Health insurers are aware of this and are looking for ways to offer good, affordable plans to suit a variety of employers. As a result, one of the newer options is a consumer-directed health plan (CDHPs) -- a high-deductible benefit plan combined with personal health savings accounts (HSAs) or health reimbursement arrangements (HRAs). Below, we discuss HSAs.
An HSA is a tax-exempt account with a financial institution in which funds accumulate to pay for qualified medical expenses. They can be paired with high-deductible plans, which have lower premiums and allow employers to choose a program that is right for them and their employees, regardless of group size. These arrangements help empower employees to make more educated decisions on their health care choices.
They also offer numerous tax advantages to both employers and employees, as they are triple tax-free. That is, contributions, growth and spending related to these accounts are not subject to state or federal taxes. In addition, the account goes with the holder whether they change jobs, retire, move, etc.
The account holder is responsible for paying for services until the deductible is met. Once it is, they pay a coinsurance, while the health insurer covers the remaining portion of the expenses. If the member's expenses reach their out-of-pocket maximum, the health insurer then pays all charges.
Individuals can use tax-free dollars to pay for medical expenses not covered under the high-deductible plan, such as dental, vision and alternative medical expenses. They can also use funds to cover co-payments, deductibles, coinsurance and prescriptions. Unused HSA contributions rollover from year to year and accumulate to be used for future health care expenses.
It's important to keep in mind, however, that HSAs need to be managed -- individuals who are not good at keeping receipts, watching balances and keeping track of medical expenses might not be good candidates. There are many online tools that can make this easier, but it isn't automatic -- it still requires investment on the part of the consumer.
On the other hand, high deductible plans, paired with HSAs, give many employers the ability to offer good health insurance coverage for their employees -- an option that hadn't been available in the past and which troubled many small businesses. This allows employers to offer a health benefit with less financial burden.
Another key aspect of these arrangements is their emphasis on staying healthy. Most preventive care services are covered by the plan, like annual physical exams, well-baby/child exams and immunizations. But consumers must also be willing to seek care when it's appropriate, and know where to go when they need it.
A good health insurer will have information readily available on health care options for people who seek it. Their Web sites can be trusted to have accurate information on where to go for help in seeking treatment or how to manage chronic diseases like asthma, heart disease or diabetes.
These arrangements present a wonderful opportunity for great health care coverage for many people For the right businesses, offering these plans to employees can make a significant difference by not only lowering the company's health care costs, but helping employees access health care when, where and how they need it.
Mike Koziara is chief financial officer for Care Choices, a nonprofit health care organization and a subsidiary of Trinity Health. Care Choices HMO is ranked No. 7 among 257 commercial plans nationwide and is the top-rated plan in Michigan, according to the U.S. News & World Report/NCQA America's Best Health Plans 2005.