How new drug coverage programs can help control costs, keep employees safe

The concern over the cost and safety of compound drugs is growing. According to a report from Towers Watson, 39 percent of employers have already excluded certain compound drugs from their benefits, while another 24 percent expect to do so by 2018. Many pharmacy benefit managers, which work with insurance companies, have done the same.

“Despite not being approved by the Food and Drug Administration (FDA), many compound drugs are in high demand, and costs have skyrocketed in the last few years,” says Veronica Hawkins, Medical Mutual Vice President of Government Accounts. “Unfortunately, it is more difficult than ever for patients, and employers, to know which ones are safe and effective.”

Smart Business spoke with Hawkins about compound drugs, their financial impact and how to help employees avoid high-priced medications that are often unnecessary or dangerous — or both.

What are compound drugs?

To make a compound drug, a licensed pharmacist has to combine, mix or alter the ingredients of a medication. There are a variety of examples on the market today, but the most common are topical pain treatments, such as ointments, creams and powders.

Unfortunately, certain compound drugs are unproven, as well as overpriced. That’s why insurance companies and pharmacy benefit managers have stopped covering many of the ingredients used to make them.

Why is this issue important?

First, the FDA does not verify the quality, safety or effectiveness of any compound drugs. Many have been shown to be clinically unnecessary or even dangerous. Second, many employers have suffered financially from the excessive costs of some compound drugs. A gram of a bulk powder or cream, which hasn’t been proven to be safe or effective, can cost hundreds or even thousands of dollars.

Has the situation gotten worse?

Absolutely. According to Express Scripts, the pharmacy benefit manager for Medical Mutual, the average per patient cost for a compound drug increased from $90 to $1,100 between 2012 and 2014. And it’s gone up since then. As a result, most pharmacy benefit managers have eliminated or reduced coverage for many ingredients used to make compound drugs.

Are all compound drugs dangerous or ineffective?

No, certainly not. There are reputable pharmacies, which compound prescriptions that may be unavailable commercially. For example, employees might need a crushed or liquefied form of a drug if they have difficulty swallowing pills. It’s also common for many pediatric drugs.

However, other pharmacies charge inflated prices for compound drugs that don’t provide additional clinical value over more affordable and FDA-approved alternatives. Those are the ones that are currently creating problems for many employers.

What can organizations do?

One of the best ways organizations can avoid problems with compound drugs is to let their insurance company manage their coverage for them.

Many insurance carriers, including Medical Mutual, allow clients to participate in compound management programs. In these programs, the carrier excludes compound drugs or ingredients that have been determined to be unsafe or unnecessary. The compounds that are found to be reputable stay covered.

In these types of programs, many of the drugs that are excluded are also excessively overpriced. In most cases, organizations will see their compound drug claims dramatically reduced. Of course, employees need to know what’s going on, so the insurance company will notify its members before a claim is denied.

What else is important to keep in mind?

Education is important, too. Employees should know enough to question their doctor when they get a new prescription. They can also ask their doctor to send prior authorization to their insurance carrier to find out if the drug is covered ahead of time.

The most important thing is to keep employees safe from unproven medications that, in many cases, do more harm than good. And that, in turn, will help prevent excessive and unnecessary costs.

Insights Health Care is brought to you by Medical Mutual

How to improve company performance by integrating health and safety

In the workplace, the concepts of health protection and health promotion have long existed side-by-side. The former places primary focus on worker safety, the latter on worker health.

What’s become more evident in recent years is that making a distinction between the two is not the best way to optimize either. Companies improve their employee and financial performance when the perspectives are aligned.

“Research has shown that development of a true ‘culture of health,’ at a company is dependent on integrating employee safety and employee health,” says Dr. Michael Parkinson, senior medical director for Health and Productivity at UPMC Health Plan and UPMC WorkPartners. “Keeping employees healthy and keeping them safe, are essentially the same thing.”

Smart Business spoke with Parkinson about the importance of integrating employee health and safety.

What is health protection?

Health protection traditionally encompasses all aspects of on-the-job worker safety. In recent decades, through the creation of the Occupational Safety and Health Administration (OSHA) and the National Institute for Occupational Safety and Health (NIOSH), there’s been an added emphasis on understanding ways to make the workplace safer.

And, partly as a result, OSHA-reported worker deaths have dropped from 38 per day in 1970 to 12 per day in 2012. Through increased use of risk assessment, safety training, improved protective equipment, better mechanical safety engineering, etc., worker safety has improved. However, the underlying health status and behaviors of the workers themselves was overlooked.

What is health promotion?

Health promotion is an umbrella term for workplace wellness programs. Employers introduced worksite health promotion programs to keep employees healthier and to reduce health care and productivity-related costs. These could include health risk appraisals, biometric screenings, employee events such as weight races, the introduction of on-site health coaching and smoking cessation assistance or weight-loss programs.

How does the term Total Worker Health™ apply to these concepts?

NIOSH created the national Total Worker Health™ initiative to enable employers to combine safety — traditionally very prominent in any company’s leadership and management consciousness — with health promotion efforts that are historically underappreciated as a contributor to safety and company overall performance.

According to an American College of Occupational and Environmental Medicine study, ‘a growing body of evidence’ indicates that there are significant benefits when health and safety policies, practices and programs are integrated. Healthier employees are safer employees and vice versa. Both contribute to the organization’s bottom-line effectiveness and success. Health impacts safety. Safety impacts health.

When wellness programs emphasize correcting workplace hazards, they are likely to get greater acceptance. For example, poor dietary habits, lack of physical activity and obesity all contribute to mental errors at work, higher rates of musculoskeletal disease and disability and workplace safety risks. Healthy behaviors are every bit as relevant to corporate success as a safety harness for job-specific risks.

What are keys for success for an integrated program?

Leadership and management should realize, and clearly state, how poor health impacts workplace safety and job performance. Engaging teams of employees to identify practical actions to improve health and safety should be solicited. Obtaining the active engagement of management once some actions have been identified is critical.

The integration of workplace wellness and occupational health requires a holistic approach to the health and well-being of each employee and their family.

Worker health cannot be addressed solely by reducing workplace hazards (safety) nor does it make sense to make individual health paramount (wellness) and ignore how work-related demands, stressors and conditions contribute to poor health. A Total Worker Health™ perspective can make our companies and employees the highest performing and most successful.


Insights Health Care is brought to you by UPMC Health Plan

How to help employees use their preventive health benefits correctly

Most organizations agree that preventive care is vital to help keep their employees healthy. And for those that follow the rules of health care reform, services that qualify as preventive are available to employees at no cost. However, there is still a lot of misunderstanding about what services are preventive.

“Doctors only bill visits as preventive if they meet certain criteria, but the average person doesn’t know what that involves,” says Amber Hulme, Medical Mutual Vice President, Central and Southern Ohio. “As a result, organizations might see employees skip preventive visits, not knowing they’re free, or get charged for a visit they thought was preventive.”

Smart Business spoke with Hulme about how to distinguish between preventive services and other medical care, why the difference is important, and how organizations can address misconceptions that might be preventing their employees from properly using the benefits available to them.

What services are considered preventive?

Essentially, preventive services are those performed for patients who don’t already have symptoms, injuries or other health problems. The physician decides what tests or screenings are right for the patient based on their age, gender, overall health status, personal health history, current health and other factors.

A visit can include a physical exam, immunizations, lab work and possibly X-rays. The goal is to keep patients healthy through early diagnosis.

How is diagnostic or medical care different?

Basically, if a patient goes to the doctor to diagnose, monitor or treat a specific illness, injury or a chronic health condition, it’s probably not going to qualify as a preventive visit.

Plus, any related services a patient might receive, including exams and blood tests, would likely be considered medical care, as opposed to preventive care.

Why does the difference matter?

Unless a plan was grandfathered under health care reform, many preventive services have to be available to employees at no cost. However, what is considered preventive isn’t always clear. Many lab tests and other procedures, for example, are only covered based on why and how frequently they are done.

Depending on the circumstances, the same test or service can be billed as preventive or diagnostic, or as routine care for a chronic condition. Even during a preventive visit, patients may have to pay a copay or coinsurance if the doctor ends up performing services that aren’t considered preventive.

It can definitely be confusing, but really it’s based on how providers submit the claims.

How would this actually work? Can you give an example?

Sure. Let’s say a person goes to the doctor to get a preventive colonoscopy. This person hasn’t had any problems in the past, but the doctor finds a polyp during the exam and proceeds to remove it. That’s still preventive. The follow-up colonoscopy, however, is going to be considered a medical procedure in terms of how the billing works. That’s because a problem has already been identified.

Another common example is a routine mammogram, which is preventive for women age 55 and older. But if a woman finds a lump in her breast and decides to get a mammogram, it would not be considered preventive because the symptom already existed. The same goes for women who have been diagnosed or received treatment in the past. Their mammograms would fall under routine chronic care.

What should employees be encouraged to do?

Organizations should make sure employees are familiar with how preventive care works under their benefits plan. Their insurance carriers can provide a list of all the preventive services available.

It’s also important to encourage employees to ask their questions when they go to the doctor, such as why a test or service is being ordered. That will help employees make sure they know how they will be charged and still get the care they need.

Insights Health Care is brought to you by Medical Mutual

How to size up the metallics — bronze, silver, gold and platinum health plans

Gold, silver and bronze are familiar categories for fans of the Olympic Games, but before the advent of the Affordable Care Act (ACA) in 2009, it was unlikely that many Americans associated those metals with health insurance.

“The terms bronze, silver, gold and platinum are part of a new era of health insurance comparison shopping,” says Adam Pittler, director of Product Development of UPMC Health Plan. “These metallic levels have been designed to help persons purchasing health insurance by providing more information.”

The Open Enrollment period for ACA coverage in 2016 that began Nov. 1, 2015, ends Jan. 31, 2016.

Smart Business spoke with Pittler about the “metallics” and how they can impact health insurance decisions in the years ahead.

Why do plans on the ACA Marketplace use the metallic terms?

The metal tiers are in place to provide consumers with a standard measurement to make it easier to compare plans and to understand which plans offer more comprehensive coverage and cover a greater portion of health care costs.

Plans in each category are assigned what is referred to as an ‘actuarial value.’ That refers to the share of health care expenses that the specific plan will cover.

If, for instance, you decide to purchase a bronze plan you will need to pay the most out of pocket. The plans are rated up from there — silver, gold and platinum, the highest. Platinum plans are the most generous and carry the highest premiums, but also have the lowest out-of-pocket costs. For example, a bronze plan will cover 60 percent of health care costs, a silver plan will cover 70 percent, a gold plan 80 percent and a platinum plan will cover 90 percent.

It’s important to remember that the metallic categories do not correspond to the amount or to the quality of care that you get with that plan.

Do the plans have any similarities?

All plans — bronze, silver, gold and platinum — must provide a minimum level of coverage in 10 categories, which are known as essential health benefits. These include prevention and wellness, ambulatory (outpatient) care, laboratory services, emergency care, hospitalization, maternity and newborn care, pediatric care (medical, dental and vision), mental health and substance use disorder services, prescription medications, rehabilitation and habilitation.

So, it doesn’t matter which metallic level you choose, all plans are guaranteed to provide at least this level of benefits.

How do you evaluate plans on the same metallic level?

You need to carefully review the details of each health insurance plan that is offered at that level. This includes the cost of monthly premiums, deductibles, copayments and coinsurance. All insurers are required to provide an easy-to-read summary of benefits and coverage to help compare plans.

Even though two plans might be on the same level, the cost to an individual consumer may differ. This could be because of out-of-pocket expenses that are accrued and are dependent on the health services needed.

What about tax credits?

Consumers looking to maximize tax credits and subsidies should probably look to silver level plans. The sizes of the tax credits are based on income level and the cost of the second-lowest silver plan in each region. The tax credit remains the same for all levels. So, it covers more of the premium at a silver level than it does at the gold and platinum levels.

Persons who are entitled to subsidies need to enroll in a specific silver plan in order to receive it.

How important is it to estimate costs?

Most insurance purchasers are focused totally on the cost of the premium and do not think about what their estimated total health care costs could be for an entire year. That means trying to make an estimate of what your out-of-pocket liability will be.

You have to determine if a higher monthly premium would be worth it in order to decrease out-of-pocket expenses.

Insights Health Care is brought to you by UPMC Health Plan

How gain share models put the control back with the member and provider

In today’s health care system, there’s a lot of misalignment. People feel the insurance companies are just out to make money. They perceive that the providers are struggling and building more services, more MRIs, more tests, more this and that. And the member is caught in the middle, says Mark Haegele, regional vice president of sales at HealthLink.

The employers aren’t in alignment with the insurance company. The insurance company isn’t really in alignment with the member. And the member isn’t in alignment with the provider.

Many in the health care industry are working to change that.

“It goes by a lot of different names in the industry, and I don’t think that the industry has settled on a specific name because there are so many different variations on the theme,” Haegele says.

Whether it’s a narrow network, community-based model, exclusive provider organization plan, accountable care organization, etc., the idea is to get everyone on the same page and create more of a partnership amongst the stakeholders.

Smart Business spoke with Haegele about how gain share models fit into this growing trend of alignment.

What is a gain share model?

In self-funded health insurance, gain sharing may be a component of provider to employer direct contracting. The employer or its third-party administrator (TPA) designs a benefit plan in partnership with a selected provider. In exchange for the employer directing business to the provider, the provider will agree to lower unit costs. The TPA creates and administers the benefit design and projects estimated costs. If the costs come in less than the projection, the employer shares those savings with the provider.

With a self-funded plan, an employer is buying stop-loss reinsurance. The underwriter looks at the employer’s claims experience, group demographics, etc., in order to predict the expected claim cost. The stop-loss insurer begins to provide insurance at what is called the maximum liability, which is usually the expected claim cost times 1.25. In a gain share model, the providers take on that 25 percent risk corridor between the expected claim cost and the maximum liability.

If costs come in lower than expected, in some cases the employer will share 50 percent of that underage with the provider.

Why would a health provider take on that risk of potentially added costs?

First of all, they want to make sure the preferred plan design that they’ve helped create succeeds. This makes the arrangement even more attractive to the employer.

Also, the hospital knows it will be getting a higher volume of patients, as fewer of the members receive care at other hospitals, so it may be willing to take on extra risk for that extra volume.

The provider is taking on a much bigger role managing the care. They have more ability to directly communicate with the membership, as well as get reports from the TPA on what’s happening within the plan. For example, it can better onboard members and align them with a primary care doctor, which in turn lowers emergency room visits and keeps patients compliant with their health care.

Employers can focus on running their business, and the provider takes on more risk, in order to potentially share in some of the gains for spending its time and resources on managing care, which is their expertise.

How have hospitals responded to this idea?

It’s interesting. Certain providers are all over it, and others are hesitant and want to crawl before they walk.

One difference maker has been that people don’t want to get a call from their insurance company to talk about their diabetes, blood pressure, etc. But if their provider calls them, it’s actually better received and more likely to result in better health.

In this new model, the member, provider and employer are working together to control costs and better manage the members’ health.

Insights Health Care is brought to you by HealthLink

How health benefits may soon change for many small businesses

In 2016, a key part of the Affordable Care Act (ACA) is scheduled to take effect for employers classified as small groups. Those organizations may have to start offering ACA plans later in the year or face a penalty.

Some reports say these changes could affect more than 150,000 businesses across the U.S.

“Back in 2013, small businesses got an extension on transitioning to the ACA, which let them keep the plans they had,” says Veronica Hawkins, Medical Mutual vice president, Government Accounts. “But the government says the extension will end in October 2016. That could mean a lot of employers will soon have to move to the ACA.”

Smart Business spoke with Hawkins about the changes scheduled for 2016, what they will mean for employers and how to make the best decisions in what is sure to be a very uncertain climate.

What is happening in 2016?

The big issue is the possible end of transitional relief, which has allowed many small businesses to delay the move to the ACA. The relief is scheduled to end with renewals after Oct. 1, 2016. Until then, nothing really needs to change.
When they renew after that point, they will have to move to ACA plans — unless transitional relief gets extended again.

Is the definition of a small group changing?

For a while it looked like it would. As part of the ACA, the threshold was scheduled to increase to 100 employees on Jan. 1, 2016. However, President Barack Obama recently signed a law that lets the states continue to define the size of a small group.

Ohio will keep the current definition, so groups with 51 to 99 employees won’t have to move to ACA plans next year, as many were thinking they would.

What is considered an ACA plan?

ACA plans are all plans that are not transitional or grandfathered. To meet ACA requirements, employers are required to offer plans that cover 10 essential health benefits, provide annual limits on maximum out-of-pocket expenses, use community ratings and include mandatory coverage for preventive benefits.

What is the difference between transitional and grandfathered?

While transitional plans were part of the government extension, grandfathered plans existed before the ACA was passed in 2010. Grandfathered plans are exempt from many ACA requirements. For some organizations, staying grandfathered makes sense because they avoid some of the extra costs of ACA requirements. If they have relatively healthy employees, however, they may see lower rates with ACA plans. It really depends from case to case.

Does it make sense to move to the ACA early?

Keep in mind: transitional groups aren’t subject to ACA requirements. There’s also a chance the government will grant another extension. Or, another option might be introduced before they have to switch.

That’s why, if your plan is working, it may be best to sit tight for as long as you can.

What if you’ve already switched?

These changes don’t really affect organizations if they have already moved to an ACA plan. The only thing they really have to do in 2016 is recertify their status as a small group. All small groups have to certify their status to ensure they are placed in the correct market segment.

What else should organizations do?

Depending on the organization’s size and plan status, they may have a lot of questions. The landscape is still uncertain and things can certainly change.

The best thing organizations can do is work closely with their health insurance carrier to know where they stand — and what their options are.

Insights Health Care is brought to you by Medical Mutual

What you need to know about health care transparency tools

Price and quality transparency is more than just a trend in health care; it’s an expectation. With the cost of the same medical procedure varying sometimes by more than 100 percent even within the same region, the need for transparency by health care consumers could hardly be greater.

“Without having good, solid cost and quality information, the modern health care consumer is pretty much in the dark,” says Kim A. Jacobs, vice president of Strategic Business Development, Consumer Innovation, and Commercial Strategy and Performance for UPMC Health Plan. “Transparency is the future of health care and, as consumers, health plan members need the tools that help them make the best and most well-informed decisions.”

Smart Business spoke with Jacobs about how health care costs and quality can become more transparent for employees and how that can help drive down the high cost of health care.

What kind of information do health care consumers need?

Being able to manage both the quality and the cost of their health care is something that will enable consumers to make the best treatment decisions for themselves and their families. Ideally, you want them to have price and quality information readily available so they can easily read and compare. Having both cost and quality information is essential because, in health care, there is not always a correlation between higher costs and better health care quality.

Why has health care cost and quality transparency become an important topic?

Health care trends suggest that there will be an increasing need for cost and quality information from health care consumers in the years ahead. With health insurance plans requiring members to handle more of the upfront costs of care — through high deductibles and coinsurance — a lack of good, valid information could translate into them paying much more for care that may actually be substandard.

Consumers won’t be literally ‘shopping’ for care as they might for other retail items, but, just like retail consumers, they are entitled to information that enables them to select high-quality and affordable health care. Providing consumers with quality and cost transparency tools can give them the ability to do this.

By having easy access to consistent, accurate information about quality, price and service options when choosing a physician or health service, consumers will be able to make more informed choices.

Will transparency tools replace consultations with physicians?

No, not at all. It will always be important for families to talk with their physicians about any plan of care. The primary physician’s knowledge of a patient’s history is invaluable. In addition, the convenience and comfort connected with using a familiar physician cannot be discounted. Transparency tools can serve as a way to educate patients in terms of cost and quality, and they can use that knowledge to have a more informed conversation with their physicians.

How do effective transparency tools work?

Transparency tools are often powered by crowdsourced data from consumers and physicians. What these tools can do is focus intelligence about a variety of conditions. For instance, the top treatments for persons with the same condition can be highlighted, as well as the most popular treatment chosen by other users of the tool.

With these tools, users can compare treatment options, and learn about side effects, costs and typical patient preferences. These tools also can compare costs for the same procedure at different facilities in the same region.

How do these tools benefit employers?

Transparency tools support an employer’s efforts to encourage employees and families to make informed choices based on good information about quality and cost, including out-of-pocket costs.

When health care consumers are only able to learn the actual cost for a procedure at the time they get their bill, it can lead to them feeling somehow cheated by the process. This adds to an erosion of trust in the health care system and could contribute to dissatisfaction with an employer that offers plans that don’t include any form of transparency.

Insights Health Care is brought to you by UPMC Health Plan

Transitions in care: How to better ensure patients navigate the health system safely

Transitions in care are the most critical component in preventing quality and safety issues in health care. Whether a patient is moving around a hospital, transitioning from one type of care to another like going from a hospital to nursing home, or heading home under self-care — this internal or external hand-off is the time when more mistakes are made.

Orders might not be communicated properly. Patients might not receive the right medication or dosage. There can be a lack of treatment or delay in care.

Both the government and regulatory agencies have put improving transitions in care high on their radar screen, says Diane Nichols, manager II of Case Management & Support Services in HealthLink’s Medical Management.

“It’s important that we have processes in place so we’re all speaking the same language and have the same understanding of what’s happening with a patient and what we need to do to help them improve their health,” Nichols says.

Smart Business spoke with Nichols about the role case managers have to ensure health plan members are transitioned properly.

What is case management and how does it improve care?

Whether they are self-insured or fully insured, employers have the option of purchasing case and/or disease management. The case managers are advocates for the members, managing patients that have significant conditions or multiple, complex conditions that show instability.

Case managers act as an advocate and educator for patients to ensure they are getting all of the treatment they’re enabled to receive under their benefits. The case managers coordinate care by working with all of the different providers, such as hospital case managers, physicians, specialists, etc., to make sure care is being provided correctly and everyone is on the same page.

They can make sure patients — or their families — understand discharge orders, set up follow-up appointments and have a way to pick up new medications. Case managers also help with medication reconciliation — creating an accurate list of all medications a patient is taking, which is one of the biggest problems with transitions in care.

Not only does this kind of care coordination improve outcomes, it also keeps costs in check because patients are able to get better quicker, and back to work sooner.

For example, a patient was supposed to have a dressing changed, but the home care agency scheduled to take care of it never showed up. This can cause a wound to become infected, which requires additional medication, and the person could end up being readmitted to the hospital. In this instance, the case manager intervened, preventing the care disruption and unnecessary complications from occurring.

Every time your recovery from an illness is disrupted and you become sicker and debilitated — especially when it’s related to a medical error due to poor patient handoff — not only is it possible that you are ill longer but it also impacts your quality of life, and your ability to work and pay the bills.

How does case management work when switching from one health plan to another?

Most insurers have a continuity of care policy, which is related to the transition of care. If a health plan group is switching networks, the case manager can help ensure there’s continuity of care for significant treatments.

If a woman is in her third trimester of pregnancy, she’ll be able to continue with her current doctor. If an employee receives chemotherapy or has a chronic disease like diabetes, then the case managers would work with him or her over a period of months to transition over to the new network with no negative effects.

Is there anything else employers can do to improve transitions in care, beside signing up for case or disease management?

Employers can help with ongoing communication to ensure their employees or union members are utilizing these services.

A lot of patients have great experiences navigating the complexity of the health care system with the help of their case manager. The employee can even take that feedback and share it with the health plan’s members.

In today’s health care environment when employers and members face increased costs, it’s more important than ever to ensure members don’t fall through the cracks of their prescribed treatment and prolong recovery time.

Insights Health Care is brought to you by HealthLink

How a more attractive benefits package can help recruit and retain employees

Employers have found that a good health benefits package is essential to recruit and retain the best and brightest employees. A Harvard Business Review survey of human resources professionals showed 60 percent of them believe health benefits are more important than base salary in recruiting.

“Many employers are finding out the best way to make sure they have a highly motivated and satisfied workforce is through a solid health benefits package,” says Amber Hulme, Medical Mutual Vice President, Central and Southern Ohio. “Employers now have many creative options to ensure they can still offer benefits in an era of rising health care costs.”

Smart Business spoke with Hulme about why health benefits are so important to employers and employees, and how employers can mitigate the cost of providing their employees with excellent benefits.

How does a strong employee health benefit plan attract and retain good employees?

Today’s job market, particularly in Central and Southern Ohio, is very competitive. Employers want to find and hire the most skilled and motivated employees. Many surveys show the top two employee-valued benefits are health care and retirement funds, with health benefits often the most important.

With the costs of health care increasing, many job seekers look for those companies that provide health benefits. Additionally, other surveys clearly show the majority of a company’s existing employees say they would leave if their employer no longer offered health benefits. Health benefits today are an essential part of business strategy.

How can employers manage the cost of providing health benefits?

Employers can maintain and sometimes lower monthly health insurance premiums by increasing employee out-of-pocket costs. One way to do this is through a high-deductible health plan. These are plans with lower premiums and higher deductibles than a traditional health plan.

When coupled with a health savings account, a high-deductible health plan covers some costs upfront and then employees pay for other medical expenses using money that has been set aside before taxes. This encourages employees to manage and keep track of their own health care and take responsibility for how they spend those dollars.

Besides lowering the monthly premium for both employers and employees, high-deductible health plans empower employees to control their own costs.

Why is it important for employees to be responsible for their health care costs?

The idea is to make health care more consumer-driven. When employees have a greater financial stake in their own health care, they learn how to choose the most efficient doctors and hospitals in terms of cost and quality.

How do online tools help?

Online tools provide transparency in cost and quality, which are essential in giving health care consumers the information they need to make informed care decisions.

For example, Medical Mutual has an online tool called My Care Compare, which helps members find the best price, provider and location for health care services. With this tool, members can check cost estimates for more than 170 types of health care procedures and tests. Also, they are able to review satisfaction scores for physicians and quality ratings for health care facilities in their area.

Why does it make sense for organizations to invest in the health and well-being of their employees?

Wellness programs provide health information and engagement to help employees achieve healthy living goals. The programs also help employees understand their health, identify risk factors for disease and make positive changes. Wellness programs are good business, too, because they can help employers control health care costs, raise morale, improve productivity and reduce absenteeism.

Insights Health Care is brought to you by Medical Mutual

How to make sense of tax-free financial accounts for your health benefits

Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements (HRAs) are three of a number of tax-advantaged financial accounts that employers can make available to employees looking for health benefit options in what can be a confusing marketplace.

“To pay for their medical expenses, employees have a number of tax-free options that they can explore,” said Ryan C. Wasileski, director of Ancillary & Specialty Product Administration for UPMC Health Plan. “The differences between them often are the kinds of insurance plans they work with, who owns the account, who controls the account and who can put money into it.”

Smart Business spoke with Wasileski about HSAs, HRAs and FSAs, and how they can make sense for employers and employees.

What exactly is an HSA?

An HSA is similar to a 401(k) retirement account, except that the money goes for medical expenses. HSAs, only available through HSA-compatible insurance plans, combine a high-deductible health insurance plan with a tax-advantaged savings account.

Employees own the account and money can be deducted from their paycheck, pretax, and deposited into their HSA. Employee contributions, interest earned and dollars spent on qualified health care expenses are all tax-free. Employers may contribute to HSAs, and employees also can invest, once they reach a certain level of savings.

HSAs do not limit when money has to be used by, therefore employees have the freedom to build their balance up for future medical expenses, invest in a variety of mutual funds or use for current out-of-pocket medical expenses. Employees who leave their job can keep their HSA.

What is an FSA?

With an FSA, the employer sets up the account and owns it, but employees get to decide the qualified medical expenses they choose to pay for. It’s considered ‘flexible’ because of its compatibility to be offered with just about any employer-sponsored health plan.

Similar to HSAs, employees and employers can make tax-free contributions to the account. FSA money cannot be invested, however, and must generally be used before the end of the plan year.

The IRS guidance issued in 2013 began allowing Health FSAs to carry over unused balances of up to $500 remaining at the end of a plan year, to be used for qualified medical expenses incurred in subsequent plan years. Carryovers are optional and make a good alternative to the grace period.

Employees who leave their employer generally lose their FSA coverage.

How do HRAs differ from HSAs and FSAs?

A HRA is a benefit that is set up by the employer for employees or retirees. It is a fund that pays for medical expenses that are not covered by a health plan. These could include deductibles, coinsurance or both.

The employer owns the HRA fund and can decide which expenses will be covered. For the employer, any money that is given to an employee for use as a medical expense is tax deductible. In addition, employees do not need to pay taxes on money received from an HRA if used for qualified medical expenses. The employer has the option to allow a rollover of HRA funds from plan year to plan year.

What do employers like about FSAs, HSAs and HRAs?

Many employers are attracted to high-deductible plans combined with account-based plans because it gives the employee more control of their health care by having them assume a more active role. They have a financial stake in lowering their costs.

The term consumer-driven health plan often describes the increased responsibility of employees or consumers. Increased financial responsibility increases consumer awareness and market competition, and ultimately leads to greater health care quality and availability to lower costs.

A well-designed consumer-driven health care plan will include a high-deductible health plan, account-based plan and wellness and disease management programs. Studies show consumers in these plans have increased consumption of preventive care services, healthy behaviors, care engagement and lower cost than other types of plans — even for patients who are high users with chronic medical conditions.

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