Thursday, October 11, 2012

It is estimated that health care costs will continue to rise between 6% and 8% in 2013, and while this is much lower than in previous years, the trend to transfer more risk and responsibility to the employee will continue according to the latest surveys. This transfer occurs when deductibles and co-payments are increased to lower the premium. The addition or move to a consumer driven health plan sometimes called a High Deductible Health Plan is an increasing tread among businesses of all sizes. The Affordable Care Act will likely increase the usage of High Deductible Health Plans since this type of plan will meet the minimum coverage guidelines mandated for employers with over 50 full time employees.

The definition of consumer driven plans for this article is a High Deductible Health Plan as defined by the I.R.S. This means there is no co-payment for physician visits or prescription drugs and the insured (employee) must pay all the costs for medical care up to the deductible. The minimum deductible for an individual policy is $1200 and for a family is $2400 in 2012. The maximum deductible these policies can have for the individual $6050 and for a family $12,100. These will increase in 2013.  Plans often include well child visits and annual physicals at no cost to the employee.

The premise behind consumer driven plans is that with the traditional PPO and HMO plans the user (employee) is shielded from the actual costs because they only pay a co-payment or deductible which is only a fraction of the cost. In addition, the premiums are lower and the employee can elect to keep this savings in a tax favored account called a Healthcare Savings Account (H.S.A.). If the employee does not need any significant healthcare during the year they get to keep the savings. Another estimated benefit of consumer driven health plans is that the employee will be more careful utilizing services since they will have to pay for them until the deductible is reached.

Surveys consistently show that most Americans do not have adequate savings. It is estimated that 25% of Americans do not have any savings and at least that many have less than $5000. With no savings or disposable cash the employee may not seek treatment in the early stages of illness allowing the situation to reach a critical point before seeking help. In a recent article by Kathryn Mayer "Cost keeping the doctor away" she quotes one surveys results that 1 in 3 delay, postpone or skip regular doctor visits due to the out of pocket costs http://www.benefitspro.com/2012/10/03/cost-keeping-the-doctor away?utm_source=BenefitsProDaily&utm_medium=eNL&utm_campaign=BenefitsPro_eNLs).

So this is what happens. The employee signs up for the High Deductible Health Plan because the premium is much less. However, instead of putting the savings in a Healthcare Savings Account to cover the cost of the medical care up to the deductible they pocket the savings and spend it on something else. Now flash forward; the employee needs medical care because they have not prepared for this event through utilizing the Health Care Savings Account they delay treatment. Eventually the situation becomes a crisis and the employee goes to the emergency room. They are told they have a deductible of $1200. They do not have $1200, so the hospital treats them, sets up payment plan to recoup the $1200 debt. In 50% or more cases the hospital will have to write the debt off or take a reduced payment due to collection activity. In addition, the increased costs incurred by the insurance company because the employee delayed treatment will be reflected in larger premium increases the following year.

So how can we educate employees on the importance of early treatment and financial preparedness? Here are some ideas based on 12 years of experience:

1. Take adequate time to present the employee benefit plan.

2. Allow time for employees to meet with a qualified representative to ask questions privately.

3. Put in place an incentive to open and contribute to a Healthcare Savings Account. A company contribution is a great way to start. My most successful plans included a company match for every dollar the employee contributes up to a monthly, quarterly or annual cap.

4. Hold quarterly meetings to answer questions, especially during the first year.

5. Emphasis the no cost services included in a High Deductible Health Care plan like annual physicals and provide incentives to get employees to participate.

6. Consider implementing a wellness plan to encourage positive life skills.

In addition to the increased healthcare costs, the additional costs of extensive time off and reduced production from the employee have not been considered in this scenario.

The cost savings of moving to a High Deductible Health Plan with a Healthcare Savings Account do not happen overnight. Employee education and incentives will advance the process and the savings curve for the employer and the employee. The biggest savings occurs when the employee is healthier both physically and financially and the employer is more confident in having their health costs under control.

You can find all the I.R.S. guidelines regarding Health Care Savings Accounts in Publication 969 at www.irs.gov.

If you have questions regarding High Deductible Health Care plans or Healthcare Savings Accounts contact gary@illuminaregroupinc.com.