Account-Based Health Plan

What is an Account-Based Health Plan? An Account-Based Health Plan (ABHP) is the combination of a High Deductible Health Plan coupled with a Health Savings Account. It offers employees the choice of paying lower monthly premiums and is designed for you to be in control of your health costs. By enrolling in an Account-Based Health Plan, you may also enroll in a Health Savings Account to help pay for medical expenses by contributing funds each pay period.

General Plan Overview

What is an Account-Based Health Plan?
An Account-Based Health Plan offers lower monthly premiums than traditional plans, which may reduce out-of-pocket costs. With this plan, a lower monthly premium comes out of your paycheck and the savings can be deposited into a Health Savings Account. The money saved in a Health Savings Account is FREE OF FEDERAL TAXES* and may be used to pay for all eligible health expenses. Savings not deposited in your Health Savings Account will be taxed as cash in your paycheck.

Account Based Health Plan

• Can have lower monthly premiums than other health plans.
• Provides quality health insurance.
• One calendar-year deductible per family.
• Can pay 100 percent of covered expenses after deductible is met.

Counting the Cost
When considering the ABHP plan, it’s often a good idea to do some research regarding potential out-of-pocket costs, especially if you or a dependent take maintenance medications. Here are some resources:

• Understanding Your Costs
• Sample Fee List
• Tutorial Video to help you learn more about a Health Savings Account

Frequently Asked Questions

1. What is a Health Savings Account?

2. What is a deductible and how does it work?

3. Will I receive the same medical care and services as I currently do?

4. If I’m paying for doctor visits other than preventative care such as annual exams, how much will I be paying for an office visit?

5. How much will I save on my monthly health premiums?

6. Is an Account-Based Health Plan with a Health Savings Account a good choice for me?

7. If I enroll in the Account-Based Health Plan and am not satisfied, can I return to a traditional health plan?

8. Am I required to enroll in a Health Savings Account?

9. What are the maximum IRS allowed Health Spending Account contributions for 2016?

10. What are the advantages of a Health Savings Account?

11. What are the tax benefits?

12. How can I make contributions to my Health Savings Account?

13. What type of expenses can be paid for with a Health Savings Account?

14. Is there a penalty for using my Health Savings Account to pay for non-qualifying expenses?

15. How do I utilize my Health Savings Account?

16. Can I invest my Bank of America Health Savings Account funds?

17. Does my money in a Health Savings Account earn interest?

18. Can I still enroll in a Flex Spending Account?

19. What happens to my Health Savings Account if I leave City employment or switch back to a traditional HMO plan?

What is a Health Savings Account?
A Health Savings Account is an individually owned account that allows pre federal tax dollars to be set aside to pay for qualified medical expenses, as defined by the IRS. The money can also be spent on IRS-qualified dental and vision expenses. The money saved with a lower monthly premium can be deposited into a Health Savings Account. Contributions made to a Health Savings Account, up to the IRS annual limits, will earn interest. Health Savings Accounts are only available to those enrolled in an Account-Based Health Plan.

HSA Savings

• Used to meet your deductible.
• Federal tax deductible off of gross income.
• Grow tax-deferred.
• Pay no federal taxes when used for qualified medical expenses.
• Roll over year after year -- no "use it or lose it".
• Portable; goes with you wherever you go.

HSA Savings can also be used for:

• Health insurance premiums when you're between jobs.
• Qualified long-term care premiums.
• Medicare premiums and out-of-pocket expenses.
• Living expenses after age 65 (pay ordinary income taxes).

About the Account-Based Health Plan

What is a deductible and how does it work?
A deductible is the amount you must pay each year before your health insurance plan starts to pay the costs for covered medical expenses. Until your annual deductible is reached, your insurance will pay a portion of medical costs and the costs you pay are applied toward the deductible. After your annual deductible is met, you will only pay the plan’s defined co-payments or co-insurance for medical services until you reach your annual out-of-pocket maximum. Once you have met the out-of-pocket maximum, the health provider will cover 100 percent of the medical services for the year. Please refer to your health provider’s summary plan overview for more information.

Will I receive the same medical care and services as I currently do?
Yes. The only change you will see are lower premiums and the costs you will pay for medical services beyond preventative care. (Annual exams are considered preventative care.)

If I’m paying for doctor visits other than preventative care such as annual exams, how much will I be paying for an office visit?
The cost depends upon which healthcare provider you choose. All healthcare providers offer online estimating tools to use before doctor visits. From that you can do the calculations to determine if an Account-Based Health Plan is right for you.

How much will I save on my monthly health premiums?
Each employee’s savings will be different depending on the health provider, number of people being enrolled, and the City's contribution toward health plans. The City's contribution varies per bargaining unit.

To determine an approximate savings, you will need to know:

• Your associated bargaining group
• What you currently pay for your HMO health plan
• Choose an Account-Based Health Plan to compare to your current plan
• Look up the City’s contribution towards your health insurance on the Benefit Services webpage
• Subtract the City’s contribution from your current monthly premium and vice versa – subtract the City’s contribution from the Account-Based Health Plan
• Compare the out-of-pocket costs for both after the City’s contribution.

Is an Account-Based Health Plan with a Health Savings Account a good choice for me?
Do you currently have a way to pay for healthcare costs? Do you have a savings account specifically for medical expenses you contribute to tax-free* that is earning interest and can be invested to multiply your money? Are you aware of what you are charged every time you go to the doctor? Are you actively taking steps to prepare for your future medical expenses? All of these are good reasons to consider enrolling in an Account-Based Health Plan and a Health Savings Account.

If I enroll in the Account-Based Health Plan and am not satisfied, can I return to a traditional health plan?
You can elect to return to a traditional health plan during the next open enrollment period or during a life qualifying event. You can no longer make contributions to your Health Savings Account once you return to a traditional health plan, however, you can use the existing funds to pay for qualifying health expenses.

About the Health Savings Account

Bank of America Health Saving Account Guide for Employees

Who is eligible to set up a Health Savings Account?
Employees who meet the following requirements are eligible to enroll in a Health Savings Account.

• Must be enrolled in a qualified Account-Based Health Plan.
• Must not be claimed as a dependent on anyone else's tax return.
• Currently not entitled to Medicare benefits.
• Must not be enrolled in any non-qualifying health coverage that does not satisfy the statutory minimum deductible requirements of the IRS.

You may not be eligible to open a Health Savings Account if you have a Flexible Spending Account or a Health Reimbursement Arrangement, or if you are covered under your spouse's Flexible Spending Account or Health Reimbursement Arrangement. However, employees can have a limited-purpose Flex Spending Account for dental and vision expenses only and be enrolled in a Health Savings Account for medical expenses.

Am I required to enroll in a Health Savings Account?
Yes. If enrolled in an Account-Based Health Plan and you meet eligibility requirements, you are required to enroll in a Health Savings Account through Bank of America. The amount you decide to contribute to your Health Savings Account is at your discretion.

What are the maximum IRS allowed Health Spending Account contributions?
The contribution amount is total regardless if it is made by the employee or employer or a combination of both. There is a “catch-up” provision for anyone 55 or older; additional contributions up to $1,000 can be made without penalty.

You cannot contribute more than the annual maximum amount allowed by IRS to a Health Saving Account – there are associated IRS penalties if contributing more than the maximum annual amount. Bank of America has a policy to automatically “refund” account holders who contribute more than allowed by law in an effort to prevent penalizations.

What are the advantages of a Health Savings Account?
Employees who open a Health Savings Account receive the following benefits:

• Contributions are pre-tax by the federal government.*
• Unused funds roll over annually. No “use or lose” penalty.
• Unused funds stay with you through all life changes, including a new job, new health plans, and retirement.
• Funds can be used to pay for any IRS-approved medical, dental and vision expenses.
• Tax-free growth, current interest rates apply.
• After 65, or if you become disabled, you can use the funds for whatever you choose, penalty free.

What are the tax benefits?
There are major tax advantages to your Health Savings Account.

1. Cash contributions to an HSA are 100 percent deductible from your federal gross income (within legal limits).

2. Interest on savings accumulates tax deferred.

3. Withdrawals from a HSA for “qualified medical expenses” are free from federal income tax.

How can I make contributions to my Health Savings Account?
Tax free* contributions are made through payroll deductions. Additional contributions can be made directly (not through payroll) to your Health Savings Account by anyone such as a family member or yourself, up to the annual maximum contribution.

What type of expenses can be paid for with a Health Savings Account?
Eligible medical expenses in IRS Code Section 213 can be paid from a Health Savings Account. They include, but are not limited to, the following:

• Standard medical services such as office visits.
• Prescribed health care products.
• Preventive and restorative dental care, as well as braces for children and adults.
• Eyeglasses, contact lenses and solutions and laser eye surgery.
• Co-payments, coinsurance and deductibles.
• Acupuncture and chiropractic services.

A comprehensive list of eligible expenses can be found on the IRS website.

Is there a penalty for using my Health Savings Account to pay for non-qualifying expenses?
Yes. A 10 percent tax penalty will be assessed and you will have to report the amount of the withdrawal as taxable income for the year. You are responsible for saving your receipts in the event you are audited by the IRS.

How do I utilize my Health Savings Account?
Bank of America will issue you a Visa debit card with a four-year expiration date. There are no claim forms – you pay your portion of medical expenses with your Visa debit card.

Can I invest my Bank of America Health Savings Account funds?
Yes. Once your Health Savings Account balance reaches $1,000, you can invest any portion above this amount in select mutual funds with no additional fees.

Does my money in a Health Savings Account earn interest?
Yes. When you enroll, an interest-bearing deposit account is set up at Bank of America. Funds in the account can grow through tax-advantaged earnings, much like an IRA. Additional investment options may be available after your account balance reaches $1,000.

Can I still enroll in a Flex Spending Account?
Yes. You can enroll in a limited-purpose Flex Spending Account to be used for qualifying dental and vision expenses only. You cannot use both a Flex Spending Account and a Health Saving Account for medical expenses per the IRS.

What happens to my Health Savings Account if I leave City employment or switch back to a traditional HMO plan?
Nothing, you own your account. You can take your Health Savings Account with you to a new employer or into retirement. You will no longer be eligible to make contributions to your Health Savings Account if you switch back to a traditional HMO plan, however, the existing funds can be used to pay for qualifying health expenses.

For more information on Bank of America’s Health Saving Account, please visit: https://healthaccounts.bankofamerica.com/.