By David Goldfarb, CBC
Without question, the uncontrollable and ever-increasing cost to provide quality health care benefits to your employees is among your most grave concerns. Every year, executives and business owners like you find they have no choice but to ask employees to help share the burden of the premium increases. Furthermore, many companies also turn to diluting benefit plans by enacting cost-cutting measures such as lowering reimbursements, increasing deductibles and co-payments, and deploying more stringent price controls, among other things. While wielding the annual budget ax on your benefits plan may not be avoidable, there are options out there that will not only help your company control costs but also may be very appealing to many of your employees: the Health Savings Account or HSA.
Consumer-driven health plans (CDHPs), including HSAs linked with high-deductible health plans, are gaining adoption by employers that are adding it to their existing benefits portfolios or, in some cases, even using them to replace their traditional plans. The Employee Benefit Research Institute found that, although larger companies are more likely to adopt HSA plans, small business owners are also lured by the plan’s lower costs.
According to 15th Annual NBGH/Towers Watson Employer Survey on Purchasing Value in Health, companies with higher levels of CDHP enrollment reported lower costs. Survey respondents reported at least 50 percent of their workers enrolled in a CDHP realize average annual costs per employee of nearly $1,000 less than at non-CDHP companies. Similarly, nearly 60 percent of survey respondents reported their employees pay premiums that are at least 30 percent less than those for traditional copay plans.
Available since late 2003, adding an HSA-compatible plan is a less expensive option to provide employees when compared to traditional medical plans — interestingly enough, if implemented correctly many employees favor the plans over traditional PPO or HMO plans. An HSA empowers workers to take more ownership of their health care decisions, pay for non-reimbursed medical expenses on a tax-advantaged basis and best of all, premiums are lower (typically anywhere between 20-45 percent lower when compared to traditional plans). The HSA is also attractive to employees because both the company and the worker can contribute to the account, but the money is portable and belongs to the workers if they leave the company.
Consumer-driven health plans are foundational to the philosophy that people with a larger financial responsibility for spending will become more responsible for their health and better consumers of health care services. Research bears out this concept. According to a survey by the Blue Cross and Blue Shield Association, employees eligible for an HSA were 17 percent more likely to take part in wellness programs such as smoking cessation, stress management (22 vs. 8 percent in a traditional plan), and nutrition and diet programs (27 vs. 12 percent). The survey also found 63 percent of workers eligible for an HSA tracked their health care spending as opposed to 43 percent in traditional plans.
If you adopt an HSA plan, achieving optimal results requires your company, the insurance carrier, and your benefits consultant to partner together and develop an effective, proactive communication plan to ensure everyone understands how the plan works. Lack of proper communication, education and access to information to employees is one of the most common mistakes companies make when implementing HSAs. It is important to look for an HSA plan that incorporates a debit card to help eliminate confusion and encourages employee adoption over other plan choices.
It is important to note that recent health care reform will impact HSAs. As it stands today, beginning in January 2011, HSA funds will no longer be usable for over-the-counter medications unless prescribed by a physician. Additionally, beginning next year, there will be an increase in penalties if one uses the HSA funds for non-eligible medical expenses; the penalty increases from 10 to 20 percent. Despite these two changes, however, the HSA remains a very viable and recommended option to consider.
While the effects – and the final verdict – of health care reform in America remain to be seen, we do know consumer-driven health care plans will continue to gain adoption. Both the lower premium of the HSA option coupled with employees’ personal spending responsibility will together achieve positive impact on your bottom line — both short-term and long-term.
David Goldfarb is president of Dallas-based DSG Benefits Group, LLC