Controlling Medical Insurance Premiums. August 7, 2007

Transcription

1 Controlling Medical Insurance Premiums August 7, 2007

2 Damon Thompson Graduated from Austin College in Immediately began working with business owners for their insurance needs. Began working with G&A Partners as they began to develop their independent insurance agency with the focus of helping business owners identify and mitigate risks.

3 Agenda Overview and history of medical costs Benefits and premiums Long-term options to impact premiums Short-term options to impact premiums What does the future hold? Q&A

4 The overly simplistic answer to controlling medical costs Reduce the number and severity of medical events, then The cost goes down The premiums needed to finance the bills goes down

5 How can the employer foster fewer and less expensive claims? In the short run Plan design In the long run Healthy employees

6 This sounds simple enough, so why are we dealing with increasing costs? Let s take a moment to examine how we reached the current health care crisis

7 A (very) short history Individuals went to the doctor and paid their bill Healthcare industry developed individual health insurance policies WWII: IRS authorizes employers to pay premiums as an ordinary & necessary expense Post WWII: HMOs develop in California via the efforts of Mr. Kaiser HMOs become more like traditional by adding deductibles and co-insurance Traditional insurance becomes more like HMOs by adding co-pays and network doctors

8 Benefits & Rates over time Early 1960 s Late 1970 s Currently Benefit Maximum $10,000 per lifetime $1,000,000 Up to $1,000,000 Up to Unlimited Unlimited Employee only $60 -$80 monthly $250-$450 monthly Full Family $ monthly $800-$1,700 monthly

9 Long-term options to impact premiums

10 Change our behaviors While many diseases can NOT be prevented, there are two habits that can greatly reduce the frequency and severity of medical bills: Improved dietary choices Regular exercise Since eating and exercising are personal choices, what can an employer do to have an impact on medical premiums?

11 Helping consumers fund additional expenses associated with healthcare The insurance industry has responded with: Policies that will reimburse employees for money they spend on deductibles, co-insurance, co-pays as well as other nonreimbursed medical expenses The federal government has responded with Changes in the tax code allowing employees to save money on a tax free basis (similar to 401k savings) and use that money to pay deductibles, co-insurance, co-pays even some insurance premiums The tax code even allows for employers to reimburse employees for those same costs and deduct the reimbursements as ordinary and necessary business expenses

12 Changes in Plan Design Second only to improving our health, increasing the total out of pocket financial costs to the consumer has the biggest impact on controlling premiums The downside of the consumer accepting more financial liability is the ability of the consumer to pay the bills The insurance industry as well as the federal government both recognize the ability to pay these costs is crucial to successfully containing costs and have developed programs to help consumers.

13 Short-term term options to impact premiums

14 What does all of this mean to the employer in Texas? You can choose to provide benefits OR You can choose not to provide benefits

15 What is available in Texas? For those not buying insurance County hospitals are funded from taxes In this case the government collects then redistributes the funds to pay medical bills Eligible expenses are defined by the government For those buying insurance Individual & employer programs In this case the insurance company collects then redistributes the funds to pay medical bills Eligible expenses are defined by the contract

16 The next few slides we will examine Tax Law designed to help consumers Insurance products designed to take advantage of those specific laws The savings that result from combining these two components with traditional plan design

17 Flexible Spending Accounts IRS allows employees to set aside a portion of their earnings into an account to pay for nonreimbursed medical expenses. This allows plan designs to have higher out of pocket expenses to the employee thus reducing premiums. Establishing a FSA is as simple as drafting an document outlining how the plan will work. Employees then defer a portion of their earnings (on a pre-tax basis) into the account. Beware of Use It or Lose It Rules

18 Health Reimbursement Accounts IRS allows employers to reimburse employees for medical expenses and take a deduction. Allows for plan designs to have higher out of pocket expenses to the employees thus reducing premiums Requires simple plan document outlining how the account will work and what expenses will be reimbursed. Can be used in conjunction with any traditional health insurance product Reimbursements can also be made even when there is no insurance program.

19 Health Savings Accounts IRS allows employers to create HSAs for their employees. These accounts are portable. Employer and/or employee can contribute to HSA Employees can use HSA monies to pay for unreimbursed medial expenses Employees can roll unused contributions from one year to the next. HSAs can only be established when the underlying health insurance policy meets certain criteria, such as larger deductibles and no co-pays for office visits or medications. These plans are less expensive to the employer. Can not combine HSAs with GAP plans or HRAs

20 Consumer Driven Health Plans Employees spend money from HRAs or HSAs for routine medical services Non-routine services are covered by traditional health plans with much higher deductibles Employees are encouraged to shop around the network for the most affordable medical care Early indications show savings of 5% or more over traditional HMO, POS or PPO plans

21 GAP Plans Reimburse employees for certain office visit, out-patient & in-patient hospital expenses. Allow employers to offer group medical insurance with higher deductible and out of pocket expenses thereby reducing premiums Most GAP plans require employees to pay up front and then submit a claim form to get reimbursed. Employee out the money until reimbursed. G&A s GAP Plan provides the insured with an ID card that allows the provider to submit payment for the high deductibles and co-insurance charges directly to the insurance company. No cash flow issues.

22 How do we combine insurance plans that take advantage of current laws in order to lower premiums? Single option plans Increase the deductible from $500 annually to $1,000 annually and save 16% or $74 or Increase the deductible from $500 annually to $2,500 annually and save 21% or $97 Now the employer installs the a GAP payment card to pick up the increased deductible. The cost is about $25 monthly in the first example The net savings is about $49 per employee per month The cost is about $35 monthly in the second example The net savings is about $62 per employee per month Dual / Triple options plans Several insurance companies will allow the employer to offer two or three plan designs and allow the employee to choose the plan that best suites their needs. This would allow the employer to simultaneously offer the $500, $1,000 and $2,500 deductible plan above As well as install the GAP payment card to help employees pay the increased liability

23 How do we combine insurance plans that take advantage of current laws in order to lower premiums? HRAs The HRA could be used instead of the GAP payment card plan if desired. The advantage here is that no premiums are paid for the GAP payment card plan, the expense is incurred only when the reimbursement is submitted & made FSAs The FSA could be used when offering a single, dual or triple option plan instead of the GAP payment card plan or the HRA HSAs When offering single, dual or triple option the HSA can only be established by those employees enrolling in the HSA qualified plan. All other employees could establish an FSA or receive reimbursement from the HRA

24 What does the future hold? More use of: Nurses Physician Assistants Tele-diagnosis Video/remote diagnosis Continued advancement Pharmaceutical Technology

25 Where do you go from here? Just like every other business issue Learn what all is available to you Compare prices between options Provide a level of benefits most beneficial to your employee population Reexamine options periodically

26 Q&A Visit source_collection.html for a recording (audio and video) of this webinar. For more information, contact Anthony Grijalva, or agrijalva@gnapartners.com.

27 G&A Partners Position your company for success