Transcript Consumer Driven Healthcare

Alphabet Soup -THE ABCs OF FSAs, HSAs, HRAs
A.I.M.’s 2nd Annual Health Fair
The ABCs of FSA, HSAs, HRAs
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How did we get here?
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Consumer Driven Health Care
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The CDHC Tool Box
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Q&A
The Reality Employers Face
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3 - 4 years of double digit increases
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Factors driving cost increases are many
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Prescription Drug Costs Rising
Baby Boomers Aging
Medical Technology Advancing
Provider Recontracting
Factors Driving National Increases
Other
Litigation,
Risk Mgt
7%
Increased Consumer
Demand
Drugs, Medical
Devices/Advances
5%
22%
15%
18%
Govt Mandates,
Regulations
15%
18%
Sources: Pricewaterhouse, 04/02, AAHP
General Inflation
Rising
Provider
Expenses
. . . the average company pays 3% of revenue for
health care benefits – up 50% in five years
Health care as percent of revenue
3.5%
CAGR=9%
3.0%
3.0%
2.7%
2.4%
2.5%
2.2%
2.1%
2.0%
2.0%
1.5%
1998
1999
2000
2001
Source: Hewitt Health Value Initiative; United States Census; Bureau of Labor Statistics (2002 Productivity
estimated based on first 3 Quarters)
2002
2003
Health care costs are growing much faster than
productivity (revenue per employee)
$220,000
$6,000
CAGR=3%
$205,087
$200,000
$194,153
$180,000
$183,067
$195,994
$5,456 $5,500
$187,110
$5,000
$4,778
$160,000
CAGR=10%
$140,000
$4,500
$4,336
$3,963
$120,000
Revenue per employee
$4,000
Healthcare costs per employee
$3,676
$100,000
$3,500
1998 1999
2000
2001 2002
Source: Hewitt Health Value Initiative; United States Census; Bureau of Labor Statistics (2002 Productivity
estimated based on first 3 Quarters)
Healthcare increases are rapidly consuming
the growth in household income
100% =
$2957
100%=
$2293
100% =
$1073
100% =
$1093
— Annual increase in
household income
65%
39%
7%
4%
1999
2000
* 2002 estimate based on 2001 growth
Source: U.S. Census Bureau, Kaiser Family Foundation, UHC Analysis
2001
2006
— Portion used to pay
increases in healthcare
premiums and out-ofpocket expenditures
What is a CDHC Plan?
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ANY health plan, so far as it…
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empowers patients
shares economic consequences
rewards good health
promotes consumerism
provides health/healthcare tools
improves healthcare quality
What a CDHC Plan DOES
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Provides member with Targeted Incentives & Tools:
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to stay healthy
to consume health care carefully
to shop for health care prudently
Varies member cost based on health care behavior
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Consumer participates in small claims(controllable)
Globally - effects utilization
Rewards members
The Lingo
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Consumer Driven
Consumer Directed
Defined Contribution
Wrap Around Plan
Health Reimbursement
Arrangement
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Health Reimbursement
Account
Personal Care Account
Personal Medical Fund
Personal Health Fund
Health Savings Account
The CDHC Tool Box
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High Deductible Health Plan (HDHP)
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Reduces insurance premium
Creates the “space” for the other tools to work
Flexible Spending Account (FSA)
Health Savings Account (HSA)
Health Reimbursement Arrangement (HRA)
Health, Fitness & Quality of Care Initiatives
Some Old
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Flexible Spending Account (FSA): employee funds
claims costs with pre-tax dollars
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Medical Reimbursement Account
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Dependent Care Account
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Use it or Lose it
Some New
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HSA (Health Savings Account):
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Qualified Health Care Expenses (213d)
Combination of employer/employee money.
Unused balances vested
May be used to fund health care post-retirement
Trustee or custodian required
Contribution maximum = the lesser of annual HDHP
deductible or:
 $2,600 Individual
 $5,150 Family
HSA DETAILS
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Employer must purchase High Deductible Health Plan
(HDHP)
HDHP must have Minimum in-net annual deductible...
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Self-only: $1,000
Family: $2,000
… and Maximum in-net out-of-pocket cost
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Self-only: $5,000
Family: $10,000
HSA
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Deductible must apply to most covered services
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Preventative Services “Carve Out”
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Well patient evaluations & tests
Well-child care/routine pre-natal
Immunizations
Smoking cessation & weight loss programs
Preventative drug therapies such as treatment of heart
attack/stroke with ACE inhibitors
HSA Highlights
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Automatic 100% vesting (employee owns)
Triple Tax Advantage
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Funded with pre-tax dollars
Grows tax free (or value declines)
Reimbursement for qualified expenses paid tax free
Possible Employer Concerns
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HSA (Health Savings Account):
– Employer does not have control over plan specifics
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Employee has no access to uncontributed funds
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cannot limit or direct use of HSA money
vs. FSA & HRA
Employee can use account balance to pay for nonqualified expenses (Plasma TV)
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Employee pays State, Federal tax + 10% penalty
Some New
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HRA (Health Reimbursement Arrangement)
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Qualified Health Care Expenses
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IRC 213d expenses only
 no non-qualified use permitted
– Employer can further limit access to HRA funds
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Unused Funds can be carried over
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“Use it or Keep it”
Employee builds a benefit bank
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Vesting provisions may vary with plan design
HRA
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HRA (Health Reimbursement Arrangement)
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Employer funded only!
Claims paid as incurred (not as funded)
Employer can set parameters of the plan (control)
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Rollover %
Vesting provisions
Underlying medical plan specifics
Amount of employer contribution flexible year-to-year
HRA/FSA integration common
Health, Fitness & Quality of Care
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Fitness club subsidy
Smoking cessation & weight loss
Rich preventive care benefits
Health risk assessments
Disease management & lifestyle coaching
Provider report cards
Online 2nd opinions
Key to successful CDHC strategy
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Organized Health Care Arrangement:
Partnering Employer + Insurer + Consumer
into single strategic initiative
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High Deductible Health Plan (HDHP)
FSA, HSA, HRA
Consumer Incentives
Health, Fitness & Quality of Care Tools