BENEFIT PLAN ADMINISTRATORS, INC. HEALTH SAVINGS ACCOUNTS (HSA’s) SUMMARY

General

• Effective January 1, 2004 under the new Federal Medicare Regulations, Health Savings Accounts (HSA’s) help employees save for qualified medical and retiree health expenses on a tax-free basis.

Eligibility

• Employees under the age of 65 are eligible to contribute to a Health Savings Account if they have a qualified high deductible health plan.
• For employee coverage, a qualified health plan must have a minimum deductible of $1,000.
• For family coverage, a qualified health plan must have a minimum deductible of $2,000.
  Contributions
• Contributions are allowed up to 100% of the health plan deductible. The maximum annual contribution is $2,600 for employee only and $5,150 for family coverage.
• Contributions may be made by employees and employers. Contributions can be made pre-tax by the employee and the employer contributions are tax deductible.
• Investment earning accrue tax-free

Distributions

• Health Savings Accounts distributions are tax-free if they are used to pay for qualified medical expenses, such as:
  • Amounts paid for diagnosis, cure, mitigation, treatment, or prevention of disease,
  • Prescription drugs,
  • Qualified long-term care services and long term care insurance,
  • Continuation coverage required by Federal Law (i.e., COBRA),
  • Health Insurance for the unemployed,
  • Medicare expenses, and
  • Retiree health expenses for individuals age 65 and older (Note: retiree health plans would not have to meet the $1,000/$2,000 minimum deductible requirements.)

BENEFIT PLAN ADMINISTRATORS, INC. HEALTH SAVINGS ACCOUNTS, (HSA)

HSA Q&A

Q. Who can purchase an HSA?
A. Anyone with a high deductible health insurance plan –individuals, employers and employees. (Certain exceptions apply, including Medicare.)

Q. Who can contribute to an HSA?
A. Individuals, employers and their employees. There are no restrictions.

Q. How much can be contributed to the HSA in 2004?
A. The maximum annual contribution is $2,600 for a single person and $5,150 for a family.

• The annual maximum HSA contribution will change each January 1st based on the CPI. There are no maximum limits on the account accumulation.
• The legislation provides for an additional contribution (and tax deduction) for those who turn age 55 before the end of the tax year. The additional contribution amount is $500 for 2004 and increases annually, to an additional $1000 in 2009.

Q. What can HSA funds be used for?
A. The funds belong to the individual or employee. Funds can be withdrawn for any purpose, however, if not withdrawn for qualified medical expenses by someone under age 65, the amount withdrawn is taxable and subject to a 10% penalty by the IRS. After age 65. there is no penalty for non-qualified withdrawals but amounts are taxable.

Funds used to pay for the following are tax-free and penalty-free:

• Qualified medical expenses as defined under Section 213 of the IRS Code.
• COBRA insurance.
• Qualified long-term care insurance and expenses.
• Health insurance premiums for individuals receiving unemployment compensation.
• Medicare and retiree health insurance premiums but not Medicare Supplement premiums.

BPA’s High Deductible Gap Plan

What is a High Deductible Plan?

• The BPA High Deductible Gap plan is a traditional high deductible health plan with a $1000 or $2000 individual deductible.
• A high deductible plan generally saves 30% in claim costs.

What is the Gap Plan?

• The Gap Plan reimburses employees deductible dollars.
• The Gap plan is a fully-insured product. The price ranges from $19.50 for an employee to $60.00 for a family per month.

What is covered under a typical Gap Plan?

• $1000 inpatient hospitalization
• $500 out patient hospitalization
• Five $25 office visits
• $350 ambulatory

How are Gap claims filed?

• When BPA administers the self-funded high deductible core plan, BPA will file all Gap claims for the employees to the insurance company and the employee will be reimbursed. A signed claim form must be on file at BPA.

Projected Savings

• Incorporating a High Deductible Gap plan can save the employer between 10-15% on plan costs compared to plans with low deductibles and no Gap coverage.

Additional Broker Revenue!

• The Gap plan pays commission that BPA shares with brokers.

Benefit Plan Administrators, Inc. Health Reimbursement Arrangement (HRA) Consumer Driver Health Plan

Market Trends Influence Consumer Demand!

Converging factors at a time of high employee and employer frustration have created an environment that is ripe for change:

• Health costs are increasing at an alarming pace. According to studies, the rate of increase was 13% in 2001, over 14% expected for 2002 and 15% expected for 2003. At the same time, prescription drug costs are expected to increase at a rate approaching 25% per year.
• Employees are dissatisfied with the current system, the quality of care and the restrictions of managed care. They want more control in managing their health care.
• Managed Care’s ability to control costs has diminished as health car providers express their dissatisfaction with managed care by increasing costs and withdrawing from managed care networks.
• Employers are concerned with the increased administrative costs of supporting a health care program and would like to capitalize on the internet to reduce costs. They are also looking for ways to attract and retain high quality employees through new and enriched health care programs, without increasing their health care costs.

How does Your BPA HRA Plan work?

Employees are covered by a partial self-funded high deductible health plan, administered by Benefit Plan Administrators. Inc, (BPA). This high deductible program is the core Plan. Reduced premiums for the core plan allows the employer to fund the BPA HRA fund for all eligible employees. The BPA HRA plan provides first dollar coverage, with no deductibles or co-pays, for expenses below the Core Plan deductible, or for expenses not routinely covered under traditional plans. As eligible expenses are paid through the BPA HRA Plan they also reduce or eliminate the Core Plan deductible. Once the BPA HRA Plan is depleted, the employee is responsible for any remaining deductible and coinsurance, in the core plan. Any excess BPA HRA Plan dollars may be rolled over to the following year.

HRA Illustration

The Smith family is in good health. This illustration demonstrates how Your BPA HRA Plan could work for them over a two-year period.

Year One

Year Two

*Actual rollover amount will depend upon individual plan design.

HRA Frequently Asked Questions

Q. What is the legal basis for the program?
A. This program is authorized under Section 105 of the Internal Revenue Code. The high deductible Core Plan is a partial self funded ERISA program. To date, the IRS has issued many private letter rulings supporting 105 plans that currently exist.

Q. What size groups can participate in this program?
A. Benefit Plan Administrators has established liberal underwriting rules to allow any employer group with at least 50 full time employees to participate. There is no maximum size limit and this program may be used as a partial carve-out or a full replacement for your current health plan.

Q. Are there any required plan designs?
A. No. Like most BPA programs, plan designs will vary dependent upon the unique requirements of each individual and their employees. However, section 105 does specifically state that the plan must be non-discriminatory and that funds may only be used for qualified medical expenses as outlined by the IRS, or any subset of qualified medical expenses as defined by the Plan.

Q. How is the HRA Plan funded?
A. The BPA HRA Plan is funded by the employer on a monthly basis. The employer pays only the incurred claims and does not pre-fund the BPA HRA account balance.

Q. Are HRA plan funds subject to COBRA?
A. COBRA applies to any arrangement through which an employer provides health care coverage to employees or retirees. COBRA applies to HRA plans.

Q. What happens if an employee terminates employment before the end of the plan year?
A. Should an employee terminate prior to the end of the plan year, and not take COBRA, only eligible expenses incurred while covered under the plan will be eligible for reimbursement.

Q. How are claims processed?
A. Each employee receives a personal identification card that reflects the coverage under the Core Plan, as well as the coverage under the BPA HRA plan account. Providers or the employee will send the claims to BPA, and if eligible, the claims will first be applied against the high deductible Core Plan. Automatically, the claims will also be processed under the HRA plan and checks will be issued to the provider on assignment, or the employee if the bill has been paid. BPA will provide access to all claims and account data, via employer reports as well as access through their web site, www.bpatpa.com, in accordance with all privacy regulations.

Q. What happens at the end of the year and all HRA account funds have not been spent?
A. Any unspent funds will automatically be rolled over into the employee’s BPA HRA account for the following year, to be added to any amount that the employer has deposited for the following year. The amount of the rollover may vary based upon individual plan design and any other potential use of the funds will be determined, once the final regulations are published.

Q. Can excess HRA funds roll over to investments accounts?
A. It is anticipated that the final regulations will clarify whether excess funds may be available for additional financial options, such as cash, 401 (K), or the purchase of a Roth IRA.

Q. Would a program as illustrated reduce my health plan cost?
A. Yes, the aggregate, or maximum claim liability would be lowered by 20%-30%.

Benefit Plan Administrators, Inc. Ancillary Product Administration

• COBRA/HIPAA Administration
  • Provide HIPAA privacy manuals and procedures that encompass fully insured and self funded health plans.
• Self funded dental Administration
  • Flexible plan design
  • Voluntary or group dental plan
  • Minimal risk
  • Reimbursed at the 85th percentile of Reasonable and Customary (No Network)
  • Network plans available
• Self funded short term disability
• Consolidated billing and enrollment services