HSA's

System · January 2005

Friday I will be attending an information meeting about HSA's. I believe they are a type of defined contribution (investment) and are pre-taxable. I would like to know how these plans are working out for both the employer and the employee. What hangups have you encountered? What positive things or feedback do you get? What surprises or hidden costs popped up?

I find that the information I get here will be the most straightforward and honest.

SMace · January 2005

No experience with them, just opinion. I think it is well intentioned. Short-term it is just cost-shifting. You MUST accompany the program with a lot of education and information. I don't think the education piece of the puzzle is where it needs to be, yet. If you had the education and information piece it could be successful long-term.

HRCalico · January 2005

I concur with Smace. This looks like the way of the future, my prez says we'll be converting next January and I'm scared. I don't think you can do too much education on this, though. An employee asked me about getting her husband on our plan because his co went to a $5,000 deductible with only a $400 contribution, according to her. That's a hell of a hit if it's true. I just don't know how to make heads or tails of it, and I'm a college educated professional woman. How am I to explain it to my production staff?

safety · January 2005

Beginning this year we are offering a Consumer Driven Health Plan that offers a Health Savings Account. The company I work for decided to partially fund the HSA for all ee’s that chose that plan. We also offer a PPO plan to employees. We believe the CDHP allows the consumer more control over their spending. One must be more cost conscious because under a CDHP all medical charges are paid by the consumer until the plan deductible is met. For our plan, once the deductible is met then the plan pays on an 80:20 split until the annual-out-of-pocket is met. An advantage to this type of plan is the negotiated rate for services from a provider. We are 100% self-insured and our new vendors have a great-negotiated rate so far. One benefit of a CDHP is the fact that monies in a HSA carry over from year to year unlike a flex spending use it or loose it account. The HSA also has the ability to earn interest and that can be a good thing if one never goes to the Doc. Another advantage to a CDHP and HSA is the premium typically is less than a traditional type of plan.

You are correct that they are pre-taxed and this is another advantage. Monies in this type of account can be used for any health related expenditure but one must be aware that if it is not a qualified medical expense it will not be counted toward the deductible. That is only one downside; another is the fact that you must pay 100% of your health care cost until the deductible is met. Another downside is the record keeping aspect of this type of account. One must keep records of all expenses paid from an HSA in case of an IRS audit. You have to be able to prove that you spent these dollars on an approved health care cost or the tax monkey jumps on your back. There are no doubt other good and bad points but that is all I can think of for now.

SMace · January 2005

Safety jogged my brain a little. One thing that was not pointed out is well care. You have to cover well care 100%. If you don't, you are encouraging people not to get the preventative care that is the real basis of these types of plans. With these types of plans you want everyone to spend $2000/year being healthy, not $100,000 being sick.

The other issue you have to be careful with, is you arm them with money to be a consumer and expect them to make the correct decisions. People can't buy a videocamera now without reading Consumer Reports, or spending an hour quizzing the Best Buy guy on what to buy. Yet where do they turn to find out the least expensive cardiologist? How do they know what the cheapest, safest course of treatment for X disease is? They are going to have to decide, should I really get this MRI? At the present state, I think you are sending people into a lion's den with a paperclip for defense.

safety · January 2005

Oops, sorry, I forgot to mention we offer a $500 per person wellness screen in our CDHP. This is covered at the full 500 level unless there is a diagnosis, and then it is charged to the deductible.

You are correct on the shopping aspect but I think you are possibly underestimating the insurance administrator. They have the negotiated rates and although these are considered proprietary the plan administrator can help a consumer in the decision making process. Ultimately it comes down to freedom of choice for the consumer. As an example, I have several ee’s who in the past have taken their siblings to the local emergency room for routine care, not a wise choice. If one is not near death or in a true emergency this is a bad personal decision. In our open enrollment meetings I used this example as a bad decision some have made and it wouldn’t make a hill of beans worth of difference if one were on the PPO or the CDHP. We have a couple of walk in clinics that take patients M-F and going to the ER for routine care will rack up unnecessary charges.

mwild31 · January 2005

We're going to go with a HSA, if not this year then next. We didn't go with one during our last renewal because the premium was still as unreasonable as the traditional plans. Ultimately, we went with PacifiCare and their PPO/Self Directed Health Plan coverage. Under the SDHP, the employee begins to get a taste of what it's like to manager their "money" for health care. The issue I have with HSA's right now is closely in line with SMACE's point about researching best prices for medical services. Ever tried to call the local clinic and ask about their pricing plans? Ever hear, "Well if you need this, then it will cost x dollars, but if you need this, well then, you have to add x dollars, wait a second, that's not right, tell you what, let me have Susie from billing give you a call." That's just the clinic - now try the emergency room or the hospital. Plus the time involved to research (price comparison) & trying to get that done between the hours of 8 a.m. to 5 p.m. (Susie's hours). It's a mess right now trying to figure it out & most disappointing is that right now, since the HSA is so new & so few companies are participating, there is no leverage, zero, for the patient. The clinics, hospitals, emergency rooms (read: board rooms) still don't care enough to reduce prices - it's not even a ripple. That may change in a year or two. But, right now, it's tough. I started by saying that we will probably go to one this year or next - still true even with my concerns. Why? Low premiums. If they get low, then we will come.

Ty · February 2005

We are doing the HSA with all of our Drs who have high deductible insurance and have had high deductible for atleast a year. We have set up savings accounts with a bank in Wisconsin. The deduction for this account is pre-taxed on their payroll and submitted to the bank by the HR dept. Yes the monies does roll over and that is what our Drs like it works just the same as an IRA. Our Drs are only planning on using the monies should they have a catastrophic illness or later on should their medical expenses get high. The bank that has our accounts monitors the accounts and if they use their cards for something other than medical the bank will bill them and they will have to pay the monies back to their HSA account. No and I do mean No they cannot use this account to by a boat.

I have research this quite a bit but I do have a question that I don't seem to beable to get a total committment to the answer. When it comes to malpractice lawsuits will the monies that are in the HSA accounts be included in any lawsuit against the Drs.

Caroliso · February 2005

We added a CDHP option last year and this year added the HSA, a portion of which the company funds. The jury is still out on results, we had very few people elect last year, but more elect this year because the EE co-pays were favorable with the company's funding. We also offer a PPO and an HMO
One thing we didn't learn until we were well into the process was that people on HSAs cannot participate in the traditional uninsured health FSA, you have to set up a separate FSA that doesn't include reimbursible expenses (which on the uninsured side left dental and a few other expenses). it's not enough to just have them enroll in the traditional FSA and police the submissions. That's more work for HR, and as a person who elected the HSA, means I may be paying for more uninsured health expenses after tax. I can be reimbursed through the HSA pre-tax for eligible expenses, but if they are not "covered" by the plan it does not apply toward my deductible. So it makes most sense to hold onto the FSA expenses until the end of the year, when meeting the deductible for the year is less of an issue, by which time you may or may not have funds left from which to reimburse.

Caroliso · February 2005

A question for you, Safety, or for anyone offering HSAs and prefunding the deductible. If your employeees are paying something for their health plan, do you consider their contribution to be going against the pre-funding, or against the premium? I'm getting feedback from our tax attorneys that it has tax implications if you do it one way or the other, and we didn't know that so obviously we didn't determine that when we set it up.

System · January 2005

Thanks for sharing your thoughts and experience with me. It's more valuable than what I find in the literature I read. Any insight I gain will help me to form intelligible questions in the meeting Friday.

E Wart · January 2005

Our broker tried to sell us a consumer driven health plan last year. We too are self funded with about 190 covered emmployees + dependents. After examining it, we didn't feel we would save that much money (vs just raising the deductible.) Also, will take a lot of education and we dont' have the staff for that (in 8 locations). Also, I haven't found the experience that positive (articles and horror stories on companies that changed back to more tradition in mid stream). We wanted more before we considered this. I am interested in how it works for others.
You must be looking at a large deductible if you are looking at HSA's.
Good luck and let us her about your success.
E Wart

Don D · January 2005

Our self funded corporation started making this one of the plan choices two years ago. I think it wasn't well received primarily because of the education piece. They can bring two hundred HR managers to the outskirts of Cleveland for three days and throw it all up on power point. If it can't be satisfactorily taught at that level to educated people, how in hell can we go back home and market it to 50 thousand production workers?

"Consumer Driven". Now there's a monumental misnomer.

SMace · January 2005

Do you know what % of your people have chosen the HSA? Has it gone up or down since it started? If your corporate started it 2 years ago and it's still just a choice, I would imagine there has not been substansial cost savings. If it would have saved money, I would have imagined they would have rammed it down your throat whether you wanted it or not.

Don D · January 2005

My initial, gut reaction was that it would be floated as a choice for a couple of years, then made mandatory. Time will tell. I don't have figures on who elected it, but, I know of not a soul who did, although surely there are a few in the country somewhere. The superior benefits of the election are touted, but the numbers have not been.

It has nothing to do with 'consumer driven'. It's totally 'bottom line driven'.

owenlady · February 2005

One of the best learning/teaching documents I have found about HSA is at the website of the folks we contract with to administer our HSA, Wells Fargo. You might try going to their website at [url]www.wfhbs.com[/url] and reading their information to see if it helps. This is our first year and we had about 25 enroll. BUT we also offer a more traditional PPO & HMO just with much larger premiums.

stilldazed · February 2005

We'll hear a pitch for the 2nd time in a year on the benefits of going to an HSA. We'll be looking at HRA as well. I'm terrified at the chance that might move that way, but the reality is the cost of health care will drive most employers toward 'consumer driven' eventually.

My biggest fear is education--myself & my staff to ensure proper administration, and employees to make some stab at ensuring understanding. My personal opinion is that it is still too new and a significant change from what folks currently understand.

So far I have the backing of most other senior management that we avoid HSA and continue to look for other alternatives. Another question I didn't quite understand from your post is whether your employer will contribute to employee HSAs. Unless I'm confused, HSAs are fully portable, once the money is there, it stays there until a qualified expense comes along, and unspent account balances are not returned to the employer at the end of the benefit year. The one and only presentation (by a group of benefits attorneys) explained that unspent money could accumulate for years, become a sizable sum for the employee, and eventually be used as some level of supplemental income. They specifically said that an employee could buy a boat with unspent HSA funds and the purchase would be legal. Again, I'm speaking as one who has only seen one presentation and will see a 2nd shortly, but I think a fundamental difference between HSA and HRA is that an employer can contribute to both or neither. For the employer who chooses to contribute (potentially to help offset a high deductible), the employer risk of loss in an HRA is reduced because unspent funds can be returned to the employer at the end of a benefit year. When you get to your presentation, ask about HRAs as well. I'd like to hear what you find out.

stilldazed · February 2005

As a follow up to my prior post, someone just passed an article to me today, published in the November issue of Kiplinger, that presents HSAs in fairly simple terms. Because of my limited knowledge on the subject, I found it helpful.

I'm not endorsing Kiplinger and have heard that there are other recent articles in other similar publications. I just haven't seen any of them, so I'm not familiar with where they might be located.

Again, still interested in any other opinions on the subject. In my elementary understanding, it seems that critical factors will be education (administrators and employees who might participate) and options for alternative coverage through spouses' employers, i.e., if we offer HSA and employees migrate to other non HSA group plans through spouses' employers, our costs will definitely go down, but will we have accomplished what we really set out to do?

AJ SPHR · February 2005

In addition to the issues identified by Stilldazed, one that I struggle with overcoming is the adverse selection potential if you offer a "regular" medical plan alongsize the HDHP. We are considering an HSA and HDHP but would also offer our regular PPO. Am concerned that the "good" experience will move to the HDHP, which will result in larger increases to premiums for the PPO.

stilldazed · February 2005

Another one of my 'sentiments exactly.'

Sue · February 2005

I've been to several presentations and have three problems with HSA's. 1) Documentation. The employee can submit a claim with no documentation (to buy a boat). The only time the documents are check, is if the IRS audits the individual's personal tax return. I'm not that trusting. 2) Drug Copays. HSAs will not work with prescription drug copays. Prescription drug costs must go against the deductible. There is a grace year (2005 I think). In 2006 you must re-design your plan. Our employees would not like this. 3) Communication. We currently have an FSA and HRA and its really tough educating the employees on these two relatively simple plans. I can't imagine the hurdle to explain HSA's.

irenesmsaclaims · February 2005

In order to have an HSA, you HAVE to have an HDHP, according to the rules. Also, the rules allow the money to be spent on non-medical expenses, but then they would be taxable to the participant. During my study of HSAs, it also occured to me that it would be difficult to sell to lower-income employees, who may be accustomed to a lower out-of-pocket cost for medical expenses, rather than meeting a high deductible first, with their own money, even if it is pre-tax.

stilldazed · February 2005

Can you share a few details on your company's HRA: how long has it been in place? successful? company contributions vs. employee contributions? anything else?

HRA is less popular in current presentations, my guess is because it isn't the latest/greatest on the market, but it still mentioned as a potentially better option for some employers. What little I know about HRA leads me to believe it may be a better option for us.

Sue · February 2005

We implemented an high deductible plan and an HRA in March 2003 when our initial rate increase was 67%! We adopted a $1000 deductible plan (up from $200) and the rate increase dropped to 25%. The employees pays the first $250 and the company pays the next $750. Our plan is designed that the HRA applies exclusively to the in-network deductible. We do not carryover unused balances. Only 15% of our "$750 pies" gets used each year. It has 'reconnected' employees back into the health equation. There's paperwork/claim forms involved, but I think that's essential to employees getting back in touch with the costs.

In 2004 we had an 11% increase, which was great in Wisconsin. In 2005 we had a 0% increase! We have not changed our plan design in 3 years - and the employees appreciate it. And, finding only a $250 deductible plan is getting rare.

At the same time (starting in 2003) we got serious with wellness efforts. Employees receive a substantial discount on their premium share IF they take a Health Risk Assessment and screening.

HSA's

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