Purdue Healthcare Plan Choices

Purdue experienced a few changes in its health care programs in 2014 by contracting with Anthem to govern the self-insured plans. With the new design, Purdue offered two high-deductible plans and one traditional preferred provider plan, PPO (1). Here we look at a few of the differences between the plans.

What is the difference between a high deductible plan (HDHP) and a preferred provider plan (PPO)?

The major difference between the types of plans is out of pocket costs. The PPO requires a higher monthly premium and lower deductibles. The high deductible plan requires a higher deductible while paying a lower premium. Additionally, the high deductible plan may allow you to set aside funds into a health savings account, health reimbursement Healthcareaccount, or flexible spending account. Each of these instruments allow tax savings for approved medical expenses (2). For an illustration of the how the deductibles work for the plans, click here.

Both types of plans have preferred providers and higher cost out of network provisions. The out of pocket maximums are different for each plan (5).

As faculty and staff increased participation into the HSA1 and HSA2 plans to 74% (6), the potential costs covered by the university run as high as $19,454 (7). As a means to help preserve the reasonable nature of the plan, Purdue gathers information on costs for lab work, specialists, doctors, and other medical services. The employees may then compare services by the Castlight program, saving the university and participant money (8). The program is convenient and easy to use (click here for more information.)

What is the different between the two high deductible plans?

Aside from the premiums and deductible amounts, coinsurance levels are different as well. For example, a test for a preferred provider is 20% coinsurance for the HSA1 and 25% coinsurance for the HSA2. Many of the excluded services are the same (3,4). The out of pocket maximum for the HSA2 is higher than the HSA1 (5).

Which plan should I choose?

Numerous factors need consideration to answer this question. Here are a few to start:

–    Current state of health: Consider how much you have paid in and the cost of care. Estimate how costs may change as you move from one plan to other. Purdue ran examples for illustration purposes.

Healthcare drs–    Future healthcare needs: Like a retirement analysis, planning for future healthcare can be done with the health savings account. As we get older, more healthcare is needed, so why not save money to cover future obligations? In the event actual needs are less than expected, the funds may be used for retirement (click here for more information).

–    Cash flow: Monthly cash flow varies from household to household. Funding the PPO option may be a desirable option when compared to the larger deductibles of the HSA1 and HSA2.

Once enough accumulation takes place in an HSA, it may be a good fit for additional asset accumulation while taking care of current healthcare needs. If it is a participant’s first year for an HDHP plan, one may jump-start an HSA account with funds from an IRA (click here for more information).

Additional Resources

Purdue University also set up the Center for Healthy Living that “provides the preventive care services that are vital to protecting your health, and treats your illnesses and your ongoing conditions (9.)” Medical services supplied by the center include treatment for common illnesses, primary care and wellness, conditional management, and tier 1 labs.

Faculty, staff, retirees, and family members covered by the Purdue Health Plan, HSA1, or HSA2, or J-1 Visa Plan Participants may receive services at the center. Employees who are benefit-eligible but not covered by a Purdue medical plan may receive preventive care, primary care, and treatment of common illnesses for $40 per service.

Wrap up

As you look ahead to the next benefit enrollment period, you will be able to track your expenses for 2016 and gain a better idea of what to expect beyond 2017. Look at your healthcare spending in the same way you look at retirement spending. The way you spend and save, and the savings vehicles used, will likely change over time. The right plan for one household may not be the correct selection for another.

If you have questions regarding your healthcare planning, contact your human resources representative or an advisor, or send me an email at ncarmany@thewatermarkgrp.com.

 

Sources:

  1. Lewin, :uis. “2015 Purdue Medical Benefit Programs.” Letter to Members of the Board of Trustees. 17 Sept. 2014. MS. West Lafayette, IN.http://www.purdue.edu/bot/meeting-documents/2014/sept/aic/health care plan.pdf
  2. “HDHP vs. PPO Plans.”HDHPs vs. PPOs. Web. 18 Apr. 2016. <http://www.bcbst.com/manage-my-plan/health-accounts/ppo-plan.page>.
  3. Purdue University: Health Plan Plus H.S.A. 1. Plan Description Coverage Period: 01/01/2016 – 12/31/2016. West Lafayette. <http://www.purdue.edu/hr/Benefits/currentEmployees/Medical/pdf/2016/Purdue_Health_Plan_Plus_HSA_1_SBC.pdf>
  4. Purdue University: Health Plan Plus H.S.A. 2. Plan Description Coverage Period: 01/01/2016 – 12/31/2016. West Lafayette. 5. <http://www.purdue.edu/hr/Benefits/currentEmployees/Medical/pdf/2016/Purdue_Health_Plan_Plus_HSA_2_SBC.pdf>
  5. “2015 and 2016 Medical Plan Coverage Comparison.” Medical Plan Coverage Comparison. Web. 19 Apr. 2016. <http://www.purdue.edu/hr/Benefits/currentEmployees/Medical/employeeCosts.html>.
  6. “Through the Years: A Look at Our Medical Premiums.” Human Resources: CONNECT (2015). Print. <http://www.purdue.edu/hr/newsletter/Connect/connect_10_15/medical_premiums.html>
  7. “2015 and 2016 Annual Employee/Employer Medical Plan Contributions.” Annual Employee/Employer Medical Plan Contributions. 2015. Web. 19 Apr. 2016. <http://www.purdue.edu/hr/Benefits/currentEmployees/Medical/ContributionChart.html>.
  8. “Castlight – Benefits – Purdue University.” Castlight – Benefits – Purdue University. Purdue University, 2015. Web. 19 Apr. 2016. <http://www.purdue.edu/hr/Benefits/castlight/castlight.html>.
  9. “Welcome to the Center for Healthy Living.” Center for Healthy Living. Purdue University, 2015. Web. 19 Apr. 2016. <http://www.purdue.edu/hr/CHL/>.
  10. “Cost and Eligible Clients.” – Center for Healthy Living. Purdue University, 2015. Web. 19 Apr. 2016. <http://www.purdue.edu/hr/CHL/Services/costs.html>.

Kick Start Your Purdue Health Savings Account

I help Purdue faculty make the most of their benefits and 403(b) retirement plan.
Contact Information: ncarmany@thewatermarkgrp.com, 317-805-0840
TOPICS
1. What is a high decductible healthcare plan?
2. Contribution limits?
3. Funding from an IRA and provisions.
4. Catch up contributions.
5. Mid-year qualifications

Sources;

1. https://www.optumbank.com/customer-support/depositing-to-your-hsa/contribution-limits.html

2. https://www.irs.gov/irb/2008-25_IRB/ar09.html#d0e814

3. https://www.betterment.com/resources/life/truth-about-hsas-and-retirement/

4. http://news.morningstar.com/articlenet/article.aspx?id=743774

Health Savings Accounts: Possible Retirement Supplement

Health Savings Accounts: Possible Retirement Supplement

How often does one find the need to balance financial priorities; college or retirement, emergency fund or the family vacation?  Rarely, does an opportunity come through the tax code similar to what a Health Savings Account, HSA, provides.  As it currently stands, a large portion of “traditional” health plans is going away, while being replaced with the high deductible care options in order to help contain costs.  It is each employee’s responsibility to weigh options which may become a monumental task.  Let’s examine what this tool is and how to use it.

What is an HSA?

An HSA is a tax-favored account used in conjunction with a high-deductible health insurance plan. The account should receive funds for healthcare related expenses.  The list of possibly covered items includes things like some premiums (please see IRS Publication 502 for more details), deductibles, vision, and dental expenditures.

As previously mentioned, one needs to be covered under a high deductible plan in order to have an HSA.  For an individual, the plan must have a $1300 deductible and $2600 for a family.  Contribution limits to the plan are capped at $3350 for the individual and $6650 for a family.  Additionally, anyone over the age of 55 may contribute another $1000 for the year.

How does the HSA work?

With your plan, contributions are tax deductible as an adjustment to income and the distributions are tax-free if used for qualifying medical expenses.   Once your insurance deductible has been met, your insurance provider will cover expenses in accordance to the plan provisions. You may use the HSA funds as previously noted to cover premiums in addition to hearing aids, eyeglasses and contacts, chiropractor, stop smoking programs, and several other items.  However, funeral expenses, cosmetic surgery, and weight loss programs are not covered. (For a full list of covered and ineligible expenses, please check with your HSA provider.)

The other important aspect of the account is the fact you may keep the monies in the account as long as you need them.  It is a “not use it or lose it mandate” similar to a flexible spending account making the HSA more attractive for longevity.  In fact, you may even be in a position where you contribute and later move to a non-high deductible plan and still withdraw funds for qualified expenses from the account.

How can an HSA be used as a retirement income supplement?

One of the lesser known provisions of the tax code involves the fact anyone over the age of 65 may withdraw funds from an HSA for living expenses. Pre age 65 withdraws for ineligible expenses are included in taxable income and subject to a 20% penalty.   For age 65 or older, withdrawals for non-medical expenses, the amount is taxable, but the penalty is avoided.

Other noteworthy aspects currently include, currently no required minimum distributions, the account may initially be funded with one year’s deductible from an IRA or Roth IRA (ongoing SEP’s and Simple IRAs are not eligible), and many providers have investment options attached to the account.

If you do elect to use the investment options, make sure you keep enough cash available to cover your medical expenses. The excess funds invested may be used as a backup in case the liquid portion of the account is spent.

The health savings account allows a family to maximize contributions while not feeling comprised about saving for retirement.

Pit Falls

Most importantly, the HSA should not be used as a replacement for retirement savings accounts, but rather as a supplement.  As mentioned earlier, the penalty for nonqualified expenses is 20% versus the 10% penalty on most IRAs.  The contributions, if coverage is for a single individual, are lower when compared to IRAs.  If investment options are available, there is usually only a hand full.

Review your health care plan options with your employer or insurance agent.  Weigh your options and include the HSA as part of your overall financial picture.

 

Sources:

  1. http://www.hsacenter.com/index.html