high deductible health plans health savings accounts a benefit solution october 3, 2007
TRANSCRIPT
High Deductible Health Plans Health Savings Accounts
A Benefit Solution
October 3, 2007
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Health Care Cost Inflation
Example of Current WNY Carrier Rates*
The Local Perspective
2001 2006 Change
Single $1,924 $3,670 + 91%
Family $5,335 $9,969 + 87%
*Assumes typical plan design: $10 co-payment; $0 in-patient; $7/15/30 Rx; student age to 23Note: Average family/single = $6,819
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Health Care Cost Inflation
Example of Future WNY Carrier Rates*
2006 2011 Change
Single $3,670 $7,010** + 91%
Family $9,969 $18,642** + 87%
*Assumes typical plan design: $10 co-payment; $0 in-patient; $7/15/30 Rx; student age to 23**Average approx 13% per year during the next 5 years
The Local Perspective
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Future of Healthcare
• If we do nothing, we can expect continued double-digit rate increases
• Continued increase of experience rating – a rate determined on the specific company’s health risk.
• More emphasis on healthy lifestyles • HMOs with comprehensive benefits and low co-pays
become historic. • Consumer Driven Healthcare & HSA’s (Health Savings
Accounts) will become the “norm”• Emphasis on increased generic use• Employees will transition from passive consumers to
active consumers
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Description
Community Rate
• Healthier than average employer groups pay higher premiums than necessary
• No adjustments are made for individual group experience
• Health plan is less accountable for group cost management
• Community rate will become more expensive as smaller groups 51-100 are experience rated
• Community pool should be strengthened, not weakened
Pros
• Rates are known and guaranteed for 12 months
• Attractive premium for groups having higher than average claims experience or an older population
• Spreads risk over a broader group
A fully insured methodology that encompasses the historical claims experience of all groups in the community
Risk is allocated across the entire population vs. the groups specific experience
Cons
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Health Savings Accounts (HSA)The Amherst Chamber of Commerce Solution
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Definitions of the HSA
• High Deductible Health Plan - A qualified benefit plan defined by the IRS. Guidelines define deductibles, out-of-pocket maximums and annual indexing.
• Health Savings Account - A savings account established through a financial institution used to cover qualified medical care expenses. Funds can be invested like an IRA, and are owned by the individual.
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How Do HSAs Work?
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How do People use their Health care?
The following chart shows annual medical expenses for the United States population by percentage:
Dollars Spent on Medical Care Annually Percentage of U.S.No Medical Expenses 13%$1 - $500 33%$501 - $1,000 19%$1,001 - $2,000 17%$2,001 - $5,000 9%$5,001 - $10,000 3%$10,001 - $25,000 3%$25,001 – And Up 2%
Health Savings Accounts provide coverage for preventative care,
not subject to deductibles or co-pays
65% of Americans spend less than $1,000 annually
on healthcare
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Low Co-Pay vs. HDHP with HSA
Scenario An average, healthy family of four who uses their medical plan regularly
throughout the year. Their main objectives when selecting the right medical plan is cost, coverage, ease of use and peace of mind.
Medical Usage Annually for Average Family
• 2 Adult Primary Care Sick Visits• 1 Gynecological Office Visit• 1 Mammogram• 4 Chiropractic Visits• Monthly Maintenance Drug, Tier 2 • 6 Pediatric Visits• 2 Immunizations• 6 Prescription Drugs, Tier 1• 1 Emergency Room Visit• 1 Diagnostic X-Ray
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Low Co-Pay (HMO) Plan
Service Cost
2 Adult Primary Care Sick Visits 50.00
1 Gynecological Office Visit 25.00
1 Mammogram 0.00
4 Chiropractic Visits 100.00
Monthly Maintenance Drug, Tier 1 120.00
6 Pediatric Visits 0.00
2 Child Immunizations 0.00
6 Prescription Drugs, Tier 1 60.00
1 Emergency Room Visit 75.00
1 Diagnostic X-Ray 40.00
Annual Medical Premium 10,607.76
Total $11,077.76$11,077.76
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Health Savings AccountService Cost
2 Adult Primary Care Sick Visits 110.00
1 Gynecological Office Visit 0.00
1 Mammogram 0.00
4 Chiropractic Visits 108.00
Monthly Maintenance Drug, Tier 1 48.00
6 Pediatric Visits 330.00
2 Child Immunizations 0.00
6 Prescription Drugs, Tier 1 24.00
1 Emergency Room Visit 200.00
1 Diagnostic X-Ray 95.00
Annual Medical Premium 5159.28
HSA Contribution 3999.96
Total $10,074.24$10,074.24
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Low Co-Pay vs. HDHP with HSA Cost Comparison
Service HMO Cost HSA Cost
2 Adult Primary Care Sick Visits 50.00 110.00
1 Gynecological Office Visit 25.00 0.00
1 Mammogram 0.00 0.00
4 Chiropractic Visits 100.00 108.00
Monthly Maintenance Drug, Tier 1 120.00 48.00
6 Pediatric Visits 0.00 330.00
2 Child Immunizations 0.00 0.00
6 Prescription Drugs, Tier 1 60.00 24.00
1 Emergency Room Visit 75.00 200.00
1 Diagnostic X-Ray 40.00 95.00
Annual Medical Premium 10,607.76 5,159.28
Health Savings Account Deposits 3,999.96
Total Expenses $11,077.76$11,077.76 $10,074.24$10,074.24
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Low Co-Pay vs. HDHP with HSAComparison Summary
Annual Costs/Deposits HMO HSA Savings
Premiums 10,607.76 5,159.28 5,448.48
Co-Pays/Costs 470.00 1,175.00 -445.00
Savings Deposits 0.00 4000.00 4,000.00
Total Premium Savings (Premium Savings - co-pays/costs - savings deposits)
$ 1,003.48$ 1,003.48
Savings Account Balance $3,555.00$3,555.00
TOTAL SAVINGS $4,558.48$4,558.48