Transcript Document

It’s Time to Rethink your
Medical Plans Strategy Plan
Planning Ahead for 2010
Presenter
Donna Lively
Director, GuideStone
Insurance Solutions and
Services
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Value of Employee Benefits
•Employees consider workplace benefits as
personal safety net
• Consider health benefits are nearly as
important as salary
3
Employers evaluate benefits
•Consider benefits to be important tool for:
• Retention
• Productivity
• Cost control
4
Employer concerns
60%
50%
40%
30%
20%
10%
2008
0%
2007
5
Skyrocketing Costs
National Health Care Expenditures in the US
Source: Centers for Medicare & Medicaid Services (Office of the Actuary, National Health Statistics Group)
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Factors contributing to the
current entitlement mentality
Consumers are insulated from true cost of
health care
• Office visit co-pays
• Prescription drug co-pays
• Employer-provided or subsidized benefits
7
Trends in health care
cost management
• Shift more cost to employee
• Cut benefits
• Explore consumer-directed health care
options
◦ Health Reimbursement Arrangements
(HRAs
◦ Qualified High Deductible Health Plans
(HDHPs)
◦ Health Savings Accounts (HSAs)
◦ Implement Wellness Incentives
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Deciding what’s right for your group
• Start with your health plan:
• Are you paying for more coverage than your
employees use?
• Where do you want to spend your health
care dollars?
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Deciding what’s right for your group
•Consider your circumstances:
• Do you want to encourage employees to
cost share?
• Do you want to provide benefits or
subsidize salary?
• What’s your demographic?
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Creating a successful cost
control strategy
• Consider the total cost of health care
• Find the right balance of premium and
deductible
• Incorporate wellness support
• Encourage active employee participation
• Explore consumer-directed health care
options
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What is “Consumer-directed
health care”?
• Puts the consumer in the “driver’s seat”:
where do you want to spend your health care
dollars?
• Makes consumers aware of the true cost of
health care
• Encourages people to become wiser health
care consumers
• Incorporates preventive care and wellness
as cost controls
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Types of consumer-directed
health care options
• Health Reimbursement Arrangements
(HRAs)
•Qualified High Deductible Health Plans
(HDHPs)
• Health Savings Accounts (HSAs)
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Increasing Deductibles:
Savings on Premiums and Claims
without moving the burden to my
employees
Why increase our deductible?
• The premium of any health plan is based on
the ratio of the deductible
• The lower the deductible,
the higher the premium
• The higher the deductible,
the lower the premium
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Why increase our deductible?
• Select the appropriate plan based on need
• Lower deductibles are beneficial for those
with frequent medical needs
• Higher deductibles are beneficial for those
with less medical needs
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Health Reimbursement
Arrangements (HRAs):
Helping Employers Move
to Higher Deductibles
What is an HRA?
Health Reimbursement Arrangement (HRA)
• An employer-provided medical reimbursement
plan that:
• Is funded solely by employer
• Reimburses employee tax-free for “medical
care expenses” (for individual, spouse and/or
dependents)
• Funded up to specified dollar amount per
coverage period
• Is non-discriminatory in reimbursement for all
eligible employees
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Why have an HRA?
Employer benefits
• Can pair with a higher deductible plan
• Helps provide quality benefits while
controlling costs
• This unfunded approach allows payments to
be made from employer’s general assets
• Flexibly designed:
◦ Timing of HRA fund availability
◦ Amount of HRA
◦ Who pays first – employer or employee
◦ Roll over availability
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Why have an HRA?
Employee benefits
• HRA can help offset increased out-of-pocket
expenses of higher deductible
• Lower monthly premiums can reduce
employee share of cost
• HRA reimbursements are tax-free for
qualified expenses
• Increases employee awareness of true cost
of health care
• If allowed by employer, HRA rollover option
encourages wise spending choices
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Design flexibility:
HRA plan options
• Rollover of funds
• Option of cap for rollover amounts
• Employer determines list of eligible medical
expenses (213(d) eligible)
• Order of HRA reimbursement:
◦ Employer pays percentage of every
claim
◦ Employer (HRA) pays first
◦ Employee pays first
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HRA risk sharing options
Employee Pays First
Employer Pays First
$250
Employee
Employer
Employee
$250
$500
$500
$500
$500
$500
Deductible Amount
Using a $1,000 deductible plan as a model
Employee
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Maximizing the HRA:
Design tips
• Employee pays first
•Makes employees aware of true cost of
health care
• Allow some rollover
•Encourages wise spending
• Build in Wellness incentives
• Wellness and preventive care can
improve health and productivity and
reduce long-term costs
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Illustration: How an HRA can
save you money
(Current PPO)
HC 500
(New PPOw/HRA)
HC 1000
Annual cost of coverage*:
$11,820
$10,082
HRA Pledge:
$
$
Total employer costs:
$11,820
0
500
$10,582
Savings with 100% of HRA Utilization: $1,238
*Illustration based on family coverage for your group for one employee with family coverage. HRA pledge is for
$500 employee.
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Federally Qualified High
Deductible Health Plans
(HDHPs):
Helping Employees Build
Savings for Medical Expenses
Federally-qualified HDHPs
Qualified High Deductible Health Plans
(HDHPs) for 2009
• Minimum deductibles:
◦ $1,150 (self) / $2,300 (family)
• Annual out-of-pocket maximums, including
deductible, cannot exceed:
◦ $5,800 (self) or $11,600 (family)
• Can have first dollar coverage for preventive
care / wellness
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How can a qualified HDHP save
me money?
• Lower monthly cost of coverage (premium)
• High coinsurance levels after deductible
• Helps you engage total health care costs,
not premium or deductible only
• Eligible for HSA contribution
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Saving with an HDHP: Pairing
with a Health Savings Account
• Takes into account total cost of health care
• Can take savings from lower HDHP
premium and contribute to an HSA
• HSA money can be:
◦ Used to “fund” deductible (pay for
claims as they arise)
◦ Allowed to accrue for large unexpected
medical expenses
◦ Allow to remain in HSA and grow year
after year to pay for retiree medical
expenses
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What is a Health Savings
Account? (HSA)
• Must be paired with a federally-qualified
High Deductible Health Plan (HDHP)
• Individually owned—no “use it or lose it” rule
• Contributions are tax-exempt
• Completely portable
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“Triple tax advantage” of an HSA
• Direct HSA contributions made by the
employee are an above the line deduction
from employee’s federal gross income
• HSA earnings accumulate tax free
• HSA withdrawals for qualified medical
expenses are free from federal income tax
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Who is eligible to open an HSA?
Individuals who:
• Are covered by a qualified High Deductible
Health Plan
• Are not covered by any other health plan
• Are not Medicare enrolled
• Are not claimed as a dependent on
someone else’s tax return
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What are HSA contribution rules?
• Can contribute up to federal maximums:
◦ 2009 annual maximums:
• $3,000 (Self coverage)
• $5,950 (Family coverage)
• Contributions can be made by employee,
employer, or by someone else on behalf of
employee
• Employees age 55 and older can make
“catch-up” contributions
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What are HSA contribution rules?
• Employer contributions must be
“comparable” for all participating employees
• FSA or HRA money may be used to open an
HSA one time only. Maximum contribution
limits apply.
• IRA funds may be used to open an HSA one
time only.
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HSA distributions
• Tax-free for “qualified medical expenses”
◦ Section 213(d) items, including over-
the-counter drugs
• Can be made for:
◦ Person covered by HDHP
◦ Spouse
◦ Dependent(s)
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HSA distributions
• Cannot be used to pay premiums for any
coverage other than:
◦ COBRA, Medicare or LTC coverage
◦ Health premiums while receiving
unemployment compensation
• If not used for qualified medical expenses:
◦ Amount is taxed as income
◦ 10% penalty is levied
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Which Medical Plan strategy is
right for
your group?
• Consider to current needs
• Consider your short-term strategy
• Consider your long-term goals
• For more information go to
◦ www.ustreas.gov and click on HSA link
on the left hand side of the webpage
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HSA / HRA comparison:
Health Savings Account
Health Reimbursement
Arrangement
Individually owned
Employer owned
Portable
Specific to employer
Funded before use
Funded as needed
Funded by employee,
employer, or others on
owner’s behalf
Funded by employer only
Balance rolls over at year end
Rollover optional
Must be used with
qualified HDHP
Can be used with any
health plan
Employee can use for future
medical expenses
Remains employer asset
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It’s Time to Rethink Your
Medical Plans Strategy
Questions?