consumer driven health plan discussion

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Consumer Driven Health Plan Discussion

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Consumer Driven Health Plan Discussion. Common Objections to Consumer Directed Plans. Need vs. Want Filet mignon or hamburger Vioxx or aspirin Employee noise and understanding Provider resistance Funds for accounts. Managed Care. - PowerPoint PPT Presentation

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Page 1: Consumer Driven Health Plan Discussion

Consumer DrivenHealth Plan Discussion

Page 2: Consumer Driven Health Plan Discussion

Need vs. Wanto Filet mignon or hamburgero Vioxx or aspirin

Employee noise and understanding Provider resistance Funds for accounts

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Common Objections to Consumer Directed Plans

Page 3: Consumer Driven Health Plan Discussion

Has created a generation of consumers unaware of the true cost of healthcare

Provided little incentive to be a prudent healthcare consumer

Result - the return of runaway medical inflation

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Managed Care

Page 4: Consumer Driven Health Plan Discussion

Cost of the benefit dollar exceeds cost of real dollar $1000 in insurance benefits costs more

than $1000 in cash Result – Account-based health plans

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What has happened?

Page 5: Consumer Driven Health Plan Discussion

A healthcare program: Through plan options or Funding of claims The employee has a significantly larger

stake in financial decision-making for healthcare provided under the plan

If done right – THIS IS NOT A COST SHIFT – It is a responsibility SHIFT

5

What Makes a Consumer-Directed Health

Plan?

Page 6: Consumer Driven Health Plan Discussion

Stabilize employer premium

Facilitate employee behavior change

Educate employeesEngage employees with financial

incentivePromote better healthcare spending

decisions and utilization habits6

Objectives of a Consumer- Directed Health Plan

Page 7: Consumer Driven Health Plan Discussion

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Consumer-Directed Health Plan Wheelhouse

Common 1st step

Page 8: Consumer Driven Health Plan Discussion

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Dual / Triple Option Medical Plans

Two or more health benefit plans offered to employees, with a differentiation in the employee’s cost of healthcare coverage depending upon their plan selection.

One of the health plans offered usually is a high deductible health plan.

Page 9: Consumer Driven Health Plan Discussion

Example – Dual Choice Employee chooses between:

Plan A – Low deductible plan that cost $$$ per month or

Plan B – Higher out of pocket exposure that cost $$ per month

Typically – “Seasoned” employees and those with chronic conditions will select the low deductible plan. Younger and /or lower utilizers of care will select the high deductible plan

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Page 10: Consumer Driven Health Plan Discussion

High Deductible Plan

Employer sponsored healthcare plan with an annual deductible of $1000 or more

May or may not have copays, Rx etc..

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Page 11: Consumer Driven Health Plan Discussion

Example – High deductible

One plan with high potential out-of-pocket exposure

Typically, employees do not view this as coverage that “is worth anything”

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Page 12: Consumer Driven Health Plan Discussion

Employer Reimbursement Program

Employer offers a high deductible health plan and self-funds a portion of the deductible for reimbursement to the employees.

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Page 13: Consumer Driven Health Plan Discussion

Supplemental Coverage Voluntary Offerings

Employer offers a high deductible health plan to the employees

Sponsors a menu of supplemental options

Employees share in the total cost of the supplemental programs.

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Page 14: Consumer Driven Health Plan Discussion

Example - Supplemental Any type of plan that also offers:

Flexible Spending Accounts

Specific disease coverage Cancer Accident Critical Illness “Gap” Plan

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Page 15: Consumer Driven Health Plan Discussion

Healthcare Reimbursement Arrangements

Federally approved program, which allows an employer to create an arrangement or plan for reimbursing employees for a portion of their medical expenses.

Most flexible account-based plan

Created by the market, not the government

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Page 16: Consumer Driven Health Plan Discussion

HRAs Plan design/flexibility/can be coupled with FSA

Employer can fund reimbursements using savings from switching to a high deductible plan

The employer determines the funding mechanism and amount

Employer owns the funds until used

Reimbursements are tax deductible for the employer

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Page 17: Consumer Driven Health Plan Discussion

HRAs HRAs are available to any size group

Employer determines how much of funds can be carried over

Employee can use only for applicable medical expenses defined by the employer

Employee contributions not allowed

Employee does not own account

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Page 18: Consumer Driven Health Plan Discussion

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HRA’s

HRAs can be portable

Funds available on day 1

Page 19: Consumer Driven Health Plan Discussion

Example - HRA

Typically no additional EE out of pocket exposure

Typically savings in year one for the employer

Smaller groups total replacement, larger groups option plan

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Page 20: Consumer Driven Health Plan Discussion

Health Savings Account

Tax exempt trust or custodial account established exclusively for the purpose of paying qualified medical expenses

Created by the government with assistance of specific groups

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Page 21: Consumer Driven Health Plan Discussion

Who is Eligible for an HSA?

Anyone enrolled in a “qualified health plan” with an annual deductible of $1,150 for self coverage and $2,300 for family.

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Page 22: Consumer Driven Health Plan Discussion

Key Components High deductible plan with limited 1st dollar

coverage, no Rx after 2005 Account to reimburse qualified medical

expenses – 213(d) Both employee & employer may contribute to

the account Tax advantages for both employee &

employer Carryover provision

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Page 23: Consumer Driven Health Plan Discussion

HSAs

Lower premium costs for qualified plan Employer contributions are tax deductible

Individual contributions are tax deductible

Interest and earnings on assets are tax free, money grows tax deferred

Money saved can be used for qualified medical expenses tax free for life

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Page 24: Consumer Driven Health Plan Discussion

HSAs Account is portable Money remaining in account rolls over Employee sees advantage of building funds…

Better healthcare consumer Catch-up provision for those 55 and older Can be used to pay COBRA and other

medical insurance premiums No substantiation requirements Age 65 and over - no penalty for non-medical

use of money

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Page 25: Consumer Driven Health Plan Discussion

HSAs

Flexibility up to maximum contribution into accounts

Medicare eligible individual loses ability to deposit into HSA the month they are entitled to benefits

Must be held by a bank or other qualified trustee

Total contributions limited annually - all sources

Potential asset accumulation = ???

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Page 26: Consumer Driven Health Plan Discussion

Example HSA $2500 deductible, 100% plan

Employer or Employee funds up to statutory max

Physician Office Visits and Prescriptions subject to deductible

Contributions Tax Free, growth Tax Free, medical “IRA”

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Page 27: Consumer Driven Health Plan Discussion

HSA Best Fit Scenarios

High income

Tax shelter

Employer contribution strategies

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Page 28: Consumer Driven Health Plan Discussion

High Income

Not ERISA

Can discriminate

Good for company where “executive benefits” are a must

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Page 29: Consumer Driven Health Plan Discussion

High Deductible Hurdles

January start date

HDHP limitations – No 1st dollar benefits or copays except for Wellness

Prescriptions subject to deductible

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Page 30: Consumer Driven Health Plan Discussion

Tax Shelter

“Above The Line” tax deduction at all income levels

Use HSA to invest Pay for all other services out-of-

pocket

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Page 31: Consumer Driven Health Plan Discussion

HSA Limitations

Can’t be covered by other plans Except

◦ Limited or Specified Benefit Plans

◦ Can’t combine HSA with HRA or FSA unless designed as a specific use plan

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Page 32: Consumer Driven Health Plan Discussion

Employer Contribution Strategies

Does employer limit his contributions to 50% of single rate across all tiers?

Is single rate >$225 for high deductible health plan?

How much are the employees currently paying?

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Page 33: Consumer Driven Health Plan Discussion

Employer Contribution Strategies

If yes and yes….

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Page 34: Consumer Driven Health Plan Discussion

Employer Contribution Strategies

Take existing employee contribution and place in HSA

Employee contribution + employer contribution remaining apply to high deductible health plan

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Page 35: Consumer Driven Health Plan Discussion

Employer Contribution Example

$500 deductible, 80% plan

Office visit $25, Rx $10/$30/$50

$300 single rate

$900 family rate

Employer pays $200 of single, employee pays balance

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Page 36: Consumer Driven Health Plan Discussion

Employer Contribution Example

Qualified HDHP

$2500 Single, $5000 Family deductible, 100% plan

No office visit, Rx roll up under deductible

$200 single premium, $600 family premium

Employer pays $200 per employee

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Page 37: Consumer Driven Health Plan Discussion

Employer Contribution Example

Single employee

Premium $0

HSA $1200 or more

Family employee

Premium $400

HSA $3600 or more

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Page 38: Consumer Driven Health Plan Discussion

Employer Contribution Example - Impact

Employer impact Less insurance company exposure = less

rate increase Same cost

Employee impact Keep $$$ Earn interest Better retirement Same cost Funds available

ENGAGES THE EMPLOYEE!!!!38

Page 39: Consumer Driven Health Plan Discussion

Integrated Carrier-Based Products

Questions to ask

Who owns the $$ Auto adjudication

◦ All the time for everyone?

Portability for employee Termination for employer Experience

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Page 40: Consumer Driven Health Plan Discussion

HRA vs. HSA

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Employer perspective

HRA HSA

Cash Flow Can vary, employer has total control

100% gone

Income Statement

Expenses taken as claims paid. No deduction or account contribution

Expense taken as contribution made

Balance Sheet

Asset can accumulate and off set any potential liability

No impact. NO assets

Page 41: Consumer Driven Health Plan Discussion

HRA vs. HSA Employee perspective

HRA HSA

Funds Availability

Full amount available on day 1

Available as contributed unless tied to credit

Office Visit Can have copay or come from account

Must come directly from account

Pharmacy Drug card can run outside or be integrated in the program

Has to be taken from the account

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Page 42: Consumer Driven Health Plan Discussion

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For additional questions or to schedule an

appointment, contact Jeff McGuire or Matt

Robertson.

Call Daines Insurance & Financial Services, LLP.

877-793-3034