Transcript Document

History of Cost Controls
1940-1970
Virtually no cost control
1970-1980
Introduction of UC limits,
deductibles and
coinsurance
1980-1990
Hospital Pre-admission
authorization, surgical
authorizations, utilization
review
1990’s
Managed care
Present
Consumer Driven Health Care – CDHC
Health Care Costs % of change
Drivers of Health Care Costs
Prescription Drugs
Hospital Costs
Lifestyle choices
Third party payer system
Drivers of Health Care Costs
Prescription Drugs
Increased Utilization
Price Inflation
Higher Cost Drugs
Rx costs are projected to
increased over 12% each year
until 2010.
Marketing directly to
consumer. Patients are
asking for name-brand drugs
Drivers of Health Care Costs
Rising cost of hospital visits
Outpatient costs are the fasting growing
component of healthcare costs.
Inpatient costs are being driven primarily by
increasing hospital expenses per inpatient stay
Rising costs per admission are driven in part by:
Greater use of expensive technology
Higher labor costs
Hospital consolidations
Drivers of Health Care Costs
Lifestyle choices
Centers for Disease Control (CDC)
estimates that U.S. obesity-attributable
medical expenditures reached $75
billion in 2003
Drivers of Health Care Costs
Third Party Payer
People are not price sensitive in the market for
health care as they are in the market for other
goods and services because some third-party
(Medicare or a private insurer) pays most of the
cost of health services.
Consumers do not know the true cost of health
care.
How Employees View Health Care Costs
A recent Hewitt Study shows employees
don’t understand health care costs.
63% underestimate health insurance costs
69% overestimate how much they contribute to
health insurance
57% are unsatisfied with their coverage
Consumer Driven Health Care
Consumer Driven Health Care
(CDHC) refers to health plans in
which employees have a personal
health accounts such as a Health
Savings Account or a Health
Reimbursement Arrangement from
which they pay medical expenses
directly
Types of Consumer Driven Health Care
HRA
HSA
FSA
Health Reimbursement
Account
Health Savings
Account
Flexible Spending
Account
Who is eligible
Employees and
Retirees
Employees and
Retirees
Employees
Max Annual
Contribution (2007)
No maximum
$2,850 Individual
$5,650 Family
No maximum
Who owns
Employer
Employee
Employer
Who contributes
Employer Only
Employer or
Employee
Employee Only
Can employee earn
interest on money
No
Yes
No
Can money roll over
Yes
Yes
No
Is an HDHP required
No
Yes
No
Is it portable
No
Yes
No
Eligible for Cafeteria
No
Yes
Yes
Health Savings Accounts (HSA)
What is an HSA?
An HSA is a savings account where
consumers invest money and then
withdraw it, tax free, for eligible medical
expenses.
HSAs combine with high-deductible
health insurance plans to give
consumers more control -- and more
responsibility -- over their health
spending.
Health Savings Accounts (HSA)
Who is Eligible
To be eligible, an individual must
be covered by an HSA-qualified
High Deductible Health Plan
(HDHP) and must not be covered
by other insurance that is not
HDHP.
An individual may not be claimed
as a dependent on another
person’s tax return. In other
words, dependent children cannot
establish their own HSAs.
Health Savings Accounts (HSA)
Other Insurance
Certain types of insurance are permitted
with an HSA
Specific disease or illness
Accident
Disability
Dental
Vision
Long Term Care
Employee Assistance Programs
Wellness Programs
Health Savings Accounts (HSA)
Can employees have both an
HSA and FSA?
You can have both types of accounts,
but only under certain circumstances.
If you offer a “limited purpose” (limited
to dental, vision or preventive care)
FSA, then your employees can still be
eligible for an HSA.
Health Savings Accounts (HSA)
What's a High Deductible
Health Plan
Sometimes called "catastrophic"
coverage, high-deductible insurance
plans offer low premiums in exchange
for a high deductible.
For 2007, the minimum deductible is
$1,100 for individuals and $2,200 for
families.
Health Savings Accounts (HSA)
What's a High Deductible
Health Plan:
With the exception of preventive care,
you must meet the annual deductible
before the plan pays benefits.
Health Savings Accounts (HSA)
How much can you
contribute to an HSA?
HSA Contribution Limits - 2007
HDHP
Deductible
Single
Coverage
Family
Coverage
Maximum HSA
Contribution
Minimum: $1,110
$2,850
$1,500
$2,850
$2,000
$2,850
$2,500
$2,850
$3,000
$2,850
Minimum: $2,200
$5,650
$3,000
$5,650
$4,000
$5,650
$5,000
$5,650
$6,000
$5,650
HSA Out of Pocket Limits - 2007
Maximum out-of-pocket limits for HDHP
Single
Coverage
$5,500
Family
Coverage
$11,000
Health Savings Accounts (HSA)
Eligible Expenses
In general, funds from an HSA can be
used for a wider range of expenses
than covered by comprehensive
insurance plans.
HSAs cover routine doctors'
appointments and prescriptions, and
cash can be withdrawn to cover overthe-counter medicines, such as
aspirin and antihistamines.
A partial list of eligible expenses is
available in IRS publication 502.
Health Savings Accounts (HSA)
These are not considered
eligible expenses
Health insurance premiums
(Exceptions: LTC, COBRA, and
for individuals over age 65 certain
Medicare premiums)
Expenses incurred BEFORE the
HSA coverage is established.
Expenses that are covered by
your health care plan.
How are claims processed?
Individuals typically receive a checkbook
or debit card
Individuals are responsible for paying
providers as they are billed
There is no “gatekeeper” to insure the
charges are for qualified expenses
During an IRS audit, it is the individual’s
responsibility to prove that deductions
for the account were for qualified
medical expenses
Health Savings Accounts (HSA)
Advantage to the School District
Reduced Premiums
Provide Incentives to employees
to get Involved with healthcare
decisions
Encourage healthier staff
Health Savings Accounts (HSA)
Advantages to the employee
Money (including any employer
contributions) belongs exclusively to the
employee.
Money can be invested and income
earned grows tax-deferred.
Unused balances carry over each year
without limitations.
Portable – Employees can take with them
when they change jobs or retire.
How to add an HSA
Review plan design specifics and
determine level of employer
involvement
Limit medical offerings to one vendor to
avoid adverse selection
Outline eligibility
Select a vendor and or HSA
administrator
Draw a clear line between the HSA and
the health coverage to make it clear
that there are two components
How to add an HSA
Communicate clearly to staff – before,
during and after implementation
Share the savings from switching to a
high deductible plan with the employees
Make a one time contribution to the
account. Ongoing contributions can be
paid by the employee
When you educate the employees, talk
about the savings account first; the
deductible second.
During the first year, only a small
percentage of employees will participate
even if it is designed correctly. The
second year – through word of mouth –
generates greater participation.
How to add an HSA
The two most predictive aspects of an
employer’s success in offering an HSA are:
1. Whether or not they fund the account
2. How much the employer funds it.
Results and forecast
A recent Pricewaterhouse Coopers survey of large employers
who implemented an HSA:
Reductions in prescriptions by 5-25%
Reductions in office visits by 5-20%
First year rate increases in the range of –5% to +8% as
opposed to +14% to +16% nationally
In the first year alone, over 60% of CDHP enrollees had
average HSA balances of $400 to roll over to the next year.
According to Forrester projections, the number of HSAs will
grow to more than 6 million in 2008. That number could triple to
more than 18 million by 2012.
Results and forecast
Results and forecast
Interested in a quote for your district?
Call Bill Baker
417-882-2992
Or e-mail:
[email protected]
Forrest T. Jones & Company has worked
with Missouri School Districts since 1953.
We’d be happy to work with your School
District to see how much you can save
by introducing an HSA.
Resources:
U.S Treasury Department for HSAs
http://www.ustreas.gov/offices/public-affairs/hsa/pdf/HSA-Tri-fold-english-07.pdf
FSAFEDS www.fsafeds.com;
1-877-FSAFEDS(372-3337) or TTY 1-800-952-0450
OPM Web address for HSAs www.opm.gov/hsa
U.S Treasury Department for HSAs www.ustreas.gov/offices/public-affairs/hsa
For a list of qualified medical expenses that can be reimbursed through an HSA or HRA: www.irs.gov/pub/irs-pdf/p502.pdf
HSA Insider http://www.hsainsider.com