Consumer-driven health plans?The plans loom large in strategic decision-making for employers. Most firms have heard of the plans by now, and feel compelled to think about offering one to their employees. Health reimbursement arrangements are the most commonly implemented plan, but the newly available health savings accounts are generating plenty of interest, too.
Employers are at a point of saying, "How much cost can I shift to employees under my existing plans?" This is kind of similar to when we went from indemnity to managed care.
Employers cite two reasons for embracing consumer-driven health plans: Some do it to shift costs to employees, while others see it as part of a long-term strategy to reward people for adopting healthy lifestyles. Those employers who reject CDHPs, on the other hand, often think that their employees aren't Internet-savvy enough to use the online tools. Many are skeptical about employee willingness to modify unhealthy behaviors. The union would never go for it, say others.
By this time next year, the majority of employers will look at a formal CDHP proposal. Whether they implement it or not will depend on a key factor: How desperate is the employer to reign in costs?
The bottom line for the employer is, "If I don't do this, what am I going to do? Give me another alternative."
Employers need to reduce health plan options for employees when implementing a consumer-driven health plan. The alternative should be truly different from the consumer-driven plan - a traditional HMO, for instance.
Not all benefit managers are enamored with HRA-based CDHPs, however. What I don't like about HRAs is that only the employer contributes.
On the other hand, you may be enthusiastic about HSAs, which under the new Medicare law must be offered with a high-deductible health plan. HSAs need not require an employer contribution.
The HSA high-deductible health plan is basically a flexible spending account option with a rollover. You can plan in a tax-efficient manner for the out-of-pocket expense with your HSA and build that account for future unanticipated out-of-pocket expense.
Health care costs and premiums continue to increase much faster than either income or inflation, making health insurance increasingly unaffordable for more and more people. Research offers little hope that employee cost-sharing will help drive down health care costs.
While employers are falling back on increased patient cost-sharing to help slow health care cost growth, it's unlikely that increased patient cost-sharing alone will significantly slow cost trends over time.
Lance Wallach, CLU, ChFC, CIMC, speaks and writes extensively about VEBAs, retirement plans, and tax reduction strategies. Reach him at (516) 938-5007.
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