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| October, 2003 | The
Monthly Newspaper of the NYSSCPA |
Vol.
6, No. 10 |
Consumer-Driven Health Plans
By Patricia Lawrence, Human Resources
It is that time of the year again, when associations and companies start the nail-biting process of analyzing their health-care plans to find hidden savings in the event of a big premium hike. Over the last two years, premium rates have increased between 16 and 25 percent, enough to force employers to severely curtail their health-care plans, including reducing benefits or transferring the costs to employees.
ManagerIt is that time of the year again, when associations and companies start the nail-biting process of analyzing their health-care plans to find hidden savings in the event of a big premium hike. Over the last two years, premium rates have increased between 16 and 25 percent, enough to force employers to severely curtail their health-care plans, including reducing benefits or transferring the costs to employees.
A consumer-driven health plan might be the answer to an employer’s woes in combating double-digit health premium increases. It also can get employees more involved in deciding how much they want to pay for medical costs.
Health Reimbursement Accounts to the Rescue
1. At the beginning of the plan year, the employer establishes a health reimbursement account for the employee. Both the employer and the employee can then put aside money for the health reimbursement account.
2. The employee or the consumer decides how much he or she would like to put into the account to pay for medical services like physicals, eye exams, prenatal care and others.
3. The funds in the account are flexible so the employee can use them to pay for vision care, dental care or other medical services.
4. The employee has access to a wide choice of doctors and is in a good position to compare the quality and costs of certain providers, options that are not available under a regular group plan. Though it depends on the group arrangement, choosing doctors usually is a task undertaken by a broker or consultant.
5. The health reimbursement account is portable and the funds can be rolled over from year to year without the employee losing any funds, as is the case with a flexible spending account.
A health reimbursement account reduces costs not only for the employee but for the employer as well. The employer saves on premium rates since employees spend only what they need. If an individual does not visit the doctor, he or she doesn’t have to pay for the doctor’s visit, unlike under an HMO plan in which the doctor gets paid upfront even if the employee did not go to the doctor for the year.
Consumer-driven health care gives the employee more autonomy on how to spend his or her money, which is a change from being told how much it will cost to have health insurance. Consumer-driven health care not only empowers employees, but gets them involved in managing their medical benefits, as is the case with many employees participating in defined contribution plans. Under defined contribution plans, the employee decides how much to contribute to his or her retirement account and how much risk to take. The same concept is true in consumer-driven health care.
Educate, Educate, Educate
For consumer-driven health plans to work, employers must educate and communicate the benefits of health reimbursement accounts so that employees aren’t apprehensive and fear that something may be taken away from them. Once employees cross the bridge over the unknown, they will be more willing to try a new way to pay for their medical expenses, especially when they learn that benefits will not be lost from one year to the next.
A health reimbursement account is a new concept that is slowly being accepted. This concept will pick up speed and eventually could become a popular and effective way to control the double-digit health premium increases, which appear to have no end in sight.
