Selecting the right wellness vendor takes careful study

Wellness programs have become a staple of American companies over the past two decades. A 2012 study by Rand Corp. showed that 51 percent of all employers with 50 or more employees reported that they offered wellness programs.

The foundation for workplace wellness programs actually goes back to the 1970s, when government entities such as the National Institute for Occupational Safety and Health and the Occupational Safety and Health Administration were created to help ensure safe, healthful working conditions.

Over the past 20 years, the popularity of wellness programs has intensified, especially as health care costs have risen. But not all wellness programs are created equal as companies are finding out. Choosing the one that best suits a specific company can be a challenge.

“The characteristics and quality of health management and wellness programs can vary considerably,” says Stephen T. Doyle, senior director of Strategic Health Management Solutions at UPMC WorkPartners. “Business owners should make a careful study of their options before selecting a wellness vendor.”

Smart Business spoke with Doyle about what employers should look for in a wellness program.

What is the future of wellness programs?

It is obvious that with health care costs on the rise and participation-based incentives losing some effectiveness, the emphasis is shifting to programs that provide incentives (or disincentives) based on outcomes. Recent employer surveys have shown 52 percent of employers had outcomes-based incentives for tobacco use in 2013, and 33 percent offered outcomes-based incentives for biometric screening values such as weight, blood pressure and cholesterol.

To ensure continued participation and to maintain program momentum and success, programs often need to make significant shifts toward outcomes-based incentives.

What are some characteristics of successful incentive wellness programs that employers should look for?

An effective incentive program can be a powerful strategy for engaging employees and motivating behavioral change. However, while many programs may provide incentive strategies for specific behaviors, often these will fall short of addressing the whole population, given individuals’ specific health concerns or needs.

Each employer’s needs are different, and, therefore, wellness and health management providers need to be able to tailor programs to accommodate an organization’s particular needs.

Should wellness programs be integrated with other employee benefits?

Wellness and health management programs produce optimal results when integrated with an organization’s medical benefits. Integrating all employee benefits allows for seamless coordination of benefits and can provide the most complete picture possible of the health of the employee population, which in turn can help guide program direction and development.

Professionally trained and credentialed staff is needed to produce the best service. Ideally, staff should be involved in ongoing training and education initiatives.

In addition, a wellness and health management program provider should be readily accessible in the same geographic region as an employer. This allows for the most responsive service delivery and face-to-face interaction with employers and employees as needed.

Regular, customized reporting that summarizes employee utilization of programs and its impact on the organization is essential.

Are wellness programs the final answer to improving overall workplace health?

Achieving widespread and significant improvements in health risk levels, especially among workers at risk for chronic diseases, may require more than financially incentivized workplace wellness programs. Other workplace modifications — such as on-site health clinics and lifestyle and disease management health coaches on-site — may be needed to enhance the impact of workplace wellness programs.

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Weighing the potential of wearable fitness technology

It’s only a gadget that attaches to someone’s wrist but it could be the future of health insurance. Or, it represents a major overreach by insurers and raises serious privacy issues.

“Devices that measure physical activity, heart rate, caloric expenditure and other biometric measures, often referred to as ‘wearable fitness technology,’ hold the promise of dramatically changing the face of the health care industry,” says Stephen T. Doyle, senior director of Strategic Health Management Solutions at UPMC Health Plan. “But we have to remember that this is innovation that is not without some risks.”

Smart Business spoke with Doyle about the potential of wearable technology and what employers might like and not like about it.

What about wearable technology is attractive to insurers?

With wearable technology, there is potential for accurate, real-time data. It can provide a continuous validation of an individual’s daily health behaviors, which over time build to define his or her overall health. These devices have the capacity to collect data in several areas, including physical activity, eating and sleep patterns. They provide relevant and customized feedback to end users, showing them areas where they’re doing well and areas of opportunity for them to improve.

Most devices function like a health coach or a trainer would from a goal-setting, monitoring and feedback perspective, but their added value comes from the fact that they’re always with you.

How likely is it that wearables will become popular enough to have an impact?

According to Pricewaterhouse Coopers, an estimated 20 percent of Americans currently own a wearable device. Of these users many are young. Millennials make up more than 50 percent of the population, and 53 percent of millennials say they’re excited about the future of wearable technology. Some estimates project the sales of wearables could gross almost $6 billion by 2018.

In addition, these devices are evolving in both design and capability, increasing their relevance and use. Early fitness monitors were generally expensive and obtrusive; only athletes, the very fit and/or participants in clinical or research programming used them. Now, with the myriad design options, the integration with other technologies (smartphones, smartwatches, etc.) and the reduced price point, these devices are bound to continue to expand in popularity.

Why are wearables seen as an effective way to promote wellness?

Wearable technology is generally affordable and easy to use. These devices could track the user’s fitness activities, sleeping habits, body temperatures and heart rates to deliver real-time, relevant health information.

By leveraging the data produced from these devices, the potential is there to improve health and reduce health care costs over time by modifying daily health behaviors, while also improving preventive care. Wearable technology could advance population health management and allow an individual’s health care provider to support them in a more proactive and effective way.

Wearable technology is not a silver bullet, nor does it replace the relationship between a patient and physician. However, the data these devices produce can enable health care organizations to develop more effective and personalized approaches to care, which can improve the health of a population and reduce costs.

What issues are raised by wearable technology?

The concerns over these devices and their use in health care and health insurance are typically around privacy and confidentiality. This, as with any protected health information, needs to be kept in accordance with all applicable laws and shouldn’t be shared with an employer or other entity without appropriate consent from the user.

There’s also concern over how the information would be used. This is a natural concern that occurs with the introduction of any new technology that requires an element of personal information disclosure to function most effectively. Many mobile apps, such as banking apps or travel apps, are great examples of how initial concerns over information sharing dissipates as technology becomes more ubiquitous, personalized and relevant to the individual.

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How to get the word out about EAPs, which traditionally are under used

Employee Assistance Programs (EAPs) have a long history of success in helping employers and employees tackle complicated and difficult problems. EAPs can trace their beginnings back to 1917, and have been a part of many company benefit programs since the 1960s and 1970s.

And, yet, EAPs remain an under-used resource for many employees. Employers have to be frustrated when something that could help all employees is not put to best use.

“The reasons for the under use of EAPs are many,” says James Kinville, senior director of LifeSolutions, an EAP that is part of the UPMC Insurance Services Division. “What’s most important is overcoming those reasons and getting the word out to employees that EAPs are a valuable resource that they have available to them.”

Smart Business spoke with Kinville about ways employers can make employees more aware of EAPs and take advantage of their services.

Why do employees resist using an EAP?

Oddly, one of the biggest reasons is that many employees do not believe that EAPs are truly confidential. This comes from a lack of understanding of how EAPs operate. It is imperative that an employer continually educates employees about how an EAP works.

And, of course, the biggest thing is that an EAP is absolutely confidential. EAPs do not report back to the employer after meeting with an employee. Time spent with an EAP is not part of an employee’s work record.

Without that kind of understanding, it is difficult for an employee to look to an EAP as a trusted resource.

What are some other reasons for not using an EAP?

Another misconception still prevalent in the workplace is the stigma attached to reaching out for help in this manner. Men, especially, can struggle with this. What needs to be explained is that everyone at some time or other has had on- and off-the-job problems of a similar nature and getting help to deal with these kinds of issues is a smart thing to do.

Consider what EAPs handle: financial problems, marital and family issues, cancer, stress-related illnesses, caregiving for parents, substance abuse, workplace conflicts, depression and more. It makes sense to turn to a professional for help with these subjects and it makes sense to realize that some of these problems are bigger than anyone can handle alone. It’s not a stigma to go for help, but rather a wise choice.

Does an employee need to go through HR or get permission from their boss to use an EAP’s services?

There is no need for an employee to tell anyone — boss, HR official or work colleague — if he or she wants to partake of EAP services. Companies provide an EAP phone number and an employee can call confidentially and make an appointment.

Because EAPs operate independently of an employer, they are often flexible about when and where they can hold sessions. It could be over the phone, at a therapist’s office or even at the worksite.

What else do employers need to know about EAPs?

Sometimes, employers can be guilty of not fully realizing how EAPs can enhance an organization’s performance, its culture and its business success. EAPs provide value in three ways — by leveraging the value of an organization’s workforce, by addressing the cost of doing business and by helping an organization mitigate its business risks.

It is a key component of an employer strategy to increase employee engagement and improve productivity, morale and workplace harmony.

How does an employer choose an EAP?

Employers need to choose an EAP that can optimize its value to a company’s culture and workforce to ensure the achievement of business objectives.

Employers should weigh an EAP’s experience and expertise in the field, the credentials of the EAP’s staff, the EAP’s level of responsiveness and accessibility, its ability to integrate with other key benefit providers and whether it can tailor a plan design to fit a company’s specific needs.

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Simple, visible moves help in achieving a culture of wellness

Small changes, big results — that’s not always how things work, especially when it comes to health and wellness. But, in terms of the workplace, small changes can often do the most to encourage a culture of wellness.

“You can make a big difference in the lives of employees simply by making the work environment more conducive to wellness,” says Dr. Michael Parkinson, senior medical director of UPMC Health Plan and UPMC WorkPartners. “It doesn’t take major, costly changes to have an impact. Small, simple but visible moves can communicate that employers are serious about improving the health, safety and well-being of their most precious asset — their employees.”

Smart Business spoke with Parkinson about small changes that can impact wellness.

What are some ways employers can impact employee wellness at the workplace?

One place to start is to encourage employees to walk away from their desks. Cubicles are a mainstay of many workplaces, and employees spend much of their time in front of computers. If ‘sitting is the new smoking’ — yes, sedentary lifestyle is a major contributor to death and disease in the U.S. — then getting employees up and moving more needs to be built into each workday.

Leading companies schedule ‘recesses’ throughout the workday, emphasizing stretching, walking meetings and brief walks. Opening an attractive break room or workplace cafeteria encourages employees to not eat at their desks and move at lunchtime.

In early studies, standing workstations have been shown to decrease musculoskeletal strain, improve concentration and increase energy expenditure. Consider introducing one swing activity workstation per group of employees, if the expense for a total office reconfiguration is unaffordable.

Can employers actually increase their employees’ physical activity?

The Centers for Disease Control and Prevention (CDC) has determined that people who get adequate amounts of physical activity have reduced rates of chronic disease, are better able to maintain a healthy weight, can better manage stress and perform better at work.

Employers can help increase physical activity by taking small measures, which make more activity the expectation and default option. For instance, unlocking the stairwells, making them attractive and encouraging all executives and managers to ‘take a hike’ multiple times throughout the day creates an activity culture.

Employers can support employees who bike to work with safe and secure places on-site for bike storage. They can promote active means of transportation, such as mass transit, by providing transit passes. They can encourage running, walking, biking or taking a fitness class during the day with flextime schedules. Even a single wastebasket in a central work area encourages employees to walk in order to dispose of trash.

How can employers promote healthy eating?

Workplace cafeterias are an ideal place to preferentially price and promote fruits, vegetables, whole grains, non-processed foods and sugar-free drinks. Vending machines can offer healthy alternatives to snack food. Sponsoring ‘new fruit and vegetable of the month’ giveaways can expose employees to foods rarely eaten but loaded with vitamins, disease-fighting antioxidants and micronutrients.

What about stress, mindfulness and well-being?

All employers see direct and indirect costs of anxiety, stress, depression and lack of mental focus in their medical, disability, worker’s compensation and total productivity costs.

Can the office space or workflow be made less stressful? Are there unnecessary noises, interruptions or poor lighting that exacerbates an already challenging work environment? Are there quiet spaces or rooms for taking a break or practicing mindfulness (deep breathing with mental visualization) to relieve stress and re-charge?

Can employers work to decrease tobacco consumption?

The CDC estimates that smokers cost employers about $5,800 more than their nonsmoking co-workers. A smoke-free policy for the workplace and worksite property should be considered. Employers can make tobacco-cessation classes and services available, as well as materials that promote the benefits of living smoke-free.

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How to handle disability and absence management in the ACA era

The impact the Affordable Care Act (ACA) has had on employers is one that continues to evolve over time, sometimes in surprising ways. For example, it may prove that the ACA may well have its greatest impact in the area of workers’ compensation.

“The ACA is the greatest incentive to integrate all forms of disability management there has ever been,” says Patrick D. Haughey, associate vice president for Workers’ Compensation at UPMC WorkPartners. “The ACA mandates that employer groups have to provide disability for employees.

“An organization that can manage total disability from beginning to end is one that can deliver for employer groups in this era,” he says.

Smart Business spoke with Haughey about integrated disability management and why it makes sense for employers.

Why is absence management so important?

According to a 2013 survey on Absence and Disability Management by Mercer, the direct cost of incidental absence and disability benefits is the equivalent of 4.9 percent of payroll. Mercer estimates that indirect costs, such as replacement labor and lost productivity, are roughly the same, making the total impact of absences at about 8 percent of payroll.

What is integrated absence management?

Integrated absence management is about looking at problems in nontraditional ways.

For instance, if someone injures a knee at work and requires extended leave, in many cases that is looked at as an issue for a company’s workers’ compensation program. That means increased focus on the rehabilitation of the knee and on getting the employee back to work. What doesn’t happen is much time considering what may have caused or exacerbated the injury. Is it a weight problem? Is there a chance the injury could recur if the weight problem is not addressed? Is the employee possibly at risk for other health-related issues? What about the indirect impact of the injury such as stress or depression?

This is a ‘whole person’ approach that looks at all the care provided to an employee and then coordinates that care for the individual by integrating benefits and programs. Health risk factors have consequences and should be addressed proactively. An integrated, total health management approach provides employers with the best strategy to proactively manage its population.

One benefit for employer groups in employing integrated absence management is that it can keep premiums from escalating. An integrated approach, which may include wellness programs (rewarded by the ACA) and things like bringing in loss-prevention specialists, can result in premium reductions.

What would an integrated approach look like?

An actual case that involved UPMC WorkPartners is a good example.

An employee filed a Family and Medical Leave Act claim in order to have time to care for her mother. A leave specialist was able to refer her to our employee assistance program (EAP) to help her get daily care for her mother. In talking with the EAP counselor, the woman revealed that she was overwhelmed by the burdens of a job and additional family responsibility. The woman was then enrolled in a coaching program to help her learn how to better manage her time and stress.

The net result was an employee who was able to return to work with limited distractions.

What are some methods used in integrated absence management?

It’s important to align and integrate workers’ compensation, disability and leave. You also must be able to provide access to medical expertise throughout the life of a claim. Understanding the connections between programs and how each program can impact an employee at a time when assistance is needed most is critical to a successful integrated absence management strategy.

The only way to reduce time away from work is to align traditionally siloed occupation and non-occupational programs, and through those programs identify opportunities to positively impact more people and, as a result, improve the health and productivity of the workforce.

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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.

 

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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.

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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.

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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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How a private exchange can balance health care products with cost

The Affordable Care Act is probably best known for its Federal Marketplace, or exchange, but as the law evolved it has helped increase the popularity of another product: private exchanges.

Private exchanges are increasingly seen as a viable business option because they offer employers predictable cost control through defined contribution, while also empowering employees to become smarter consumers.

“Private exchanges are increasing in popularity because they may offer a strong balance of product and cost choices, decision support that empowers employees to become health care consumers, and administrative and financial benefits to employers,” says Kismet Toksu, president of EBenefits Solutions, a subsidiary of UPMC.

Smart Business spoke with Toksu about why private exchanges can make good business sense for employers.

What are some of the differences between private and public exchanges?

Either the federal or state government sponsors a public exchange. An employer, broker or association may sponsor a private exchange. While public exchanges serve individuals or small employer groups of up to 50 lives, private exchanges, typically, serve the employer group market. Private exchanges also vary on the size of companies they target. Due to rules that govern public exchanges, the products offered are more limited than those available on private exchanges. Another big difference relates to customer experience and service.

What are some of the advantages of a private exchange over a public exchange?

One is an increase in options, both in terms of benefits that may be offered and companies that offer products.

With a public exchange plan, members may choose coverage for medical expenses and prescription drugs only. Private exchanges may offer more than medical and prescription plans, such as dental and vision coverage, disability, accident or critical illness. Even non-medical plan options may be offered. Private exchange plan options have fewer limitations and may be more customized.

In addition, there is more cost certainty for employers, who are often responsible for paying the largest portion of the coverage. This type of funding is called defined contribution. Employees may use the defined contribution to offset costs of the products they select.

How can an employer benefit from going to a private exchange?

First, an employer may continue to reap tax benefits by providing employees access to health insurance. An employer also may retain control over their benefit offering. When employees understand the true cost of their options, they tend to be more cost-effective, which is an advantage for both the employer and employee.
A private exchange may reduce the administrative burdens while maintaining employee loyalty associated with offering coverage.

How do employees benefit from private exchanges?

On a private exchange employees have the opportunity to select a plan that best fits his or her needs and budget. Private exchanges provide decision support not often available elsewhere. Employees may also find that private exchanges provide better customer service.

Is there a set amount that an employer must contribute to a private exchange?

The amount an employer contributes is determined entirely by the employer. With a defined contribution plan, the employer gives the employee a set amount for health care and the employee increases that, as he or she sees fit. A defined contribution can cover the entirety of an employee’s plan, or only a portion of the total cost.

What else do you need to know about private exchanges?

Remember that no two private exchanges are the same. Some offer individual plans; some offer group plans targeting specific group sizes. The types of benefits offered — such as dental, vision or disability — may vary, depending on the exchange. Certainly the member experience and quality of support varies. Also, private exchanges are only available to employees of companies that choose to participate in it.

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