Consumer Driven Health Plans

1. Consumer Driven Health Plans

2. Health Plans Premiums Experiencing Double Digit Increases! Increasing Premiums AND Decreasing Benefits

3. Who Consumes Health Care? • Who are the consumers of health care? • Individuals • NOT Employers (Plan Sponsors) • NOT Health Insurance Carriers “Nobody spends someone else’s money as carefully as they spend their own.” Milton Freidman Nobel Prize Economist

4. Fixed Costs Pay $750 in Car Insurance Premiums Potential Liability $250 Deductible if Crash Car Acting as a Consumer : Car Insurance • Option 2 • Option 1 Most Consumers choose to lower their premiums and take on more responsibility if they crash their car. • Fixed Costs • Pay $450 in Car Insurance Premiums • Savings of $300 Annually • Potential Liability • $500 Deductible if Crash Car

5. Consumer Driven Health Plan Alternative Employees: • More aware of costs • Make informed decisions • Incentive to use tools to make price and quality conscious decisions • Wellness Initiatives Employer: • Cost effective health plan • Provide a long term solution • Continue to offer great benefits with savings Decrease Premiums Increase Employee Responsibility “Deductible”

6. Consumer Driven Health Plan Alternative BUT, I don’t want to increase my employees’ out of pocket responsibility! You don’t have to! • Preventative Procedures are covered in full • “Oil Changes” • Consider what employees are already liable for in copays • And you can add an HRA and FSA for the deductible

7. CDHP at Work Employers and Employees can share the savings and the risk, by adding a Health Reimbursement Arrangement (HRA) Premiums Employer Premiums Savings Employee Premium Savings Employee Risk HRA Employer Risk Potential Out of Pocket “Deductible”

8. What is an HRA? A tax advantaged plan that employers can use to help pay for employee medical expenses. • Tax Deductible to Employer • Tax Free to Employee (Doesn’t count as income) • Pay as you go (No prefunding requirement) • Flexible Funding Mechanism

9. Renewal Premium Increase of 14% Preventative Visits covered at 100% $10 Office Visit Copay $ 25 Specialist Copay $100 Hospital Copay $300/$600 Deductible 80% Coinsurance Up to $2000/$4000 Savings Example #1 • Traditional Co-Pay Plan • CDHP with $2000/$4000 Deductible Premium Savings of 26% Preventative Visits covered at 100% $2000/$4000 Deductible for all other services (Hospital, Lab, Diagnostic Doctor and Specialist Visits) No Copays No Coinsurance

10. Savings Example #1 Small Group

11. Savings Example #3 Large Group

12. HRA Flexibility – Employer Choice • Eligible Expenses (IRS 213(d) • Deductible only • Co-pays and Coinsurance • Rx • Dental and Orthodontia • Vision • How much to fund • When funding becomes available (Pre-funded, monthly, quarterly)

13. How do Employees Access HRA funds? • Manual Claims • Check • Direct Deposit • Debit Card • Vendor Specific • Auto-Pay from Carrier Claims Data Feed • Pay Provider Directly • Pay Member IRS Required Substantiation – Plan Sponsor (Employer) must require proof that Employee claims are eligible under HRA plan guidelines (i.e. eligible expense)

14. Not all HRA Administrators are Alike • Compliance • Plan Documents, Substantiation, Health Care Reform Changes • Service • Online Accounts for Employees to check Balance, Transactions, Submit claims Online • Utilization Reporting for Employer • Claims Data Feeds with Carriers • Flexibility of Plan Design

15. Flexible HRA Plan Designs Employer Employee Potential Out of Pocket Responsibility “Deductible” Premiums Savings

16. Adding A Flexible Spending Account (FSA) • What is an FSA? • Atax advantaged plan that an employer can offer as a voluntary benefit to their employees and employees can choose to contribute funds pre-tax via payroll deductions • Employer saves on payroll tax (7.65%) • Pre-tax for employees • Pre-funded • Use it or Lose it for employees • Eligible Expenses: • Deductible, Copays, Coinsurance • Dental and Orthodontia • Rx and limited OTC • Vision

17. Tax Savings for Employer • Dependent Care Accounts (DCAs) can add savings too! • What is a DCA? • A tax advantaged plan employees can elect to contribute funds pre-tax via payroll deductions to pay for custodial care of dependents while the employee is as work • Pay as you go (no prefunding required by employer) • Maximum Contribution : $5000 per household • Eligible Expenses Include: • Custodial Care while employee is at work • Daycare while employee is at work • Non Eligible Expenses Include: • Tuition and classes • Babysitters during non work hours • Qualifying dependents: • A child, that is under the age of 13 and a tax dependent of the employee • Spouse or tax dependent that is physically or mentally incapable of self-care

18. Tax Savings Example: Small Employer

19. Tax Savings Example: Large Employer

20. FSA Tax Savings for Employee

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