Introducing HSAs Health Savings Account Plans from

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IntroducingHSAsHealth Savings Account
Plansfrom
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• Todays Health Insurance Market is in an
• Affordability Crisis

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• Most people dont have a clue what theyre
  paying for and dont much care
• U.S. News World Report
• October 27, 2003

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• Affordability Crisis for Small Groups
• Over 40 of businesses with 10 employees or
  less do not offer health insurance.

Sources Kaiser/HRET Survey of Employer-Sponsored
Health Benefits, 2002, Statistics of U.S.
Business, 2000 Joint Committee on Taxation.
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• Affordability Crisis for Small Groups
• Current Expensive Insurance Plan Designs
• The consumer is insulated from the true cost of
  healthcare by low deductibles and copays.

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• Affordability Crisis for Small Groups
• Once, medical insurance was a responsibility.
• Today, many consider it an entitlement.
• This, coupled with perceived lower cost due to
  office visit and Rx copays is driving health
  insurance premiums into the stratosphere.

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• Its time to reverse the trend
• of expensive copays

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• The true purpose of major medical insurance is to
  protect people from financial hardship due to
  unforeseen illness and injury.

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• Sell your clients
• what they need
• (protection from serious loss)
• Not what they think they need
• (100 coverage)

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• New Opportunity
• New Affordable Insurance Plan Designs
• Most dramatic change in health insurance since
  HMOs.
• The consumer must have greater financial
  responsibility for healthcare purchases to serve
  as an incentive to make prudent decisions.

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• New Opportunity
• Health Savings Accounts (HSAs) the newest
  Consumer Choice Health Plan option are
• Tax free
• Tax deductible
• Permanent
• Portable
• John Alden makes selling HSA Plans
• simple and easy!

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• New Opportunity
• HSAs are
• Part of a permanent, federally approved
  program effective January 1, 2004.
• Available with a qualified high-deductible health
  plan.
• Tax-favored accounts that allow funds to be
  accumulated to pay qualified healthcare expenses.
• Similar in concept to an IRA but substantially
  more powerful.

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• New Opportunity
• Moving Employees to New Plans
• Show substantial premium and tax savings that
  employer and employees will receive.
• Align consumer habits with a realistic
  understanding of the cost of healthcare services.
• Reverse consumer trends away from expensive
  premiums for copays and other offerings that
  increase price without delivering benefit.

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• New Opportunity
• Consumer Choice Health Plans
• Address affordability by providing
• Significant premium savings
• Substantial tax savings
• Solid protection from catastrophic financial loss
• Include a funding program to help employees pay
  for their medical expenses
• Feature simple plan designs

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• John Alden HSA Plans
• Clients choose one of John Aldens
  premium-saving high-deductible plans
• Single Family
• Deductibles Deductibles
• 1,200 2,400
• 2,000 4,000
• 2,500 5,000
• 3,000 6,000
• 3,500 7,000
• 4,000 8,000
• 5,000 10,000 Varies by state.

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• John Alden HSA Plans
• Benefit Percentage John Aldens HSA Plans are
  available in the following combinations
• Benefit Deductibles Available
• 100 2,000, 2,500, 3,000, 3,500, 4,000,
  5,000
• 80 2,000, 2,500, 3,000, 3,500, 4,000
• 50 1,200, 2,000, 2,500, 3,000,
  3,500, 4,000
• Varies by state.

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• John Alden HSA Plans
• Benefit Percentage Benefit percentages for John
  Alden HSA PPO Plans are
• Network Non-Network
• 100 70
• 80 60
• 50 50
• Varies by state.

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• John Alden HSA Plans
• Family Deductible Accumulation
• Common Family Deductible the entire family
  deductible must be satisfied before benefits are
  paid for any family member.

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• Premium Savings
• John Aldens high-deductible HSA Plans
• offer significant premium savings over
  lower-deductible plans.

up to 50 Premium Savings based on deductible
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• Premium Savings
• The amount of premium savings depends on the John
  Alden plan deductible selected.
• Current plan Copay plan, 500 deductible, 80/60
  coinsurance, 2,000 out-of-pocket
• Approx
• Plan Deductible Coinsurance Savings
• 1,200 single/2,400 family 50/50 29
• 2,500 single/5,000 family 80/60 44
• 3,000 single/6,000 family 50/50 57
• 5,000 single/10,000 family 100 57

Based on John Alden rates. Actual amounts will
vary.
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• John Alden HSA Plans
• John Alden HSA Plans are
• Affordable premium savings of up to 50
  depending on deductible.
• Secure John Alden has more than more than
  40 years experience selling and servicing health
  plans.
• Easy to choose and use specially designed
  plans and expert services.

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• John Alden HSA Plans
• Help your clients realize the maximum benefits
  that HSAs offer
• Selection clients choose from several
  premium-saving high-deductible plans.
• Simplicity 100, 80 or 50 coverage
• after deductible.
• Flexibility multiple medical plans.

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• John Alden HSA Plans
• Multiple Medical Plans Employee Choice
• Many groups have diverse health insurance needs
• Offer up to four plans including combinations of
• HSA, PPO and Indemnity Plans
• Mix and match HSA and copays to meet specific
  needs of each employee

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John Alden Consumer Choice Health Plans John
Alden offers several Consumer Choice Health
Plan options Health Savings Accounts
(HSAs) Health Reimbursement Arrangements
(HRAs) Flexible Spending Accounts (FSAs)
Premium Only Plans (POPs)
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• Investment Opportunities
• Ownership
• The funds in the HSA belong to the employee
  whether contributed by the employer, the employee
  or both.
• The funds are also portable, so if an employee
  leaves, he/she takes the funds along.

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• HSA Contributions
• First-year contributions depend on when a
  qualified
• high-deductible health plan was in force
• If a high-deductible health plan is in force as
  of January 1st, the maximum HSA contribution is
  2,600 singles/5,150 families or an amount equal
  to the deductible whichever is less.
• If a high-deductible plan starts after January
  1st, the maximum HSA contribution is prorated
  based on the number of months the plan will be in
  force during the calendar year.

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• HSA Contributions
• Anyone can contribute employers,
  employees or both
• Maximum contributions for 2004 are limited to
  
• the lesser of
• An amount equal to the deductible, or
• 2,600 for singles or 5,150 for families
• Contribution limits are indexed for inflation
  so they will change annually on January 1st

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• HSA Contributions
• Account Contributions
• Lump sum or smaller deposits
• Employer contributions must meet comparability
  rules
• Can contribute up to April 15th of the following
  year

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• HSA Contributions
• Catch-Up Contributions
• People age 55 and older can make additional
  annual contributions
• Year Additional Amount
• 2004 500
• 2005 600
• 2006 700
• 2007 800
• 2008 900
• 2009 thereafter 1,000

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• Tax Advantages
• Tax-Free Withdrawals for Qualified Medical
  ExpensesAs defined under Section 213(d) of the
  IRS Code
• Deductibles and coinsurance
• Over-the-counter medications
• Glasses, contacts or Lasik eye surgery
• Dental services including orthodontic work
• COBRA continuation premiums
• Long-Term Care premiums
• Medicare premiums
• Much more!

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• HSA Account Administrator
• MSAver Resources L.L.C.
• John Alden-Endorsed HSA Administrator
• Toll-free number 866-889-8578
• Web site www.nstarmsa.com

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• HSA Account Administrator
• MSAver provides
• Convenient ways to pay for expenses with HSA
  funds
• Checkbook
• Debit Card
• Easy ways to save and build HSA funds
• Earn interest tax free
• Keep money in the savings account
• Move money into an investment account

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• HSA Account Administrator
• MSAver offers an array of investment choices
• Money market funds
• Stocks and bonds
• Over 8,000 mutual funds

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• HSA Account Administrator
• MSAver makes investing easy for your clients
• Helps employee open a brokerage account
• No large balance required
• HSA funds can be traded online
• Money can be moved back and forth between the
  investment and savings accounts
• Access to the brokerage account is available
  24 hours a day through internet trading

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• Investment Opportunities
• Unused funds accumulate from year to year so
  the employee has several good choices
• Use the money to pay for qualified expenses
  tax free as they occur
• Save money tax free for future medical
  expenses
• Build savings and establish a tax-sheltered
  nest egg for retirement

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• Investment Opportunities
• An employee who wants to build savings has
  options
• Keep the money in the savings account
• Invest funds in money market funds, mutual
  funds, stocks, bonds, etc.

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HSA vs. IRA

• HSA
• Contributions are tax deductible to everyone with
  a qualified high-deductible health plan
• Tax deduction does not fade out with income
• Qualified withdrawals are tax free

• IRA
• Tax deduction is limited to certain individuals
• Tax deduction fades out with income
• Qualified withdrawals taxed as ordinary income

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• Seize the Opportunity!
• Over 40 of businesses with 10 employees or
  less do not offer health insurance.
• Congressional analysts estimate that up to 40
  million HSAs will be established in the next
  decade.

Sources Kaiser/HRET Survey of Employer-Sponsored
Health Benefits, 2002, Statistics of U.S.
Business, 2000 Joint Committee on Taxation.
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• Seize the Opportunity!
• The ease and flexibility HSAs bring to the
  health insurance market has broad appeal.
• HSAs are especially appealing to any employer
  who wants to provide employees with the
  opportunity to save and accumulate funds for
  future medical expenses or supplement their
  retirement.
• There are several types of small groups for
  which an HSA Plan may be particularly
  advantageous.

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• Seize the Opportunity!
• Target Small Groups
• Groups that have dropped coverage because of high
  premiums
• Smaller, family-owned-and-operated businesses
• Groups with employees who want to better control
  tax responsibility
• Employers who want different plans for themselves
  than for employees
• Employers only able to provide limited benefits
• Employers not eligible for an HRA

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• Seize the Opportunity!
• HSAs are available to everyone with a qualified
  high-deductible health plan. They provide
• ? Premium Savings
• ? Tax Advantages
• Investment Opportunities
• Certain exceptions apply, including people
  receiving Medicare benefits.

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• Seize the Opportunity!
• ? Potential Premium Savings up to 50
• ? Tax Advantages
• Tax-free contributions
• Tax-free earnings
• Tax-free withdrawals for qualified medical
  
• expenses
• ? Investment Opportunities
• ? Bonus Program
• ? Security with John Alden
• More than 40 years of commitment and
  quality

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• Seize the Opportunity!
• Consumer Choice Health Plans (CCHPs)
• The market potential for CCHPs is sizable. The
  current 2.5B market is projected to grow 142
  annually to reach 88B by 2007.

CCHP Premiums (Billions)
500 400 300 200 100 0
Consumer Choice Health Planswill account for 88
billion in 2007,a sixfold increase over 2005.
2000 2002 2004 2006
2008 2010
Sources Forrester Brief, Conning Research
Consulting, Fortis Health Affairs.
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• Seize the Opportunity!
• Contributions, investment growth and withdrawals
  for health-related expenses are all free from
  taxation.
• That makes HSA tax benefits superior even to
  IRAs. With IRAs, the money is taxed either before
  it goes into the account, or as it is taken out.
  
• USA Today
• December 29, 2003

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• HSA Employer Savings Example 1 First Year
• Traditional low deductible, copay plan 73,732
• HSA Plan 51,612
• Savings Before Employer HSA Contribution
  (30) 22,120 a
• Maximum allowed HSA contribution single 2,500
• Employer HSA contribution percentage 25
• Number of employees with single coverage (2500 x
  .25 X 9) 9 5,625 b
• Maximum allowed HSA contribution family 5,000
• Employer HSA contribution percentage 25
• Number of employees with family coverage (5000 x
  .25 X 3) 3 3,750 c
• Savings After Employer HSA Contribution (17)
  (a - b - c) 12,745 d

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• HSA Employer Savings Example 2 First Year
• Traditional low deductible, copay plan 73,732
• HSA Plan 51,612
• Savings Before Employer HSA Contribution
  (30) 22,120 a
• Maximum allowed HSA contribution single 2,500
• Employer HSA contribution 500
• Number of employees with single coverage (500 x
  9) 9 4,500 b
• Maximum allowed HSA contribution family 5,000
• Employer HSA contribution 500
• Number of employees with family coverage (500 x
  3) 3 1,500 c
• Savings After Employer HSA Contribution (22)
  (a - b - c) 16,120 d

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• HSA Employer Savings Example 3 Renewal Years

Current HSA Plan HSA
Cumulative Year Premium Premium Contribution
Savings Year 1 78,732 51,612
6,000 16,120 Year 2 84,792
59,354 6,000 35,558 Year 3
97,511 68,257 6,000 58,812 Year 4
112,137 78,495 6,000
86,453 Assuming identical rate increases.
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• Selling John Alden HSA Plans
• Simple and Smart Benefit Design Strategy
• Example 1
• ? Employer pays all of the health insurance
  premiums Funded by the premium savings
  Employer maximizes the tax deduction
• ? Employee funds the HSA Controls amount going
  into the HSA Controls amount spent from HSA
  Employee gets tax deduction Pays self not
  the insurance company Saves for the future

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• Selling John Alden HSA Plans
• Simple and Smart Benefit Design Strategy
• Example 2
• ? Employer already pays all of the health
  insurance premium
• Employer shares contributions to the HSA with
  employees Employer provides a generous benefit
  and still earns tax deductions Employee
  has a financial commitment that encourages
  consumerism and allows for long-term
  savings

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• Alternative Consumer Choice Health Plans HRAs
• John Aldens Health Reimbursement Arrangement
  (HRA) Plan may be a better choice if the
  employer wants
• Greater control over cash flow and fund
  ownership
• A prescription drug copay program
• The ability to save up to 45 in premium
  (depending on deductible)

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• Consumer Choice Health Plans The Best of Both
• An employer can offer both an HSA and an HRA.
  This combination is best for employers who
• Are not eligible for an HRA based on company
  ownership type
• Want to offer an enhanced benefit for
  themselves and/or other highly compensated staff,
  and a more basic plan for others

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• Bonus Program
• Take advantage of
• John Aldens HSA Plan
• Bonus Campaign!

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Presentation Disclaimer This presentation
includes information regarding HSAs. Information
is provided with the understanding that John
Alden and its subsidiaries are not engaged in
rendering tax or legal advice. John Alden
disclaims any and all liability for creation or
administration of an HSA. Examples are
presented for illustrative purposes only. If tax
or legal advice is required for an HSA, seek the
services of your professional advisor.