The new consumer-directed health plan (CDHP) – which includes a high-deductible health plan (HDHP) and a health savings account (HSA) – has a newly-branded name:Consumer Directed HealthSelectSM. Employees and retirees not eligible for Medicare have the option to enroll in the plan during Summer Enrollment and coverage will start on September 1, 2016. No one is required to enroll in the new plan. Employees and retirees can stay in their current plans, if they want.
Consumer Directed HealthSelect includes two parts: an HDHP and an HSA
The high-deductible health plan
The HDHP is the health insurance part of Consumer Directed HealthSelect. It has the following features:
- UnitedHealthcare, the company that currently administers HealthSelectSMof Texas, will administer Consumer Directed HealthSelect.
- Theprovider network will be the same as HealthSelect of Texas. Like with HealthSelectSM of Texas, participants in Consumer Directed HealthSelect will pay less if they use network providers.
- Participants won’t need to name a primary care physician (PCP) and won’t need referrals to see specialists.
- Participants will be responsible for much more out-of-pocket expenses and will have to satisfy a large deductible before the plan begins to pay for any health or prescription benefits, except preventive care. A deductible is the amount participants pay before the plan pays any benefits, excluding preventive services which are covered at 100%.
- The plan deductibles and out-of-pocket maximums are based on the calendar year. If your coverage starts on September 1, 2016, your deductibles and out-of-pocket maximums will start over on January 1, 2017.
- Preventive services – like annual check-ups and vaccinations – will always be covered at 100%, even if the participant hasn’t met the deductible.
- Like with HealthSelect of Texas and the HMOs, there will be an annual out-of-pocket maximum. That means after a participant pays a certain amount out of pocket, the plan pays 100% of his or her qualified health and prescription expenses for the rest of the year.
- Premiums for Consumer Directed HealthSelect will be lower than those for HealthSelect of Texas and the HMOs. But Consumer Directed HealthSelect participants could end up paying more overall because of the high deductibles. Premiums for all health plans will be announced at the May 17 ERS Board of Trustees meeting.
- More information will be available in the coming months and during Summer Enrollment.
Calendar Year Deductibles and Out-of-Pocket Maximums for 2016 (September 1 – December 31, 2016)*
|Description||Individual Coverage||Family Coverage|
|Annual in-network deductible||$2,100||$4,200|
|Annual out-of-network deductible||$4,200||$8,400|
|Annual in-network, out-of-pocket maximum*||$6,450||$12,900|
|Annual out-of-network, out-of-pocket maximum*||$12,900||$25,800|
*Out-of-pocket maximums are based on federal regulations and might change from year to year.
Once the participant meets the deductible, the HDHP will pay a certain percentage of health expenses:
- 80% for in-network health and prescription services (participant pays 20%) and
- 60% for out-of-network health and prescription services (participant pays 40%).
Consumer Directed HealthSelect participants will have pharmacy benefits.
The HDHP is designed so participants have to pay much more than the $50 per person annual deductible and the copays in HealthSelect of Texas and the HMOs. HDHP participants will be responsible for the full cost of their prescriptions (with the exception of some preventive drugs) until they meet the annual health deductible. Once they meet the deductible, participants will be responsible for 20% of the full cost of the prescription drugs.
Like in HealthSelectSM of Texas, if a participant chooses a name-brand drug when a generic is available, the participant will be responsible for the cost difference between the two. The cost difference will not count toward the annual deductible or out-of-pocket maximum.
Caremark, the same company that administers prescription drug benefits for HealthSelectSM of Texas, will manage the pharmacy benefit for Consumer Directed HealthSelect.
HSA – the health savings account
The HSA helps participants save money so they’re prepared for out-of-pocket healthcare expenses. Participants also can save money on income taxes.
The HSA is an important part of the plan. A participant in Consumer Directed HealthSelect can and should open an HSA as soon as possible. ERS will provide more information on setting up an HSA in the coming months. The state will contribute pre-tax money into the account each month, and the participant also can contribute money—up to a certain amount every year. Then, the participant can use account funds to help pay any out-of-pocket expenses they may have, including those paid both before and after the deductible is met.
- Optum Bank, a subsidiary of United HealthCare Services, Inc. will administer the HSA program.
- Every month, the state will contribute a certain amount to every member’s HSA. Participants can also make tax-free contributions, up to a certain annual amount. The U.S. Internal Revenue Service (IRS) sets the annual contribution limits.
- Participants can make pre-tax contributions directly from their paychecks or post-tax contributions they can claim later when they file their income tax. However they want to contribute, participants must make sure the total account contributions (including the state’s contributions) don’t exceed the annual maximum.
- HSAs are similar to health flexible spending accounts (FSAs) in some ways:
- Funds aren’t subject to taxes.
- Funds must be used only for qualified health expenses. (HSA participants who enroll in Medicare can use account funds for non-health expenses, but those not enrolled in Medicare could have to pay a 20% penalty to the IRS if they use the funds for non-health expenses.) Medicare-eligible members are not eligible to enroll in Consumer Directed HealthSelect.
- But they’re also different from FSAs in important ways:
- Withdrawals or reimbursements from the account don’t have to be approved by the program administrator, so it’s up to participants to make sure they’re using the funds for qualified health expenses (or answer to the IRS).
- Participants can withdraw only the money that’s currently in their accounts. If participants have major health costs early in the plan year, before they or the state has deposited money in their HSAs, they’ll have to wait until those deposits are made before they can reimburse themselves for the expenses.
- HSA money carries over and grows every year. There’s no use-it-or-lose-it requirement, like in some FSAs.
- If an HSA reaches a balance of around $2,000, the participant can invest the money in a mutual fund. Earnings on the investments are not subject to income taxes.
- HSAs will be like bank accounts. Each participant will get a debit card and a checkbook to pay for health expenses. It’s important to keep in mind that the funds won’t be available until they’re actually in the account.
- An HSA has what’s known as a “triple tax” benefit: There are no taxes on contributions, interest earnings or withdrawals for eligible expenses.
- Participants must be enrolled in a qualified HDHP (like Consumer Directed HealthSelect) to contribute to their HSAs. But they can keep and use the funds in their HSAs – even money contributed by the state – no matter what type of health plan they’re in, or even if they leave state employment.
HSA Contributions and Limits* for 2016 (September 1, 2016 – December 31, 2016)
|Description||Individual account||Family account|
|Annual maximum contribution (set by the IRS)||$3,350||$6,750|
|Annual state contribution||$540 ($45 monthly)||$1,080 ($90 monthly)|
|Annual maximum participant contribution||$2,810||$5,670|
*HSA contributions and limits may change from year to year, or based on eligibility requirements and the participant’s age. Maximums include both pre-tax and post-tax contributions to an HSA.
An HSA participant cannot participate in a traditional health care flexible spending account (FSA), according to IRS rules.
Because Consumer Directed HealthSelect participants will get state contributions to their HSAs, they cannot have traditional health FSAs, like the health care account offered through TexFlex. But a Consumer Directed HealthSelect participant can enroll in a limited flexible spending account (LFSA), which limits eligible expenses to vision and dental care only. Employees currently enrolled in TexFlex health care accounts who enroll in Consumer Directed HealthSelect during Summer Enrollment will have any funds between $25 and $500 in TexFlex health care accounts rolled into LFSAs. If they have less than $25 in their health care accounts and actively choose to enroll in the LFSA, all of their funds will roll over. ERS will provide more details about the LFSAs as they become available.
More to come
ERS will provide more information about Consumer Directed HealthSelect, including training for benefits coordinators and HR professionals, in the coming weeks. As you learn more, we hope you’ll share your knowledge with your employees before and during Summer Enrollment. Employees who are interested in Consumer Directed HealthSelect should carefully consider the decision and learn as much as they can about the plan. Dependent premiums, which will be approved at the May 17 ERS Board of Trustees meeting, will be slightly less than dependent premiums for HealthSelect of Texas and the HMOs. The lower dependent premiums, along with the state’s contributions to employees’ HSAs, might make Consumer Directed HealthSelect attractive to employees. But the out-of-pocket expenses could turn out to be more than some employees can afford. It’s important that employees understand all the benefits and potential costs of the new plan.