oxy health plans— new medical options for 2006 fall 2005

Oxy Health Plans—New Medical Options for 2006Fall 2005

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What Are the New Options?

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A Glimpse at Plans for 2006

• Basic POS ($300 deductible) plan remains.• HMO and other regional plans remain, pending

sufficient plan enrollment.• Two new high-deductible plans (with HSAs)

replace the POS 1000 ($1000 deductible) plan.

This presentation focuses on the new HSA options.

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Alphabet Soup

• EFT: Electronic Funds Transfer

• EOB: Explanation of Benefits

• FSA: Flexible Spending Account • HDHP: High Deductible Health Plan

• HMO: Health Maintenance Organization medical plan

• HSA: Health Savings Account

• IRA: Individual Retirement Account

• OOP: Out-of-Pocket maximum • POS: Point-of-Service medical plan

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Contributions for the Aetna Medical Plans

Monthly Employee Contributions

Basic POS

HealthFund

Plus

HealthFund

Saver Employee Only $ 80 $ 60 $20

Employee + 1 $160 $120 $40

Family $240 $180 $60

New Options

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New Medical Plan Options

• Two Health Savings Account (HSA) options:– HealthFund Plus– HealthFund Saver

• The new options have both a medical plan and a savings account component.

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Medical Component of New Plans

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POS Refresher: How Deductibles Work

Plan Pays

You Pay Deductible

OOP Limit (includes deductible)

You pay 100% up to deductible, then 10-20%

until your out-of-pocket limit, then Plan pays 100%

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Deductibles• Basic POS:

– $300 individual– $600 family

• New Plans:

• Basic POS has a separate individual deductible for Employee + 1 and Family coverage. The new plans do not.

HealthFund Plus

HealthFund Saver

Employee Only $1,250 $2,650 Employee + 1 $2,500 $5,250 Family $2,500 $5,250

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OOP Maximums• Basic POS: Separate individual and family OOP

maximums.• New Plans: No individual OOP maximum.• Based on salary for all plans.• Remember, OOP max includes the deductible

under Aetna plans.

Under the new options, there are no individual deductibles or out-of-pocket maximums. This means that if you enroll for Employee + 1 or Family coverage, your family must meet the entire deductible before coinsurance applies and meet the entire OOP max before the plan pays 100%.

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OOP Maxes (cont.)Basic POS HealthFund Plus/HealthFund Saver

Individual OOP Max Employee Only OOP MaxAnnual Base

Salary Basic POSAnnual Base

Salary HealthFund Plus HealthFund Saver

< $30,000 $1,300 < $30,000 $1,300 $2,650$30,000 - 39,999 $1,500 $30,000 - 39,999 $1,500 $2,650$40,000 - 49,999 $2,000 $40,000 - 49,999 $2,000 $2,650$50,000 - 59,999 $2,500 $50,000 - 59,999 $2,500 $2,650$60,000 - 69,999 $3,000 $60,000 - 69,999 $3,000 $3,000$70,000 - 79,999 $3,500 $70,000 - 79,999 $3,500 $3,500$80,000 - 89,999 $4,000 $80,000 - 89,999 $4,000 $4,000$90,000 - 99,999 $4,500 $90,000 - 99,999 $4,500 $4,500$100,000 + $5,000 $100,000 + $5,000 $5,000

Family OOP Max Employee +1 / Family OOP MaxAnnual Base

Salary Basic POSAnnual Base

Salary HealthFund Plus HealthFund Saver

< $30,000 $2,000 < $30,000 $2,500 $5,250$30,000 - 39,999 $2,250 $30,000 - 39,999 $2,500 $5,250$40,000 - 49,999 $3,000 $40,000 - 49,999 $3,000 $5,250$50,000 - 59,999 $3,750 $50,000 - 59,999 $3,750 $5,250$60,000 - 69,999 $4,500 $60,000 - 69,999 $4,500 $5,250$70,000 - 79,999 $5,250 $70,000 - 79,999 $5,250 $5,250$80,000 - 89,999 $6,000 $80,000 - 89,999 $6,000 $6,000$90,000 - 99,999 $6,750 $90,000 - 99,999 $6,750 $6,750$100,000 + $7,500 $100,000 + $7,500 $7,500

Differences between Basic POS and HealthFund options are highlighted in red.

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Medical Coverage for New Plans• What’s the same?

– Works like current Aetna POS plans with deductibles, coinsurance, and medical claim forms.

– Same network: Aetna Open Access/Choice II POS.

• What’s different?– No in-network lifetime benefit maximum.

(Max under Basic POS increases to $3 million, effective 01/01/06.)

– Most preventive services covered at 100%.

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Preventive Coverage

• New Plans: 100% coverage before deductible for these in-network preventive services:– Colonoscopies– Sigmoidoscopies– PSA tests– Mammograms– Pap smears– Well baby care– Child immunizations

• Basic POS: 80% coverage after deductible, in network.

Note: Subject to age and frequency schedule (posted on OxyLink).

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Drug Coverage for New Plans• Similar to current drug coverage under Basic POS

& POS 1000 plans.• Differences:

– Provided through Aetna instead of Medco. (One ID card!)

– Combined medical/drug deductible, per IRS rules.– Must meet combined deductible before coinsurance

applies.– No separate out-of-pocket maximum for drugs.

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Savings Component of New Plans

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What is a Health Savings Account?

• Tax-advantaged savings account that’s available only with a high-deductible health plan.

• New way of saving for health expenses and retirement.– Before age 65, use it tax-free for health care expenses.– After age 65, still use it tax-free for health care but also use it like

an IRA for other expenses.

• Like an IRA, only better.– Never taxed if used for medical expenses.– No income limits; employees at all salary levels may participate.– Pretax payroll deductions available.

• The account is held at JPMorganChase. It’s yours, even if you change health plans or jobs.

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You and/or Oxy Fund the Account

• Contributions allowed up to the amount of your medical plan deductible every year.

• Employee contributions to an HSA are optional.• Oxy pays the basic administrative fee while you are an

active employee and enrolled in an Oxy HDHP; you pay when you disenroll, terminate or retire.

HSA Option Oxy

Contribution

Maximum Employee

Contribution

Maximum Combined

Contribution HealthFund Plus: Employee Only Employee + 1 & Family

$500 $1,000

$750 $1,500

$1,250 $2,500

HealthFund Saver: Employee Only Employee + 1 & Family

None None

$2,650 $5,250

$2,650 $5,250

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Oxy Contributions

• Applies to HealthFund Plus option.– In 2006, Oxy will make contribution at the beginning of

the year, so money is immediately available.– You own the funds once deposited.

• No Oxy contributions to HealthFund Saver option, but significantly lower employee contributions for medical coverage.

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Employee Contributions: Pretax

• Payroll deduction made before federal and state taxes (in most states) are taken from paycheck.

• Some states do not allow tax-free treatment of HSAs: Alabama, California, Maine, Massachusetts, New Jersey, Pennsylvania, and Wisconsin.

• Maximum monthly contribution via payroll deduction is 1/12 of your annual limit.

• Your contributions will be credited in your HSA twice per month.

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Employee Contributions: After-Tax

• Send directly to Aetna via check or electronic funds transfer (EFT) from your bank account.

• “Above-the-line” deduction on tax return:– Reduces your taxable income by the amount of your

after-tax contribution.– Do not have to itemize to claim deduction.

• Contribute up to April 15 of the following year.• Your responsibility not to exceed maximum

contribution limit.

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Employee Contributions: Catch-Up

• Catch-up contributions for age 55+.• Send directly to Aetna via check or electronic funds

transfer (EFT) from your bank account.• Both employee & spouse may contribute.

– Spouse must also be 55+ and covered under HDHP.– Separate account and application for spouse; separate fees also

apply and will be deducted from account.

• Up to $700 per person in 2006; eventually $1,000 by 2009.• Separate from catch-up contributions to Oxy’s Personal

Savings Account (the PSA).• In addition to annual contribution limits shown earlier.

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HSA Specifics

• Unlike health care FSA:– No “use it or lose it” rule; funds roll over each year.– You cannot draw money that is not in the account. It’s

like a bank account.

• Tax free when spent on “qualified expenses.”

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Sample “Qualified Expenses” under HSA• Medical deductibles and coinsurance• Diagnostic services• Dental and orthodontia• Routine physicals• LASIK surgery, contact lenses and eyeglasses• Non-covered prescriptions such as birth control pills, drugs for sexual

dysfunction, plus most over-the-counter drugs• Chiropractic services• Hearing aids• Medicare and Medicare Advantage premiums• COBRA premiums• Qualified long-term care premiums• Certain retiree medical premiums/contributions

See IRS Publication 502 for details Items in black may be reimbursed from Regular FSA or HSA. Items in red may

only be reimbursed from HSA.

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Accessing Your HSA Funds

• Use Aetna HSA debit card or Aetna-issued checks at pharmacy, provider’s office or ATM to access HSA funds.– No fee to use debit card at provider’s office or pharmacy. Fee for

use at ATM.– HSA checks available upon request. $10 for book of 25.

• Process:– Pharmacies: You can use your VISA debit card at time of purchase.– Physician services:

• Submit medical claim for network discounts and credit toward deductible.

• Generally, network providers file medical claims on your behalf and will not require payment in advance.

• Pay doctor’s bill after claim has been processed.– No claim forms to obtain reimbursement from HSA.

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Accessing Your HSA Funds (cont.)

• You must have funds in your account to obtain reimbursement.

• Keep all your receipts and documentation in case they are requested by the IRS.

• Remember, you don’t have to use your HSA funds for current expenses.

• Details are in your Aetna Welcome Kit.

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Tax Advantages

• Contributions tax free.• Investment earnings tax free.• Withdrawals tax free if used for qualified

expenses.

Notes:

• If HSA funds are used for other than qualified medical expenses, the expenditure will be taxed and, for individuals who are not disabled or not over age 65, subject to a 10% penalty tax.

• Some states do not allow tax-free treatment of HSAs. (See slide 19.)

Triple Tax Savings!

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Investment Options

• If account balance < $2,000:– Interest-bearing, FDIC-insured account at JPMorganChase Bank.

– Cash account earning 3.09% as of October 2005.

• If account balance > $2,000: – Access to 8 JPMorgan mutual fund options:

• 3 Asset Allocation funds

• 2 Fixed Income funds

• 2 US Equity funds

• 1 International Equity fund

– $2.50/month investment fee applies if you invest in mutual funds.

– Mutual funds are not FDIC-insured and expose investors to the risk of loss of principal, but provide the opportunity to earn higher returns than might be available in the HSA cash account.

– More information will be sent when your balance hits $2,000.

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HSA Fees

NOTE: Fees

deducted from

account balance.

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Why Would I Enroll?

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Benefits of Long-Term Saving

• Assumes 5% rate of return.

Percentage of Year-End Account Balance Rolled Over

Years Contributing to HSA 50% 75% 100%

$1,000 Annual Contribution 10 $4,293 $8,500 $23,487 20 $4,312 $9,164 $46,722

$2,600 Annual Contribution

10 $7,740 $15,506 $44,053 20 $7,765 $16,816 $100,849

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Employee Example

Annual Salary $75,000Coverage Level Employee + 1Claims $1,800Preventive $300OOP Max $5,250

Basic POS HealthFund Plus Health Fund SaverDeductible $600 $2,500 $5,250

Claims minus Preventive Covered at 100% $1,800 $1,500 $1,500Claims up to Deductible $600 $1,500 $1,500Add'l Claims above Deductible $1,200 $0 $0Coinsurance (20%) $240 $0 $0

Claims Expense $840 $1,500 $1,500+ Medical Plan Contributions $1,920 $1,440 $480 - HSA Seed $0 $1,000 $0

Employee Spend $2,760 $1,940 $1,980

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Sample EmployeeOxy Salary = $40k, Family Coverage

Family

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$0 $300 $500 $1,000 $2,000 $3,000 $5,000 $10,000 $15,000 $20,000

Annual Allowed Claims

EE

Sp

end

Basic POS

HealthFund Plus

HealthFund Saver

EE Spend = Oxy medical contributions + coinsurance/deductible – HSA seed

Claims shown on the bottom axis, employee’s expenses (including medical contributions) on the side. Lines show employee expenses at different claims levels. This graph shows that:

Below $2k in claims, this family has the lowest out-of-pocket expenses in the HealthFund Saver plan. Above $3k in claims, this family has the lowest out-of-pocket expenses in the HealthFund Plus plan.

Use the Plan Cost Estimator to choose the right plan for you.

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Sample EmployeeOxy Salary = $75k, Family Coverage

Family

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$0 $300 $500 $1,000 $2,000 $3,000 $5,000 $10,000 $15,000 $20,000

Annual Allowed Claims

EE

Sp

end

Basic POS

HealthFund Plus

HealthFund Saver

EE Spend = Oxy medical contributions + coinsurance/deductible – HSA seed

Claims shown on the bottom axis, employee’s expenses (including medical contributions) on the side. Lines show employee expenses at different claims levels. This graph shows that:

Below $2k in claims, this family has the lowest out-of-pocket expenses in the HealthFund Saver plan. Above $3k in claims, this family has the lowest out-of-pocket expenses in the HealthFund Plus plan.

Use the Plan Cost Estimator to choose the right plan for you.

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Sample Expenses

$2,560

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HSA Pros/Cons

PROS• Tax advantages and interest/

investment earnings.• No “use it or lose it” rule.• Portable.• Most preventive services

covered at 100%.• Unlike IRAs, no income limits.

CONS• Additional complexity.• Higher deductible.• Limited purpose FSA

(discussed on slide 37).

• Risk of principal loss in optional mutual fund investments.

• Employees have more ownership/accountability.

• Incentive to constrain unnecessary utilization.

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What Else Do I Need to Know?

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“Limited Purpose” FSA

• If you enroll in an HSA and a health care FSA, you may only obtain reimbursements under the FSA for limited purposes:– Dental– Vision– Preventive care drugs and services– Expenses after your medical deductible

• “Use it or lose it” rule still applies.• Consider maximizing contribution to HSA before

contributing to Limited Purpose FSA.

HSA

FSA

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Who Can Enroll?

• To enroll in an HSA, you must:– Be covered by a High-Deductible Health Plan (HDHP), as

defined by IRS. (Both of Oxy’s HSA plans meet the requirements.)

– Not be covered by another health plan (e.g., your spouse’s medical plan) that is not a high-deductible health plan and/or FSA plan.

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Spouses with Medical/FSA Coverage

Note: This chart is not intended to be all-inclusive or to address unique circumstances. Seek guidance from a qualified tax expert as needed.

If your spouse has a: Allowable Participation Under Oxy’s HDHPs/HSAs

Non-HDHP Medical Plan (including Medicare)

If you are covered under your spouse’s medical plan, you and your eligible dependents may enroll in Oxy’s HDHP but not in a Health Savings Account.

If you are not covered under your spouse’s medical plan, you and your eligible dependents may enroll in Oxy’s HDHP and in a Health Savings Account. Your HSA contribution limit is based on your coverage level under Oxy’s HDHP.

Regular Flexible Spending Account (FSA) for Health Care

You and your eligible dependents may enroll in Oxy’s HDHP but not in the Health Savings Account.

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Can I Take the HDHP Without the HSA?

• You may enroll in an Oxy HDHP plan and decide:– Not to make a contribution to the savings account.– To make a contribution to an HSA account with another

insurer or financial institution.

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What Else?

• Prescription drug issues:– Refill information will not pass from Medco to Aetna.– Get new prescriptions to set up mail order with Aetna.

• If you terminate, retire, or disenroll from an Oxy HDHP, you keep the account but you must pay basic account administrative fee.

• Aetna/JPMorganChase will send the necessary tax forms showing your prior year’s contributions & withdrawals.

• Aetna will send Welcome Kit with more information to enrollees.

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Education/Tools

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Plan Cost Estimator

• Tool that allows you to enter expected office visits, drug expenses, etc.

• Shows expected OOP expenses for all plans so that you can pick most cost-effective plan.

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Quick Look at the Plan Cost Estimator

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Quick Look at the Plan Cost Estimator

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Quick Look at the Plan Cost Estimator

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Quick Look at the Plan Cost Estimator

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Quick Look at the Plan Cost Estimator

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Quick Look at the Plan Cost Estimator

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Quick Look at the Plan Cost Estimator

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Aetna Tools

• Aetna Navigator:– Cost of Care Tool– Hospital Comparison Tool– InteliHealth– DocFind– HSA Balances

• 24-Hour Informed Health Line.• Healthy Outlook Disease Management Program.

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Corporate Wellness Program

• Goals:– Understand current health status and risks.– Maintain or improve health.

• Approach:– Annual on-site biometric health screenings.– Online Health Risk Assessment and comprehensive

health website.– Phone-based coaching for those at greater risk of

certain conditions.

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Posted on oxylink.oxy.com• PLAN COST ESTIMATOR

• PUBLICATIONS:– OxyLink HSA Presentation– Oxy HSA Brochure– HSA–Frequently Asked Questions (FAQs)– HSA Fees – HSA Investment Choices– Aetna Terms & Disclosures– plus other helpful links!

• LINKS TO OTHER WEBSITES:– US Dept. of Treasury– IRS

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Next Steps

• Review the HSA brochure and online links.• Open Enrollment materials coming in early

November.• Use Plan Cost Estimator to determine best

medical plan option for you.• If enrolled in POS 1000, you must select a new

option for 2006.

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The Small Print

The information provided in this document is NOT tax advice. While the information is believed to be accurate as of the print date, it is subject to change. Consult a qualified tax expert for advice on determining eligibility for any tax benefit mentioned herein.

The company expects and intends to continue its benefit plans but does not guarantee any specific level of benefits or the continuation of any benefits during any periods of active employment, inactive employment, disability or retirement. Benefits are provided solely at the company's discretion and do not create a contract of employment.

The company reserves the right to modify, suspend or terminate any of its plans at any time. This information is applicable to eligible nonrepresented employees. Applicability to represented employees is governed by local collective bargaining agreements. Subject to this and future agreements, the company reserves the right to change, amend or terminate any benefit plan at any time.