Why Should Employers Consider the Med-Gap Card™ Administrative Package?

The rising cost of major medical insurance is reaching crisis levels

  • Years ago, major medical insurance meant catastrophic coverage.
  • Today’s rich plans with low deductibles and co-pays are no longer affordable
  • Reducing benefits (higher deductibles and co-pays) to reduce premiums is the direction in which
    the industry is headed

The Med-Gap Card™ Administrative Package can be a part of a strategy to:

  • Lower the cost of healthcare
  • Reduce taxes
  • Provide a new and exciting benefit

About the Med-Gap Card™ Administrative Package

What is the Med-Gap Card™
The Med-Gap Card™ is the latest innovation in our HRA / FSA / DCA line-up. The card can be used worldwide wherever MasterCard® is accepted to pay for qualifying medical and dependent care services. It looks like a regular charge card, but this card is used to take funds out of a Health Reimbursement Arrangement,Medical Flexible Spending Account, and Dependent Care Account.

What is an HRA? HEALTH REIMBURSEMENT ARRANGEMENT
HRAs allow an employer to reimburse an employee for out-of-pocket medical expenses on a tax-free basis. The employer makes a predetermined amount available to each employee. The employee uses the money to pay for qualified expenses. If the employee does not use the money, the employer may allow the carryover of unused funds for future use. Funds used to pay for qualified medical expenses are considered a business expense for tax purposes for the employer.

What is an FSA? FLEXIBLE SPENDING ACCOUNT
FSAs allow the employee to set aside pre-tax dollars through payroll deduction to pay for qualified medical expenses. Unused funds cannot be carried over to the next year and are forfeited to the employer at the end of the plan year.

The tax advantage to the employee is immediate as opposed to filing on their tax return at the end of the year. Because the FSA is considered an employer sponsored health plan, for tax purposes, it is an employer business expense.

What is a DCA? DEPENDENT CARE ACCOUNT
DCAs allow you to set aside pre-tax dollars through payroll deductions for eligible anticipated dependent care expenses such as child care or a dependent parent. Unused funds cannot be carried over to the next year and are forfeited to the employer at the end of the plan year. Employees save on state income, federal income, and social security taxes on up to $5,000 a year for qualified dependent care expenses.

How does the Card work?
Simply present the Med-Gap Card™ at the time of purchase of qualified medical and dependent care services, and the payment will be deducted directly from your HRA, FSA or DCA.

  1. No more waiting for your reimbursement check to arrive.
  2. No double out-of-pocket payments.
  3. Very little paperwork. Just fax a receipt if requested.
  4. Check your balances on the web 24 hours per day.

Employees will see the Med-Gap Card™ as a benefit improvement
The Med-Gap Card™ can help offset or cushion the impact of benefit changes. Employees will appreciate:

  • Convenient access to the funds when they need them
  • First dollar coverage for out-of-pocket expenses
  • Tax savings (for the employee and employer) for amounts sheltered under an FSA and DCA

Why does self-funding using the Med-Gap Card™ work to save the employer money?
It's simple. You are self-funding the smaller bills and using the major medical plan to cover costs above this. Self-funding makes it possible for you to save money. Based on our research, 75% of people covered by a typical PPO co-pay plan do not meet a $500 deductible, and 84% of people covered by a typical PPO co-pay plan do not meet a $1,000 deductible. Our research tells us that on the average only 1 in 20 people are hospitalized each year. Since the employer is self-funding the claims under the deductible, the money that is not used, is not paid to the insurance company and therefore saved by the employer.

The Med-Gap Card™ is Simple and Easy to Use
The only task required of the employer is to set up a bank account for eligible expense payments and fund the account when notified by MasterCard®. (No pre-funding is necessary)

Med-Gap Card™ Concept
Example: Health Reimbursement Arrangement

Current Plan – Traditional Major Medical Plan:
$500 Deductible | 20% to $1,000 | Doctor 15/25 | RX $5/20/35

Step One:

Employer Changes the Group Major Medical Plan Design

Goal: Maximum Premium Reduction / Minimum Risk Increase

Deductible $1,000 | 20% $1,000 | Doctor $50/50 | RX $15/35/75
Raising the doctor and prescription drug co-pays, adding a prescription drug deductible or eliminating the doctor and prescription drug benefit will normally result in a significant premium reduction.

 
Census
Current Premium
Renewal Premium
Proposed Premium
E
73
$267.85
$433.72
$375.81
E/S
3
$601.29
$968.84
$854.31
E/C
7
$483.46
$789.41
$622.66
F
9
$800.46
$1301.46
$1111.74


Renewal Annual Premium
$621,661.32
Proposed Annual Premium
$535,696.08
Premium Savings
$85,965.24

**Projected Savings and *Projected Costs assume that half of the Med-Gap™ Card amounts are dispersed. All Savings Illustrations are based on the current census and the current premium rates of the major medical remaining constant for a 12 month period. Any changes in either of these two components will result in a corresponding change in the savings illustration. Set up Fee and Administration Fee will vary by type of plan selected.

Step Two:

The employer decides on Med-Gap Card™ Amounts

  Census HRA Amount
Employee 73 $500
E + Spouse 3 $1,000
E + Children 7 $1,000
Family
9
$1,000


Total Med-Gap Card™ Liability $55,500
Set Up Fee $300
Annual Admin. Fee ($9 per employee per month) $9,936
   
Proposed Annual Premium $535,696.08
Maximum Plan Cost $601,432.08
Guaranteed Savings $20,229.24
Projected Plan Cost* $573,682.00
Projected Savings** $47,979.24

The Med-Gap Card™ – the Smart Choice!