to another HSAIf you leave state employment, the account remains yours

*Who can open an HSA?

Eligibility requirements

Covered by a qualified HDHP.Not covered by any other medical plan, like your spouses plan from another employer.Not enrolled in Medicare, Medicaid, or Tricare.Not claimed as a dependent on anothers tax return.Have not received VA benefits within the past three monthsNot enrolled in a Medical FSA, including a spouses that is not Limited purpose-post deductible; prohibits use of FSA funds prior to meeting HDHP deductible.

*How is HSA funded?

Pre-tax contributions by the state of IndianaHDHP 1single - $1375.92family - $2750.28

HDHP 2 single - $ 936.00family - $1870.44

Pre-tax payroll deductions from your pay your choice

After-tax contributions by you e.g., you write a check and deposit it in your account

*Compare: Paying premiums each pay period vs. paying only when you use services

SingleFamilyPremiumDeductiblePremiumDeductibleTrad II$1,630.98$500$4,806.36$500HDHP 1$0.00$2,500$0.00$5,000HDHP 2$502.32$1,700$1,237.08$3,400

*Important considerations when making a choice What is my maximum personal cost (premium plus maximum out-of-pocket)?

Single Trad II HDHP1 HDHP 2 Welborn EE Premium 1,630.98 ------- 502.32 858.78 Plan OOP 2,000.00 4,000.00 2,400.00 2,000.00 HSA Contribution ---------- (1,375.92) (936.00) ---------- ________________________________________________Maximum personal costs 3,630.98 + 2,624.08 1,966.32 2,858.78+ prescription all co-pays co-pays

(worst case scenario)

* Important considerations when making a choice What is my maximum personal cost (premium plus maximum out-of-pocket)?

Family Trad II HDHP 1 HDHP 2 Welborn EE Premium 4,806.36 ------- 1,237.08 2,378.33 Plan OOP 4,000.00 8,000.00 4,800.00 4,000.00 HSA Contribution -------- (2,750.28) (1,870.44) -------- _______________________________________________Maximum personal cost 8,806.36 + 5,249.72 4,166.64 6,378.33 + prescription all co-pays co-pays

This reflects the MOST one would pay if one suffered a catastrophic medical event.

*State pre-funding your HSAHalf of the states annual HSA contribution will be deposited into your HSA account on the first pay of January 2009Remainder will be deposited in 26 equal installments each eligible pay period (if enrolled in HDHP by January 1, 2009).

Full Initial (1/2) Bi-weekly contribution contribution contributionHDHP 1 single $1,375.92 $ 687.96$26.24 family $2,750.28 $1,375.14$52.89 HDHP 2 single $ 936.00 $ 468.00$18.00 family $1,870.44 $ 935.22$35.97

Wellness program incentives availablewith participation

One Care Street (OCS) health perception survey (must complete survey and, if chosen, initial coaching call Single $260.00 annually* Family $390.00 annually**Paid in two equal installments April and October

Non-Tobacco Use declaration $500 credit to deductible

*HSA funding Maximum IRS contribution limits

Anyone can contribute to your HSA

The limit on the amount that can be contributed to an HSA in 2009: Single: $3,000 Family: $5,950

If 55 or older, may contribute additional $1,000 in 2009.

*HSA funding tax benefits

Contributions to account are not taxed (true for state contributions, too)

Withdrawals from account for qualified medical expenses are tax free

Interest on account is tax free

Tax consequences if use funds for other than health purpose prior to age 65 (Funds incur income tax plus penalty)

* Using funds from your HSAYou will receive a debit card.Can have other authorized signersYou can request checks.You can pay provider directly with debit card or check.Or you can pay provider with other funds and then reimburse yourself from the account.No time restriction on when you use funds, except that the medical service. must have occurred after your HSA was opened.You can use funds to pay medical expenses for any dependent, even if that person is not covered on your HDHP.

Reminder:You cannot spend what is not there.You can use other sources and reimburse yourself once there is money in your HSA.You can contribute to your HSA and watch the balance grow quicker.

*More info on using funds types of expenses?

Any expense that is part of your deductible or co-insuranceIRS eligible medical & dental expenses: http://www.irs.gov/pub/irs-pdf/p502.pdfGlassesDental servicesPrescription drugsQualified long-term care premiumsCOBRA premiumsMedicare premiums, but not Medicare supplementsHealth insurance premiums during times of unemployment

*HSA Financial Calculator

Compare effect of benefit plan choices and pay results by linking to:

http://www.in.gov/spd/2527.htm

*Case #1 The Smith Family

Family of 4 Married couple 2 school-age children Abe and MariaMr. Smith had back surgery in AprilAll family members had annual physicals in JanuaryAbe had strep throat in September and needed an antibioticMaria had a wart removed in DecemberTwo additional prescriptions when Mr. Smith had surgeryWhich is best plan for the Smiths?(They use network providers and participate in the non-tobacco incentive and One Care Street incentive)

*Case #1 The Smiths HDHP 1 vs. Trad II slide 33

ServiceNetwork chargeHDHP 1Trad II4 annual physicals$4000$80 co-paysRoutine labs w/physicals$25000Vaccines w/physicals$30000Out-patient hospital & surgery$14,500$4,500* deductible ($5000 deductible minus $500 non-tobacco-use incentive) $8,000 MAX out-of-pocket $2,000** (balance of patient payments). $14,500 network charge $4,500* deductible = $10,000 balance; **20% of $10,000 = $2,000The most co-ins EE is responsible for: MAX out-of-pocket minus deductible : $,8000 - $4,500 = $3,500. (This EE has not met Max OOP deductible.) $250 co-payDr. visit (Abe)$80$16.00$20Antibiotic (generic) $24$2.40 (tier 1 drug @ 10% co-ins)$10 co-payDr. visit (Maria)$120$24.00$20 co-payPrescriptions (2 brand)$150$30.00$40 co-paysEE premium0$4,806.36Total cost$6,572.40$5,226.36States HSA contribution - 2,750.28------One Care Street- 390.00-390.00Net personal cost to employee($3,432.12) ($4,836.36)

*Case #1 The Smiths HDHP 2 vs. Trad II

ServiceNetwork chargeHDHP 2Trad II

4 annual physicals$4000$80 Routine labs w/physicals$25000Vaccines w/physicals$30000Out-patient hospital & surgery$14,500$2,900* deductible ($3,400 deductible minus $500 non-tobacco-use incentive) $4,800 MAX out-of-pocket $1,900** (balance of patient payments) $4,800 - $2,900* deductible **The most co-ins EE is responsible for: MAX out-of-pocket minus deductible : $4,800 - $2,900 = $1,900. Any amount greater than $4,800 is covered in full by insurance carrier, i.e. 9,700 in this case.)$250Dr. visit (Abe)$80$0$20Antibiotic (generic)$24 $0$10Dr. visit (Maria)$120$0$20Prescriptions (2 brand)$150$0$40EE premium1,237.084,806.36Total costs$6,037.08$5,226.36States contribution to HSA- 1,870.44------One Care Street- 390.00-390.00(Net personal cost to employee)($3,776.64)($4,836.36)

*

Case #2 Jane Fox25-year-old single womanUses network providersParticipates in non-tobacco and One Care Street incentivesHas annual OB/GYN exam and one sick visitTakes birth control pills and one additional prescriptionBoth prescriptions are brand drugs

*Jane Fox HDHP 1 vs. Trad II

ServiceNetwork ChargeHDHP 1Trad IIOB/GYN Annual$1350$20 co-payOB/GYN Lab$3000Sick visit$100$100$20 co-pay

Birth Control Rx$360$360$240 co-pay

Rx brand$90$90$20 co-pay

Deductibles not metEE premium01630.98Total cost$550.00$1930.98States contribution to HSA- 1,375.92- 0One Care Street - 260.00- $260.00Net personal savings(Net personal cost to employee) $1,085.92 ($1670.98)

*Jane Fox HDHP 2 vs. Trad II

ServiceNetwork chargeHDHP 2Trad IIOB/GYN Annual$1350$20OB/GYN Lab$3000Sick visit$100$100$20Birth Control Rx$360$360$240Rx brand$90$90$20Deductibles not metEE premium$502.32$1630.98Total cost$1052.32$1930.98States contribution to HSA- $936.000One Care Street- $260.00- $260.00Net personal savings/(Net personal cost to employee )$143.68 ($1670.98)

*Questions?

Web site: www.in.gov/spd/benefitsBenefits hotline: (317) 232-1167 (Indianapolis)(877) 248-0007 (outside Indianapolis)

*

YOUR FEED BACK IS EXTREMELY IMPORTANT TO THE SUCCESS OF OUR BENEFITS EDUCATIONAL PROGRAMS

PLEASE SEND YOUR COMMENTS TO:JMALOOLEY@SPD.IN.GOV

**Our goal today is to provide you with a basic understanding of how high deductible health plans work with health savings accounts. They provide an excellent option for health insurance for many people, but they are not for everyone. Only YOU can determine what the best plan is for you and your family. Sometimes, when we are presented with such a choice, it is human nature to pull the covers over our head and decide that we will just keep doing what we have always done. I am happy to see so many of you here. It means you have decided to take a look and learn more so that you can make an informed decision of what health plan is the right one for you in 2009.**We are going to learn about two separate items today: a high deductible health insurance plan and a special bank account known as a health savings account. Then we are going to learn how the two work together to help you accumulate funds for future health care expenses. The first piece is the high deductible health insurance plan, called HDHP. It is traditional insurance that you have seen before, which generally covers network expenses at 80%, leaving you with 20%. What is different is that that coverage doesnt kick in until you exhaust the deductible, which is significantly higher (we will talk about the specific deductibles in the state plans in a moment.). **The second piece is the health savings account. It is an actual bank account held at Tower Bank. Contributions to the account are never taxed so long as the money is only used for eligible health care expenses, and you cannot lose the money. It is yours to keep from year to year and even when you leave state employment.**TRAD II requires that you pay a premium every pay period whether or not you ever need medical care. A high deductible health plan will have no employee premium or only a small one and the idea is that you only pay when you need medical care. If you dont need medical care, then that money is never spent, and you keep it. So it is a question of pay now or pay when you need it.**The deductible is the amount that one pays him or herself prior to the insurance coverage begins. As you will see later in this presentation, the State will contribute to ones deductible amount to assist in meeting expenses. **The maximum out-of-pocket (OOP)is the most the subscriber will pay prior to receiving 100% coverage for charges from a provider.

One must consider the deductible, the maximum OOP, the likely services, and the states contribution to determine which plan best for him or her. We will also address this later.

How this works will be explained later.

**Currently, there are two provider panels from which to choose. One is in-network and the other is out-of-network.

The difference between the networks is the amount the carrier pays towards the claim and the amount for which you are responsible.**Lets assume you choose to see an in-network physician.How will the HDHP work? You will receive an Anthem ID card and providers will ask to see it when you visit an office. You may or may not be asked to pay at the time of service. Your doctors office will file a claim with Anthem, and bill you for any balance.All charges are adjusted/discounted to the amount the provider has agreed to accept as his/her full charge. Anthem will pay @ 80% once the deductible has been reached and 100% after the maximum OOP has been reached.*Seeking services from an OON provider is different in two ways:

Once the deductible has been met, you are responsible for 40% of the approved charge

You are also responsible for the difference between the providers full charge and the amount the carrier does not pay.

*The most important thing to remember when one uses out-of-network providers: one will always owe more money out-of-pocket than one who uses in-network providers.

In essence, one will always be responsible for full payment of the billed charge.

In the case above, the patient would have paid merely $20.00.**This website will enable you to put in the name of the service you are seeking and the corresponding cost. When available, you will see comparable places to receive services as well as the costs.

You can submit physicians services, inpatient, outpatient, labs and diagnostics.**Lets now look at paying for prescriptions. Lets begin with your needing to fill a prescription at the pharmacy. This is where the most frequent surprises occur. When you have been used to paying $10 or $20 co=pay for most prescriptions, it is sticker shock to be charged the network discount amount. It could be over $100. So when you have a prescription, you will present your Anthem card at a pharmacy. They will fill it and charge you whatever the Anthem negotiated amount is, which you can pay from your health savings account or from other funds. You will find that this is the place where you can have the biggest immediate impact as a consumer. First, did you ask your physician if there is a generic equivalent available? Did you check the list of $4 medicines available at Wal-Mart, Target, Meijer, etc. (found on the Benefits web page)? What about the antibiotics that are free at Meijer? You can save yourself significant dollars. I discovered that I could save myself about $28 a month on a prescription that is only $4 at Target. Once you have met your deductible, you will only pay 10% or 20% for many drugs.**Anthem tools for comparing prices of pharmaceuticals.**Preventive services are covered at 100% of in-network charges. We encourage you to use these as guidelines indicate including that dreaded colonoscopy!**********.**This is part 2 of the HDHP-HSA duo.

An account where one may deposit pre-tax dollarsUse the funds tax-free for eligible medical expensesEarn interest on the funds tax-free

A real triple whammy!

To open an HSA, one must be enrolled in an HSA-qualified High Deductible Health Plan.

****

To own an HSA, one must be enrolled in an HSA-qualified High Deductible Health Plan IRS determines the following: Minimum and maximum deductiblesMinimum and maximum out-of-pocket limitsMaximum contribution limitsCatch-up contribution limit

**Your HSA can be funded by anyoneparents, friends, employers, even your co-workers , but most importantly, by YOU!

Your deposits may be made as a payroll deductionpre-tax dollarsYou may also deposit cash or checks yourself directly into your HSA accountpost-tax dollars. In this case you would use the deposit amount as a deduction on your tax return.Remember that the employer contribution gives you money to use for services that occur prior to satisfying your deductible!

Any employee may fully fund the HDHP deductible by adding his/her own money to the states contribution.**Lets compare the three plans on this point. You can see the significant difference in premium between Trad II and the HDHPs. That premium is a sunken cost. The money is spent whether or not you use a medical service. If you happen to be a person or family who does not need to see a doctor very often, this chart alone may tell you that a HDHP is a better choice. But we will compare plans in specific types of situations later. For now, just recognize that in many cases you may pay for premiums that you really didnt need.

The difference between TRADII and HDHP1 single is $1630.98; family is $4806.36 HDHP2 single is $1128.66; family is $3569.28

Lets keep these numbers in mind as we continue.**This slide shows the maximum dollars needed to cover the most expensive health event during a plan year for a SINGLE subscriber

The majority of EEs never reach their deductible, let alone the OOP maximum;A significant number never use their insurance**This slide reflects the maximum dollars needed to cover the most expensive health event during a plan year for a FAMILY subscriber**We finally worked out a solution that enables the State to pre-fund your HSA.

Once again, the states maximum contribution to your HSA will be 55% of your deductible---dependent upon effective date of your HDHP, and HSA eligibility

One-half of the 55% will be deposited in a lump-sum into your HSA if your HDHP has an effective on or before January 1, 2009, through June 1, 2009.

One-fourth of the 55% will be deposited in a lump-sum into your HSA if your HDHP has an effective after June 1, 2009,through December 1, 2009.

****The first three are fondly called the TRIPLE WHAMMY tax savings advantages!

**********

We are still working on the assumption I introduced a few slides ago that you have enrolled in a high deductible health plan and now you need to fill a prescription at the pharmacy. This is where the most frequent surprises occur. When you have been used to paying $10 or $20 for most prescriptions, it is sticker shock to be charged the network discount amount. It could be over $100. So when you have a prescription, you will present your Anthem card at a pharmacy. They will fill it and charge you whatever the Anthem negotiated amount is, which you can pay from your health savings account or from other funds. You will find that this is the place where you can have the biggest immediate impact as a consumer. First, did you ask your physician if there is a generic equivalent available? Did you check the list of $4 medicines available at Wal-Mart, Target, Meijer, etc. (found on the Benefits web page)? What about the antibiotics that are free at Meijer? You can save yourself significant dollars. I discovered that I could save myself about $28 a month on a prescription that is only $4 at Target. Once you have met your deductible, you will only pay 10% or 20% for many drugs.************