Using A High Deductible Health Insurance Plan

Transcription

1 Better Coverage With Lower Costs Using A High Deductible Health Insurance Plan Presented by: Jonathan Burr Principal Benemax, The Benefit Management Company Debbie Zapasnik Human Resources Manager Community VNA, Inc. Russ Dubuc Director of Finance/CFO Community VNA, Inc. Agenda 1. Introduction 2. Overview 3. Improving Value in Group Medical Plans The Challenge What is a High Deductible Health Plan? High Deductible Plan Alternatives/Strategies The Benemax Wrap Case Study Community VNA 4. Things to Remember 5. Truth or Consequences 6. Final Thoughts 1 1

2 Who is Benemax? 2 Benemax is a full-service benefits management company dedicated to maximizing the value inherent in corporate benefit plans while providing superior client service and support. The oldest continuously operating CDHC company in the United States Forty full-time employees with comprehensive experience in: Benefit plan design Claims administration Human resources management Customer service and support Corporate Headquarters in Medfield, MA; offices in Tampa, FL and New York, NY Over 350 corporate clients nationwide 3 2

3 Overview 4 Overview In 2006, health care spending in the United States reached $2 trillion and is projected to reach $2.9 trillion in Although nearly 47 million Americans are uninsured, the United States spends more on health care than most other industrialized nations 16% vs. Switzerland 10.7% Germany 9.7% Canada 9.5% Since 2000, employment-based health insurance premiums have increased 87% compared to cumulative inflation of 18% and cumulative wage growth of 20%. The average employee contribution to company provided health insurance has increased more than 143% since Health care spending is 4.3 times the amount spent on national defense. 5 3

4 Overview Cont d 1. In Massachusetts: Medical costs continue to escalate 15+%/year Traditional plans provide no opportunity for cost/tax relief Carriers have responded to Health Care Reform efforts by: Amending underwriting guidelines Increasing small group rates dramatically 2. The future is unclear: Continued change is certain 6 The Blue Cross/Blue Shield - Member Health Care Expenditure $1818 pmpm $264 pmpm $45 pmpm ($1-$999) ($1K-$4.9K) ($5K-$100K) 7 4

5 The Challenge 8 The Challenge Improve the cost / value relationship in employer sponsored group benefit plans Benefit plans which no one can afford serve no purpose and are actually a disincentive. Jack Welch CEO, General Electric, Inc. 9 5

6 What is a High Deductible Health Plan? 10 A high deductible health plan (HDHP) is a health insurance plan that contains certain requirements with respect to deductibles and out-of-pocket expenses. Deductibles generally higher than standard health insurance plan Ot Out-of-pocket ktexpenses not covered until tildd deductible is met Premium are significantly lower than standard plans Frequently custom tailored to suit employer objectives Usually require employee administrative participation Required for HSA and Wrap plans 11 6

7 Group Medical Plan Design Alternatives + - Traditional Fully Insured 1 st dollar Business as usual Defined risk Most expensive HDHP HSA HRA Lower premium costs More flexibility Slower increase growth Tax advantages Requires education and plan member participation Can require employee funding WRAP Same as HDHP No employee funding requirement Requires education and plan member participation Self Insured Modest premium Risk can be contained Hard to predict Not always available 12 Group Medical Plan Cost Profiles Traditional Plans vs. HDHP -Premium - Premium -Fixed Cost - Premium -Fixed Cost - Claims -Variable Cost - Administration -Variable Cost - Total Cost -Fixed - Total Cost -Fixed + Variable

8 What is a Healthcare Savings Account (HSA)? A Healthcare Savings Account (HSA) is a medical and retirement planning savings account that can be used on a tax advantaged basis. The account requires a Section 125 plan and HDHP with minimum deductible. Who can make contributions? Employers and employees to allowable maximum Advantages? Lower medical premiums via HDHP Encourages member accountability Affords pretax purchase opportunities Tax liability reduction for both employer and employee Earnings are tax free Fully portable 14 What is a Healthcare Savings Account (HSA)? Disadvantages? Requires training and education Requires advanced funding Who saves? Employer: Reduced premium costs Reduced taxes Employee: Reduced premium costs Tax free interest Reduced taxes 15 8

9 What is a Wrap Plan? A wrap plan is a custom designed health plan, constructed on a high deductible platform, with plan design elements which can resemble any standard or non-standard plan. What are the advantages? Significantly reduced cost Custom plan design to suit any demographic Defined risk No front end loading Cost reduction without benefit reduction What are the disadvantages? Employees must participate administratively Who saves? Employer Rd Reduced dpremiums Reduced annual total plan increases Reduced taxes Employee Reduced costs Higher value potential 16 The Benemax Wrap 17 9

10 The Benemax Wrap A high-deductible plan platform custom engineered through self funding to meet client specifications Plan design to suit any demographic Cost reduction without benefit reduction Simple administration 18 Objectives Provide market competitive medical benefits at the lowest possible cost Maintain network access Protect plan constituents from exorbitant risk Minimize administrative requirements Cost containment on a continuous basis 19 10

11 Building A Wrap Plan BASE PLAN BENEFITS -HDHP IN-NETWORK COST Office Visit In Hospital Emergency Room Deductible Day Surgery Other Deductible $3,000/$7,500 Co-Insurance N/A O/P Max $3,000/$7,500 Rx Co-Pay $15/$30/$50 OUT-NETWORK COST EMPLOYER FUNDEDBENEFITS IN-NETWORK COST Office Visit 100% less $25 In Hospital 100% Emergency Room 100% less $25 Day Surgery 100% Other 100% Deductible 100% + Co-Insurance N/A = O/P Max $3,000/$7,500 Rx Co-Pay 0% OUT-NETWORK COST FINAL MEDICAL PLAN IN-NETWORK COST Office Visit $5 In Hospital $0 Emergency Room $25 Day Surgery $0 Other $0 Deductible N/A Co-Insurance N/A O/P Max Co-pays Rx Co-Pay $15/$30/$50 OUT-NETWORK COST Deductible $3,000/$7,500 Deductible 100% Deductible N/A Co-Insurance 20% to $5,000/$10,000 Co-Insurance 20% to $4,000/$8,000 Co-Insurance 20% to $1,000/$2,000 O/P Max $8,000/$17,500 O/P Max $7,000/$15,500 O/P Max $1,000/$2,000 O/V Co-Pay Deductible & Co-Insurance O/V Co-Pay $0 O/V Co-Pay $5 20 Using A Wrap Group Medical Plan Traditional Plan Employee visits provider Employee Pays Co-Pay Provider Bills BC/BS BCBS Adjudicates Claim Pays Provider Notifies Employee via BC/BS EOB Employee pays Provider if required Wrap Plan Employee visits Provider Employee Pays Co-Pay Provider Bills BC/BS BC/BS Adjudicates Claim Notifies/Pays Provider NEPC share Notifies employee via EOB Notifies Benemax Benemax reviews bill; pays provider r Employer share Benemax notifies employee via Benemax EOB regarding amount paid and balance due Employee pays Provider if required THIS IS YOUR BILL 21 11

12 Case Study Community VNA 22 Why Combine A HDHP With A Wrap Plan? To realize Savings Maintained benefits, or Increased benefits with less cost Reduced fixed costs Reduced Employee costs The true cost of health care (employee education) 23 12

13 What is it really? Section 105 Plan Allowed by the IRS under an employer-sponsored health plan Employer chooses to self insure some health care benefits in exchange for reduced premiums Partially self funded health plan 24 Section 105 Start up funds require by the employer if required by the plan administrator Reimbursements are not considered taxable income to the employees Fund parameters are set by the employer Employer outlines what expenses will be eligible May exist with an FSA and a Cafeteria plan Must not discriminate in favor of highly compensated employees 25 13

14 Why did we do this? Increasing Monthly Premiums Double digit increases Year after year, after year Decrease in benefits Increases to co-pays Loss of coverage Benefits Becoming Unaffordable For the Employee For the Agency Educational Opportunity Employees will see what the true cost of health h care is Employees will learn to be a good consumer when it comes to their health care 26 Why did we do this? Potential to minimize administrative costs Benemax assumes administrative responsibility Obtain experience in assisting and formulating the next year plan design Utilization 27 14

15 What were the issues? Employee Communication Dropping the HMO way of doing things Current employee expectation No one likes change 28 How was it received? Employees Unsure at first Appreciated no premium increase the first year Negligible ibl premium increase the second year less than $4.00 $400 per month for the family plan Loved the increase in benefits HMO to PPO Applicants You guys get it You don t see coverage like this at rates like this This is wonderful, you don t know what is out there 29 15

16 Financial Analysis Conventional Insurance Fiscal year 2006 expense increase 29.2% Fiscal year 2007 expense increase 16.6% Wrap Plan Implementation Fiscal year 2008 expense decrease (8.5%) Fiscal year 2009 expense increase 17.7% Increase due to utilization 30 Employee Costs Conventional Insurance Fiscal year 2006 increase contribution by 14% Increase shared by employer Fiscal year 2007 increase contribution by 13% Wrap Plan Implementation Fiscal year 2008 no increase to employee premium Fiscal year 2009 individual plans decreased (6.3%), Family plans increased less than 1% 31 16

17 Realized Savings Wrap Plan First year resulted in savings of $105,000 Actual costs compared to conventional renewal of 15% increase Second year resulted in savings of $110,000 Actual costs compared to continued renewal increase of 15% conventional insurance 32 Financial Risk Factors Wrap Plan Projected experience rate Historical i utilization i of industry Enrollment/covered lives Maximum exposure limits Per subscriber plan Control cost limits 33 17

18 Truth or Consequences 34 Truth or Consequences Influencing the costs of my group Medical plan is beyond my control My only option is to shift cost Cost shifting i is cost reduction Changing carriers will keep costs down The less employees know the better The government will fix the problem One size fits all I am committed for a year HDHP s are risky 35 18

19 Final Thoughts 36 57% of all health claims are the direct result of lifestyle choices. American Medical Association Health insurance is something you buy health care is something you do. C. Everett Koop 37 19