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Health Insurance Plan

Reference Guide


For the Employees of Muncie Community Schools

Effective January 1, 2009


Table of Contents

  1. What is a Health Reimbursement Arrangement?

  2. Why is the Health Reimbursement Arrangement important?

  3. An overview of the Health Reimbursement Arrangement plan.

  4. How the Health Reimbursement Arrangement compares to a Traditional Plan.

  5. Employer-sponsored health care is part of your total compensation.

  6. How the Health Reimbursement Arrangement deposit is funded.

  7. The Health Reimbursement Arrangement and the employee with single coverage.

  8. The Health Reimbursement Arrangement and the employee with family coverage.

  9. Health Reimbursement Arrangement Summary.

  10. Saving money in the Health Reimbursement Arrangement.

  11. Eligible and non-eligible Health Reimbursement Arrangement expenses.

  12. How does a claim get paid?

  13. Adjusting the monthly Health Reimbursement Arrangement contribution.

  14. The major medical plan for the employee.

  15. Other coverage and the Health Reimbursement Arrangement.

  16. Employee tax-withholding considerations.

  17. Medicare Eligible Retiree Coverage.

  18. Employment termination and the Health Reimbursement Arrangement.

  19. Where to call with questions.

Introduction

Muncie Community Schools (MCS) is offering its employees the Health Reimbursement Arrangement (HRA). The objective is to offer a medical benefits plan that aids the employee medically and financially. The HRA is a superior medical benefit design because it provides tangible benefits to employees and families who have medical benefit needs, and equally important provides tangible benefits for employees and families who are healthy.

Medically - It is Muncie Community School’s objective to expand the eligible medical coverage beyond the typical contractual definition of eligible medical expense. When there are rollover dollars available, MCS wants its employees to have open access to specialty providers and to have a means to cover services such as lasic eye surgery, provide a financial supplement to the current dental plan or vision plan. These services can be covered by your HRA account.

Financially - Over an employees working career, tens of thousands, even hundreds of thousands of dollars are spent either directly by the employee, or indirectly on their behalf by their employer for health insurance premiums. By the time the employee is ready to retire, the current system leaves the employee with no money to show for this effort to take with them into retirement.

Example: Typical HMO average premium/month.
Single Employee: $150/month premium X 12 months X 40 working years = $72,000
Dependents: $350/month premium X 12 months X 30 working years =  + $126,000
$198,000

The HRA is different. It empowers employees to not only expand their access to health care, but to also expand their financial savings as well. The magic of the HRA is that you have first dollar coverage for virtually any form of medical care. In addition, dollars not needed for medical care may be left in the HRA for future medical expenses.

The HRA empowers you and others to maximize the quality of care without frustrations of referrals and added costs of other insurance plans. The HRA gives you control over your medical care and financial resources.

1. What is an HRA?

The HRA is created when MCS purchases a high deductible plan, creating premium cost savings. These premium savings are returned to you in the form of a deposit into your HRA (savings account). The major medical plan protects you from the costs of large medical bills. The HRA pays for care before you reach your deductible, and is an employee-directed systematic savings plan that builds employee-owned cash reserves for the payment of current and future medical care expenses. Financial control shifts from the Insurance Plan to the patient, which means the control of medical care decisions transfers to the patient as well. The result is better access to quality medical care. In addition, a high deductible medical policy administered by Unified Group Services is provided in addition to the HRA to protect the patient from significant medical bills should they occur. This plan covers prescription drugs after a co-pay and preventive care services are paid at 100%.

2. Why is the HRA important?

Employers and their employees have common concerns about the direction health care have taken in recent years. Significant issues, such as physician and hospital choice, care quality, choice of prescription drugs, and access to specialty providers are problems challenging health care. The HRA is a financial planning approach that minimizes the use of insurance to pay for routine health care. The HRA addresses each of the above problem areas by giving both the health care spending dollars and therefore the authority to make medical decisions back to patients and their physicians. This gives unprecedented control of all aspects of health care to the patient. No insurance company can control costs or improve the efficiency of health care spending better than patients and physicians. The HRA is the tool that facilitates this transfer of access and control back to the patient. The goal of MCS is to improve medical care quality and share the rewards of cost containment with you.

3. An overview of your Health Reimbursement Arrangement plan.

Your Health Reimbursement Arrangement is a combination of 1) a savings account, called the HRA, to pay for routine care, and 2) an insurance plan to pay for major medical claims. Together these create the complete Medical plan for you and your families. This first-dollar, cash-saving medical plan is designed to put people back in control of their health care by giving them ownership of their health care spending dollars. With HRA’s, people have the opportunity to spend their health care dollars the way they choose. When good health care decisions are made, employees benefit medically and financially.

MCS has chosen Unified Group Service’s comprehensive major medical plan with a $1,700 deductible for employees with single coverage, and a $3,400 deductible for employees with family coverage. Coverage above the deductible is paid at 100% up to a maximum of $1,000,000 per lifetime per participant for medical expenses when using Cardinal Care’s participating network of providers. Non-network provider benefits will be subject to usual and customary benefit limitations, with a possibility of balance billing occurring (Non-network benefits will be less than in-network benefits).

MCS has also chosen Unified Group Services as our Health Reimbursement Arrangement (Savings Account) administrator.

The Health Reimbursement Arrangementis to be used to pay for health care expenses below the deductible. This account pays for expenses such as office visits, chiropractic care, hospital claims, and more. You may use your HRA to pay for providers not participating in your approved health plan provider network. At the end of the year 100% of any remaining funds in the HRA will be credited to your personal account, which will rollover to the next year.

In summary, the objective of the HRA is to use the same amount of money paid by the prior plan in a way that benefits the employee both medically and financially.

4. How the Health Reimbursement Arrangement compares to Traditional Plans.

Each plan offers a substantial lifetime maximum benefit and covers outpatient services, prescription drugs, hospitalizations, preventive services, substance abuse and mental health care. But with your HRA, you may see any licensed medical provider with your HRA dollars. (Keep in mind your dollars will go further if you choose care from your network providers). And unlike other medical plans, the HRA allows you to retain 100% of the dollars not spent for health care.

HRA Traditional
Choice of any doctor? Yes Yes
Can pay for prescription drug co-pays? Yes
rollover account
No
Provides insurance protection? Yes Yes
Allow you to retain unspent dollars? Yes No
Can reimburse dental and vision wear expenses? Yes
rollover account
Yes
Limits your out-of-pocket liability? Yes Yes
In future years, may supplement your medical expense needs? Yes No

5. Employer-sponsored health care is part of your total compensation.

Every month MCS contributes substantial dollars toward the employees’ health insurance costs. Employer contributions are invisible to the employee because they do not appear on the W-2 as direct compensation. These insurance dollars are not reportable as income to the employee, but are definitely a form of compensation. Over an employees working lifetime, the employee pays thousands of dollars in insurance costs, frequently without significant claims utilization. If the employee had access to part of these lost premiums, and could take advantage of a modest rate of return, they could conceivably own substantial savings by their retirement age. Savings they would not otherwise have had. This excerpt from an article from the Investors Business Daily discusses the financial cost to employees by employers who over-insure their employee benefit plans.

A survey of 1 million individuals in large self-insured plans with highly generous benefits found that one third of the participants filed no claims at all, 73% filed claims for less than $500, and 89% filed claims for less than $2000 per year.1

Health economists Gail Jensen and Robert Morlock then calculated the growth of Medical Savings Account deposits under several scenarios. One scenario is for a 20 year-old person with a family depositing $1800 per year in a Medical Savings Account with an 8% average annual return. If the family had an average of $1000 per year in claims, there would be $333,941 in their MSA at retirement, if $250/year in claims there would be $647,010, and if no claims, $751,367 in their MSA at the age of retirement. "With Medical Savings Account Plans, most people would have a source of funds that could easily cover future medical expenses, such as nursing home care, or become part of the estate at death.””

Permanent health care financing solutions can be found in sound financial planning, rather than paying ever-larger health insurance premiums. MCS believes that it is the employee who has the most to gain through proper health care financial planning solutions. These solutions return the decision-making control back to the patient and their physician by returning as many dollars as possible to the employee.

6. How the Health Reimbursement Arrangement deposit is funded.

The difference in premiums between the prior plan and the lower cost $1,700/$3,400 deductible plan creates a premium and administrative cost savings. These savings are deposited into the HRA (Savings Account). Periodic HRA statements provide employees with their personal savings account balance and year to date account activity.

7. The Health Reimbursement Arrangement and the employee with single coverage.

The employee with single coverage will be provided a savings account with $1,200/yr. to fund medical expenses. The total HRA deposits will be made according to the schedule specified by the employee on their HRA election forms.

Single Employee HRA Account
Annual Deposit
Calendar Year
Ded. & OOP
Cal. Yr. Max.
OOP
$1,200/year $1,700 $500

8. The Health Reimbursement Arrangement and the employee with family coverage.

The employee with family coverage will be provided $2,400/yr. to fund medical expenses. The total HRA deposits will be made according to the schedule specified by the employee on their HRA election forms.

Employee
With Families
HRA Account
Annual Deposit
Calendar Year
Ded. & OOP
Cal. Yr. Max.
OOP
$2,400/year $3,400 $1,000

9. HRA Summary

The Health Reimbursement Arrangement is made up of two parts 1) the savings account to help cover medical expenses within the deductible, and 2) a $1,700/$3,400 deductible major medical policy. If Network providers are utilized, the coverage for eligible medical expenses is 100% after the deductible.

10. Saving money in the Health Reimbursement Arrangement.

One of the most important features of the HRA is retaining the money that is unused. You will get to retain 100% of the unused money at the end of each plan year in your savings account. This money can be left in your HRA account to be used for future medical expenses. In this way you may accumulate funds and eliminate any potential out-of-pocket expense you might incur in future years. You are only liable for up to your medical policy out-of-pocket maximum for covered medical charges each calendar year. Your HRA liability is not increased if you should have a large amount saved in your Health Reimbursement Arrangement.

11. Eligible and non-eligible Health Reimbursement Arrangement expenses.

You may spend your HRA dollars on only medical expenses that are medically necessary and are eligible under the high deductible policy with Unified Group Services. Dental and Vision expenses are not eligible expenses for the annual HRA deposit from your employer. You may spend any HRA accumulated dollars (Rollover Account from previous years) on IRS eligible medical expenses including deductibles, co-pays, eyeglasses, lasic eye surgery, contact lenses, dental deductibles, dependent or adult orthodontic treatment and more, because these items are eligible medical expenses. Only medically necessary illness and injury covered expenses will count toward your major medical deductible. Eligible medical expenses that apply against the deductible are listed in the Covered Expenses section of your medical policy Summary Plan Description. An Explanation Of Benefits (EOB) is required in order to have claims paid out of your HRA. You may use a bill for payments out of your Rollover Account of HRA accumulated dollars. Dental care and eyewear do not apply against the major medical deductible, but are eligible to be paid out of your Rollover Account of HRA accumulated dollars at your request.

12. How does a claim get paid?

You now have two options to have you HRA claims paid: 1) Online, or 2) Manually (same as last year).

If you choose the Online Method, you will have the ability to receive electronic notification of your claims activity via email, instead of waiting to receive your EOB through the mail. Once a claim is submitted by your doctor/clinic to Unified Group Services, you will receive an email notice on the claim with a link to UGSWEB.com so you can pay your HRA claim(s) and track all claim activity. Enclosed are three pages explaining how to 1) set up your EOBs electronically, 2) how to file electronic claims, and 3) a page explaining how to use the Unified Group Services website

If you choose to file claims via fax or mail, continue to mail or fax your EOB to Unified Group Services with the completed Reimbursement Portion of the EOB with instructions to either pay the physician directly or be reimbursed. It is recommended to have Unified Group Services pay physicians/provider directly. You will receive a statement of your HRA account activity including deposits, and payments periodically. You may file your claims as you receive them, pay them and submit them all at one time at a later date, or pay them out-of-pocket and let your HRA accumulate. You may contact Unified Group Services regarding any Medical or HRA account question at 1-800-291-5837. Be sure to complete the information in the box on every EOB that directs Unified Group Services to pay either your provider or reimburse you. Unified Group Services’ fax number is 1-765-608-6691.

13. Adjusting your monthly Health Reimbursement Arrangement contribution.

The monthly HRA contribution is fixed and can only be adjusted by the employer.

14. The major medical plan with HRA.

The major medical plan protects the employee from financial loss by covering eligible medical expenses above the $1,700 deductible each plan year. Covered families have a maximum deductible of $3,400 per plan year. Outpatient or inpatient expenses for illness or injury, physical therapy, mental health or chemical dependency apply against the plan year deductible. Certain wellness benefits for pre-natal visits, well baby checks, vaccinations and immunizations and routine physicals are covered first-dollar up to $1500 per participant per year. Colonoscopy screenings are covered at 100%. Coverage above the deductible is 100% of eligible charges when using Network providers. Prescription drugs are covered as follows: The participant pays a 0% copay for Generic Prescriptions, 10% copay for Formulary Brand Drugs with no generic available, 10% copay for Formulary Brand with a generic substitute, and 20% copay for Non-formulary Brand prescriptions. There is also a mail order prescription drug program available for maintenance Rx needs. Prescription drug copayments do not apply to the deductible. Always show your medical I.D. card to the participating physician, hospital or pharmacy. They will file the claim to Unified Group Services on your behalf, and you will receive an Explanation of Benefits (EOB) to submit back to Unified Group Services have the claim paid from your savings account. The negotiated discount will be reflected on your EOB when using network providers. Be sure to read your insurance policy Summary Plan Description.

You may request replacement medical I.D. card if you wish. Pre-certification is required on all hospital stays regardless of whether it is for a network or non-network claim. You should always file your claims with Unified Group Services to apply against your deductible. Be sure to put your group number and personal I.D. number on any claim you submit to Unified Group Services.

15. Other medical coverage and Health Reimbursement Arrangement eligibility.

In order to be eligible for the HRA deposit, the Unified Group Services high deductible medical coverage must be taken.

16. Employee Tax-Withholding Considerations.

Single Employee Coverage: None for HRA deposits.

Family Coverage: None for HRA deposits.

17. Medicare Eligible Retiree Coverage.

Employees, who retire from MCS and are eligible for Medicare, may retain their HRA account and may continue with the High Deductible Benefit via COBRA. However no further contributions will be made to the HRA (savings account). Eligible retirees may continue to incur expenses and be reimbursed for eligible expenses up to their remaining account balance in their HRA.

18. Employment termination and the Health Reimbursement Arrangement.

Employees must have completed at least one complete plan year before any monies are available to them at termination. At the date of termination, the employee can elect to continue the medical program via COBRA. If COBRA is elected, the employee can continue the High Deductible Plan but the employee will be responsible for savings account contributions.

19. Where to call with questions.

You may call your High Deductible and HRA plan administrator, Unified Group Services with your questions by dialing 1-800-291-5837 or faxing to 1-765-608-6691. You may also call Bernie J. Mackell or Sarah J. Maloney at Mactavish School Benefits, by calling (toll free) 1-866-942-6838. Benefit Contacts at MCS: Kerry McLaren 281-3770 or Lynn Crouch, 747-5240 are also available to answer questions.

Disclaimer: This Health Reimbursement Arrangement reference guide is intended to be a summary of the Health Reimbursement Arrangement and the medical insurance policy. Any deviation between this guide and the major medical insurance plan or Health Reimbursement Arrangement will always be settled in favor of your insurance contract and your current Health Reimbursement Arrangement document.


1"It The Savings Stupid", Investors Business Daily, Tuesday, April 16, 1996 by Merrill Matthews, Jr.

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