Health Plans Premiums Experiencing Double Digit Increases!
Increasing Premiums Decreasing Benefits AND
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3 Who Consumes Health Care? Nobody spends someone elses money
as carefully as they spend their own. Milton Freidman Nobel Prize
Economist Who are the consumers of health care? Individuals NOT
Employers (Plan Sponsors) NOT Health Insurance Carriers
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4 Acting as a Consumer : Car Insurance Option 1 Fixed Costs Pay
$750 in Car Insurance Premiums Potential Liability $250 Deductible
if Crash Car Option 2 Fixed Costs Pay $450 in Car Insurance
Premiums Savings of $300 Annually Potential Liability $500
Deductible if Crash Car Most Consumers choose to lower their
premiums and take on more responsibility if they crash their
car.
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5 Consumer Driven Health Plan Alternative Decrease Premiums
Increase Employee Responsibility Deductible 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
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6 Consumer Driven Health Plan Alternative BUT, I dont want to
increase my employees out of pocket responsibility ! You dont 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
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7 CDHP at Work Employers and Employees can share the savings
and the risk, by adding a Health Reimbursement Arrangement (HRA)
Employer Premiums Savings Employee Premium Savings Premiums
Potential Out of Pocket Deductible Employee Risk HRA Employer
Risk
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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 ( Doesnt count as income ) Pay as you
go (No prefunding requirement) Flexible Funding Mechanism
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9 Savings Example #1 Traditional Co-Pay Plan 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 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
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Savings Example #1 Small Group Traditional Plan Proposed CDHP
Plan Monthly Premium Savings Annual Premium Savings HRA
Contributions (monthly premiums) (per tier)(aggregate)(per
tier)(aggregate) Single8
$592.31$424.92$167.39$16,069.44$1,500.00$12,000.00 EE + Spouse2
$1,232.00$883.83$348.17$8,356.08$3,000.00$6,000.00 EE + Child3
$1,273.46$913.57$359.89$12,956.04$3,000.00$9,000.00 Family9
$1,693.99$1,215.26$478.73$51,702.84$3,000.00$27,000.00 Total22
$89,084.40 $50,000.00 SAVINGS SUMMARY HRA
Utilization100%80%65%50%35%20% Annual Premium Savings$89,084.40
Less: HRA
Utilization$50,000.00$40,000.00$32,500.00$25,000.00$17,500.00$10,000.00
Less: HRA Administration Fees $2,604.00 Estimated Annual
Savings$36,480.40$46,480.40$53,980.40$61,480.40$68,980.40$76,480.40
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Savings Example #3 Large Group Traditional Copay Plan CDHP
$3000/ $6000 Monthly Premium Savings Annual Premium Savings HRA
Contributions (monthly premiums) (per tier)(aggregate)(per
tier)(aggregate) Single52
$670.04$475.06$194.98$121,667.52$2,000.00$104,000.00 EE + Spouse24
$1,440.58$988.11$452.47$130,311.36$4,000.00$96,000.00 EE + Child14
$1,393.68$1,021.37$372.31$62,548.08$4,000.00$56,000.00 Family38
$1,916.31$1,358.65$557.66$254,292.96$4,000.00$152,000.00 Total128
$568,819.92 $408,000.00 SAVINGS SUMMARY HRA Utilization
100%80%65%50%35%20% Annual Premium Savings$568,819.92 Less: HRA
Utilization$408,000.00$326,400.00$265,200.00$204,000.00$142,800.00$81,600.00
Less: HRA Administration Fees $9,332.00 Estimated Annual
Savings$151,487.92$233,087.92$294,287.92$355,487.92$416,687.92$477,887.92
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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)
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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)
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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
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Flexible HRA Plan Designs Employer Employee Premiums Savings
Potential Out of Pocket Responsibility Deductible
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Adding A Flexible Spending Account (FSA) What is an FSA? A tax
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
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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
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18 Tax Savings Example: Small Employer # of Participating
EmployeesPlan Average ContributionTotal 10FSA$1,500$15,000.00
5DCA$3,500$17,500.00 Total$32,500.00 Payroll Tax (7.65%)$2,486.25
Administration Fees$1,402.00 Employer Savings$1,084.25
20 FSA Tax Savings for Employee Without FSA/DCAWith FSA/DCA
Gross Monthly Salary$2,500.00Gross Monthly Salary$2,500.00 Less:
Federal Income Tax$333.50 Health Care Expenses$150.00 State Income
Tax$175.00 Dependent Care$300.00 Social Security Tax$191.25Taxable
Income$2,050.00 Net Income$1,800.25Less: Federal Income Tax$273.47
Health Care Expenses$150.00 State Income Tax$143.50 Dependent
Care$300.00 Social Security Tax$156.83 Spendable
Income$1,350.25Spendable Income$1,476.21 Monthly Savings$125.96
Annual Savings$1,511.46