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Consumer-Directed Health Plan with Health Savings Account

The PEBB Program offers a new option from Group Health, Kaiser Permanente, and the Uniform Medical Plan beginning in 2012 - a consumer-directed health plan with health savings account.

What Is a Consumer-Directed Health Plan (CDHP)?

A CDHP is a type of insurance plan that has lower premiums, a higher annual deductible, and higher out-of-pocket maximum than traditional health plans. All PEBB CDHPs provide 100% coverage for preventive care services with no deductible.

Keep in mind:

• If you cover one or more family members, the entire family deductible must be met before the CDHP begins paying benefits.
• Although the CDHPs don't have a separate prescription-drug deductible, your prescription-drug costs apply to the CDHP annual deductible. You must meet the annual deductible before the CDHP begins paying benefits.
• If you cover one or more family members, the entire family out-of-pocket maximum must be met before the plan pays 100% for covered benefits.
• The annual deductible applies toward the annual out-of-pocket maximum.

See the benefits comparison page for details on coverage under CDHP.

What Is a Health Savings Account (HSA)?

An HSA is a tax-exempt account that you, your employer, or anyone can deposit funds into on your behalf. Any amount that you contribute can be deducted from your taxable income, giving you a tax savings. You can use the funds in your HSA to pay for IRS qualified out-of-pocket medical expenses (such as deductibles, copays, and coinsurance), including some expenses and services that may not be covered by your health plan. You can spend HSA funds on medical expenses for your spouse or other tax dependents, even if they are not covered under your plan.

When you enroll in a PEBB CDHP, you will also be enrolled in an HSA account. HealthEquity, Inc. is the qualified trustee that will manage PEBB members' HSAs for Group Health, Kaiser Permanente, and the UMP.

Your Employer or PEBB Deposits Money Into Your HSA

When you enroll in a PEBB CDHP, your employer contributes $700 for an individual subscriber or $1,400 for an account with a subscriber and one or more family members enrolled in the CDHP. If you're a non-Medicare retiree, COBRA or Leave Without Pay member, PEBB takes the same amount ($700 individual/$1,400 family) from your premium and deposits it into your HSA.

The contribution from your employer (or PEBB) goes into the HSA in monthly installments over the year. A single subscriber will receive $58.34 each month for an annual total of $700 and a family of two or more receives $116.67 per month for a total of $1,400 by the end of the year. The entire annual amount is not deposited in your HSA on January 1, 2012. The IRS has an annual limit for contributions from all sources into an HSA, which is $3,100 for single subscribers and $6,250 for families in 2012. Members ages 55 and older may contribute up to $1,000 more annually (in addition to the limits above).

You Can Make Contributions into Your HSA Tax-Free

Many employees can arrange to have money deducted from their paycheck pre-tax and deposited into their HSA. Check with your employer if this option is available to you. If yes, you can fill out a payroll deduction form and give it to your payroll office to set up automatic deductions. You can also make post-tax contributions from your bank account and deduct the amount from your taxable income when you prepare your tax return. You will receive an annual statement from HealthEquity to help you in preparing your tax return in 2013

CDHP/HSA Eligibility

To enroll in a CDHP, subscribers must meet certain eligibility requirements to contribute to and use the funds from an HSA. HSA funds are held in the subscriber's name. If you (the subscriber) are not eligible to have an HSA and enroll in a CDHP, you may be liable for tax penalties.

If you have questions about whether you are eligible to have an HSA, call HealthEquity toll-free at 1-877-873-8823 or consult your tax adviser.

How Do I Know if a CDHP/HSA Option Is Right for Me?

Many people can save money with the CDHP option after taking into account the lower premiums, employer (or PEBB) contributions to their HSA, and the tax savings. However, a CDHP is not right for everyone. Listed below are some guidelines. We encourage you to use the links at the right to get more information so you can make the best decision for you and your family.

A CDHP/HSA is best for people who:

A CDHP/HSA is not recommended for people who:

Want the lowest monthly premium. Can pay out-of-pocket for treatments and services needed early in the year, if there are not enough dollars accrued in the HSA. Do not have ongoing major medical needs and/or use specialty drugs (high-cost injectable, oral, or inhaled drugs). Are willing to track their HSA dollars, either using HealthEquity's online services or by calling HealthEquity. Are willing to verify if noncovered services or supplies are qualified medical expenses. Can save additional money of their own in their HSA for expenses or tax-free savings.

Cannot pay out-of-pocket for treatments and services if there are not enough dollars accrued in the HSA. Have ongoing major medical needs and/or use specialty drugs (high-cost injectable, oral, or inhaled drugs). Do not wish to track their HSA dollars. Do not want to verify if noncovered services or supplies that you pay for out of your HSA are qualified medical expenses.

How Does an HSA Differ From an FSA?

If you're currently enrolled in a flexible spending account (FSA) and want to enroll in a CDHP/HSA in 2012, you must use all of your FSA dollars by December 31, 2011. This would also apply if your spouse has an FSA, even if you are not covering your spouse on your CDHP.

See a comparison of HSAs and FSAs.

What if I Have a VEBA Account?

There are specific rules that govern how VEBAs and HSAs work together. Information and forms are available at www.veba.org.

Who Do I Contact for More Information, or to Answer My Questions?

Contact the plans directly for help with questions about the consumer-directed health plans, and contact HealthEquity toll-free at 1-877-873-8823 for more information about how HSAs work. You can also view frequently asked questions.