1940-1970 Virtually no cost control 1970-1980 Introduction of UC limits, deductibles and coinsurance...
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Transcript of 1940-1970 Virtually no cost control 1970-1980 Introduction of UC limits, deductibles and coinsurance...
1940-1970 Virtually no cost control
1970-1980 Introduction of UC limits, deductibles andcoinsurance
1980-1990 Hospital Pre-admissionauthorization, surgical authorizations, utilization review
1990’s Managed care
History of Cost Controls
Present Consumer Driven Health Care – CDHC
Health Care Costs % of change
Drivers of Health Care Costs
Prescription Drugs
Hospital Costs
Lifestyle choices
Third party payer system
Drivers of Health Care Costs
Prescription Drugs
Increased Utilization
Price Inflation
Higher Cost Drugs
Rx costs are projected to increased over 12% each year until 2010.
Marketing directly to consumer. Patients are asking for name-brand drugs
Drivers of Health Care Costs
Rising cost of hospital visits
Outpatient costs are the fasting growing component of healthcare costs.
Inpatient costs are being driven primarily by increasing hospital expenses per inpatient stay
Rising costs per admission are driven in part by:
Greater use of expensive technology
Higher labor costs
Hospital consolidations
Drivers of Health Care Costs
Lifestyle choices
Centers for Disease Control (CDC) estimates that U.S. obesity-attributable medical expenditures reached $75 billion in 2003
Drivers of Health Care Costs
People are not price sensitive in the market for health care as they are in the market for other goods and services because some third-party (Medicare or a private insurer) pays most of the cost of health services.
Consumers do not know the true cost of health care.
Third Party Payer
How Employees View Health Care Costs
63% underestimate health insurance costs
69% overestimate how much they contribute to health insurance
57% are unsatisfied with their coverage
A recent Hewitt Study shows employees don’t understand health care costs.
Consumer Driven Health Care (CDHC) refers to health plans in which employees have a personal health accounts such as a Health Savings Account or a Health Reimbursement Arrangement from which they pay medical expenses directly
Consumer Driven Health Care
Types of Consumer Driven Health Care
HRAHealth Reimbursement Account
HSAHealth Savings Account
FSAFlexible Spending Account
Who is eligible Employees and Retirees
Employees and Retirees
Employees
Max Annual Contribution (2007)
No maximum $2,850 Individual
$5,650 Family
No maximum
Who owns Employer Employee Employer
Who contributes Employer Only Employer or Employee
Employee Only
Can employee earn interest on money
No Yes No
Can money roll over Yes Yes No
Is an HDHP required No Yes No
Is it portable No Yes No
Eligible for Cafeteria No Yes Yes
Health Savings Accounts (HSA)
What is an HSA?
An HSA is a savings account where consumers invest money and then withdraw it, tax free, for eligible medical expenses.
HSAs combine with high-deductible health insurance plans to give consumers more control -- and more responsibility -- over their health spending.
Health Savings Accounts (HSA)
Who is Eligible
To be eligible, an individual must be covered by an HSA-qualified High Deductible Health Plan (HDHP) and must not be covered by other insurance that is not HDHP.
An individual may not be claimed as a dependent on another person’s tax return. In other words, dependent children cannot establish their own HSAs.
Other Insurance
Health Savings Accounts (HSA)
Certain types of insurance are permitted with an HSA
Specific disease or illnessAccidentDisabilityDentalVisionLong Term CareEmployee Assistance ProgramsWellness Programs
Can employees have both an HSA and FSA?
Health Savings Accounts (HSA)
You can have both types of accounts, but only under certain circumstances.
If you offer a “limited purpose” (limited to dental, vision or preventive care) FSA, then your employees can still be eligible for an HSA.
Health Savings Accounts (HSA)
What's a High Deductible Health Plan
Sometimes called "catastrophic" coverage, high-deductible insurance plans offer low premiums in exchange for a high deductible.
For 2007, the minimum deductible is $1,100 for individuals and $2,200 for families.
Health Savings Accounts (HSA)
What's a High Deductible Health Plan:
With the exception of preventive care, you must meet the annual deductible before the plan pays benefits.
Health Savings Accounts (HSA)
How much can you contribute to an HSA?
HSA Contribution Limits - 2007
HDHP Deductible
Maximum HSA Contribution
SingleCoverage
Minimum: $1,110 $2,850
$1,500 $2,850
$2,000 $2,850
$2,500 $2,850
$3,000 $2,850
FamilyCoverage
Minimum: $2,200 $5,650
$3,000 $5,650
$4,000 $5,650
$5,000 $5,650
$6,000 $5,650
HSA Out of Pocket Limits - 2007
Maximum out-of-pocket limits for HDHP
SingleCoverage
$5,500
FamilyCoverage
$11,000
Health Savings Accounts (HSA)
Eligible Expenses
In general, funds from an HSA can be used for a wider range of expenses than covered by comprehensive insurance plans.
HSAs cover routine doctors' appointments and prescriptions, and cash can be withdrawn to cover over-the-counter medicines, such as aspirin and antihistamines.
A partial list of eligible expenses is available in IRS publication 502.
Health insurance premiums (Exceptions: LTC, COBRA, and for individuals over age 65 certain Medicare premiums)
Expenses incurred BEFORE the HSA coverage is established.
Expenses that are covered by your health care plan.
Health Savings Accounts (HSA)
These are not considered eligible expenses
Individuals typically receive a checkbook or debit card
Individuals are responsible for paying providers as they are billed
There is no “gatekeeper” to insure the charges are for qualified expenses
During an IRS audit, it is the individual’s responsibility to prove that deductions for the account were for qualified medical expenses
How are claims processed?
Reduced Premiums
Provide Incentives to employees to get Involved with healthcare decisions
Encourage healthier staff
Advantage to the School District
Health Savings Accounts (HSA)
Money (including any employer contributions) belongs exclusively to the employee.
Money can be invested and income earned grows tax-deferred.
Unused balances carry over each year without limitations.
Portable – Employees can take with them when they change jobs or retire.
Advantages to the employee
Health Savings Accounts (HSA)
Review plan design specifics and determine level of employer involvement
Limit medical offerings to one vendor to avoid adverse selection
Outline eligibility
Select a vendor and or HSA administrator
Draw a clear line between the HSA and the health coverage to make it clear that there are two components
How to add an HSA
Communicate clearly to staff – before, during and after implementation
Share the savings from switching to a high deductible plan with the employees
Make a one time contribution to the account. Ongoing contributions can be paid by the employee
When you educate the employees, talk about the savings account first; the deductible second.
During the first year, only a small percentage of employees will participate even if it is designed correctly. The second year – through word of mouth – generates greater participation.
How to add an HSA
The two most predictive aspects of an employer’s success in offering an HSA are:
1. Whether or not they fund the account
2. How much the employer funds it.
How to add an HSA
A recent Pricewaterhouse Coopers survey of large employers who implemented an HSA:
Reductions in prescriptions by 5-25%
Reductions in office visits by 5-20%
First year rate increases in the range of –5% to +8% as opposed to +14% to +16% nationally
In the first year alone, over 60% of CDHP enrollees had average HSA balances of $400 to roll over to the next year.
According to Forrester projections, the number of HSAs will grow to more than 6 million in 2008. That number could triple to more than 18 million by 2012.
Results and forecast
Results and forecast
Results and forecast
Call Bill Baker
417-882-2992
Or e-mail: [email protected]
Interested in a quote for your district?
Forrest T. Jones & Company has worked with Missouri School Districts since 1953.
We’d be happy to work with your School District to see how much you can save by introducing an HSA.
Resources: U.S Treasury Department for HSAs
http://www.ustreas.gov/offices/public-affairs/hsa/pdf/HSA-Tri-fold-english-07.pdf
FSAFEDS www.fsafeds.com; 1-877-FSAFEDS(372-3337) or TTY 1-800-952-0450
OPM Web address for HSAs www.opm.gov/hsa
U.S Treasury Department for HSAs www.ustreas.gov/offices/public-affairs/hsa
For a list of qualified medical expenses that can be reimbursed through an HSA or HRA: www.irs.gov/pub/irs-pdf/p502.pdf
HSA Insider http://www.hsainsider.com