SIHO Health Savings Account

Overview

A Health Savings Account (HSA) can be viewed much like a medical IRA. It is a tax advantaged savings account that individuals can use to pay for qualified health care expenses, both now and in the future. As employers continue to migrate to ever higher deductible plans, it makes sense to consider structuring the High Deductible Health Plan (HDHP) so that employees can benefit from the advantages of an HSA.

The SIHO HSA consists of two parts:

• An affordable health plan that provides comprehensive protection for the cost of more serious medical conditions. Preventive care services are covered 100% for all family members!
• A Health Savings Account that can be used to pay for services that are the responsibility of the member, i.e., subject to deductible and coinsurance. If the member does not use any or all of their HSA dollars, they rollover to the next year and will accumulate to provide greater financial protection! Both the employee and employer can contribute to the HSA. The HSA can also be used to pay for other qualified medical expenses that are not covered by the HDHP. Some common examples are eye care, dental services, and over-the-counter medications. In this way, the HSA functions much like a medical Flexible Spending Account, but without the need to submit claims. (Click here to view list of eligible medical expenses.)

How the SIHO HSA Works

The SIHO HSA is designed to be easy for both the member and employer. SIHO offers several HSA design variations to meet the needs of most employers. They each have differences in Deductibles, Coinsurance, and suggested HSA funding amounts by the employer.

An employer may choose to offer their employees only an HSA plan design, or offer an HSA plan together with a more traditional plan to better meet the needs of all of their employees.

Because the HSA plans have higher deductible levels than more traditional plans, the premium or expected claims for these plans are typically much less. Employers are strongly encouraged to use a large percentage of these savings to help fund each employee’s HSA.

Receiving Medical Services

When members need to receive services from a physician or hospital they should present their SIHO Identification Card just as they would with a traditional plan. Use of the ID Card ensures that the claim will be submitted to SIHO and that a provider network discount will be taken. This saves money for both the member and the health plan. Most providers will not require payment from the member at the time of service; they will bill SIHO and wait for our payment determination before billing the member for any amounts due.

HSA Description

Eligibility

1. To open or make contributions to a Health Savings Account, the account holder must be enrolled in a federally qualified High Deductible Health Plan (HDHP).
2. An HDHP must meet the following requirements to be federally qualified for 2010:

   Policy Type	Minimum Deductible (In Network)	Maximum Out-of-Pocket (In Network)
   Individual Policies 2010	$1,200	$5,950
   Family Policies 2010	$2,400	$11,900

3. An important characteristic of HDHPs is that with the exception of Preventive Care, all services are applied to the deductible and out-of-pocket (OOP) maximum, including prescription drugs.
4. The account holder cannot be covered by any other health plan unless it is also a qualified HDHP. Exceptions are permitted for limited benefit plans that cover specific diseases or illness, and accident, disability, dental, vision, or long-term care policies.
5. The account holder may not participate in medical Flexible Spending Accounts (FSAs) or Health Reimbursement Arrangements (HRAs) unless they are limited purpose (dental, vision, preventive care) or post-deductible (only cover expenses after the plan deductible is met.)
6. The account holder cannot be enrolled in Medicare or Medicaid. Medicare eligible persons who do not enroll in Medicare may have an HSA if they are covered by an HDHP.

Contributions to the HSA

1. One of the significant benefits of an HSA is that contributions into the account and any interest earned is not subject to taxes. This can be accomplished through “pre-tax” payroll contributions, or if “after-tax” dollars are contributed, through an income tax deduction.
2. Contributions can be made by the employer or the employee. For the employer, contributions are deductible as a business expense similar to a traditional health benefit expense.
   • Additionally, anyone can contribute to another person’s HSA. The HSA holder receives the tax benefit, not the person making the contribution.
3. SIHO has partnered with several banks that can provide custodial services for the individual HSAs. While the account holder is free to choose whatever bank they would like, it is administratively easier for the employer to work with only one partner bank.
4. Because of the tax advantages of HSAs there is an annual limit to the amount that can be contributed (by all parties) to the account:
   
   

   2010 Contribution Limits:
   Individual Policies	$3,050
   Family Policies	$6,150

   
   
5. Individuals age 55 and older may make additional “catch-up” contributions to their HSA, over the limits listed above. The allowable amount of catch-up contributions is up to $1,000 per year for 2010 and beyond.
   Each spouse may make a catch-up contribution providing each has a separate HSA.

Spending from the HSA

1. Another important benefit of an HSA is that as long as funds withdrawn are used to pay for qualified medical expenses they are not subject to any income tax.
2. The list of qualified medical expenses is long and broad and is defined by IRS code Section 213(d). The list includes all services that are covered benefits of the SIHO HDHP in addition to many services that are not covered. Some examples are over-the-counter medications, braces, eyeglasses, Lasik surgery and weight-loss programs. Click here to view list of eligible medical expenses.
3. Unlike contributions into an HSA, an individual need not be covered by an HDHP to make withdrawals from the HSA. With this feature a person who opts-out of a HDHP with a balance remaining in their HSA can still use those funds to pay for qualified medical expenses, even if they are covered by a traditional health plan.
4. There is no substantiation required for a person to make an HSA withdrawal. It is an honor system under which receipts need to be kept should the account holder be audited by the IRS.
5. With a SIHO partner bank the HSA can be accessed via a Debit Card, paper check, or through online tools.

SIHO HSA Summary of Benefits

SIHO Standard HSA Plan—Summary of Benefits

Click here to view/download the HSA Plans.

Illustration of Embedded vs. Non-embedded Deductible

Our case-study family, the Hampton’s, has the following claim experience:

• Fifth Third Bank