With open enrollment underway, customized consumer directed health plans are a way to increase your business and stay ahead of the competition.
I’ve been in the health insurance business for the past 20 years and have seen its evolution from the front lines. From the advent of health maintenance organizations, preferred provider organizations and exclusive provider organizations, to today’s landscape of high deductible health plans and consumer directed health plans, the business has become complicated.
Add to this health savings accounts, health reimbursement accounts and flexible savings accounts, and banking is as much a part of being a health insurance broker as the plans themselves are. As a broker, you have to ask yourself a question: Am I in the health insurance business or do I just say I am? If you are committed to the business, understanding these new health care options is a must.
As the market has evolved and changed over the years, so have many insurance brokerages. At my agency, we chose to focus our efforts, on behalf of our clients, on consumer driven health plans combined with health savings accounts. With the continued double-digit growth in health care costs, CDHPs combined with HSAs offer our clients the most value for their health care dollar.
CDHPs and HSAs defined
CDHPs are high-deductible health plans that encourage individuals to become actively involved in making their own health care decisions. At a minimum, CDHPs engage individuals in choosing their own health care providers, managing their own health expenses, and improving their own health. A key component of many CDHPs, HSAs are tax-favored bank accounts from which funds are used to cover the cost of an individual’s health care expenditures.
The Blue Cross and Blue Shield Association reports that the adoption of CDHP/HSA plans are growing at 30% a year.
Of course, the definitions I just gave are simplistic. CDHPs and HSAs can be so much more.
Nationally, 19% of large employers are currently offering HDHP/HSA plan arrangements. That is up from 10% just two 2 years ago. Today, 45% of employers are contributing to the HSA accounts they are offering to their employees. More than 11% of the contributions are in excess of $1,000 annually.
Encouraging CDHP success
So, how do you use the CDHP and HSAs as health plan options in the field, rather than just discuss them?
CDHPs are gaining popularity as fast as the premiums for traditional plans are rising. While the demand is high, there is a significant amount of education that employers need to do before making the commitment to CDHPs. When offering CDHPs to their clients, brokers will find themselves in the roles of salesperson, educator and implementer.
From a practical standpoint these plans can be scary to individuals because of the unknown cost at the doctor’s office. In order to combat this, we empower our clients by giving them tools to enhance their user experience. We know from experience: If it is not easy they won’t do it. Employees are very resistant to change, and the plans we are implementing carry a big change factor. So let’s get started.
As stated before, the Blue Cross and Blue Shield Association claims the adoption of CDHPs and HSAs is growing at 30% a year. Most health insurance providers have eased the process of setting up CDHPs and HSAs by developing their own version of a CDHP. They have also partnered with large national banks to help ease the administration on the banking side of the plan or the HSA.
As a broker, you have to help simplify administration of the plans themselves. We see one of the biggest obstacles to a CDHP/HSA model being education. The employers do not have the time or knowledge they need to help their employees navigate a system where the employees are in charge of their own medical accounts.
At my agency, we start with the basics of employee information. We employ a single Web-based portal that houses all of an employers’ information. For the portal we use simple, easy-to-use software from a company in South Carolina.
The software is a proven commodity for us, and was chosen for its simple interface, ease of navigation and the independence of the platform.
Our goal was to implement a system for our clients that does not tie them to any one health carrier, as we use an independent HSA vendor. We picked an HSA specialist with great service and a thorough understanding of health care. They are there to answer the call if someone needs help getting the lowest cost prescription at 2 a.m.
Showing employers the savings
Once we had the system in place, we needed the employer to buy in–literally for them to buy into the plan.
The question that needs to be asked is: How much are they willing to, or have been, spending?
We always begin by offering the employer a CDHP/HSA as an optional alternative to plans that are already available. As with most financially based decisions, saving money is the main motivator. The employer savings in implementing a CDHP is significant enough for them to fund a portion of the HSA that would be implemented alongside it.
A traditional HMO co-pay health plan costs the employer on average $350 per month. Currently, those same employers are looking at a renewal rate increase of 22%. This is a familiar story across the country. A simple spread sheet with the traditional options compared with a CDHP plan effectively gets across the cost savings.
For example: If the employer were to renew its HMO option, it would be looking at a rate of $427 per month. However, if it changes over to a CDHP plan with a $2,000 annual individual deductible, the employer will see a rate reduction to $290 per month.
Once the decision is made to offer a CDHP, it’s now time to determine a funding strategy. In most instances, my agency encourages employers to determine how much they are willing to continue spending on health insurance. By establishing a baseline, we work backward to determine the funding strategy.
As employers continue to navigate high cost health insurance, the CDHP/HSA plans allow them to come up with premiums they can budget for, while employees can fund their HSA plans as deemed necessary.
Continuing with the previous example, the employer may decide that it is willing to contribute 10% more than what it is contributing for the current year, or $385 per month per employee. For the employee, that means that the cost of health care increases by $82 per month in a traditional HMO.
If that same employee opts for the CDHP/HSA plan, there will be no increase in monthly costs and the employee has $95 per month deposited into an HSA account by the employer.
While the math is simple and the potential cost savings is appealing to the employee, the task at hand is helping the employee understand and navigate the plan options.
To truly get employees to buy in, showing them the cost savings is simply not enough. As never before with a traditional HMO, employees are now responsible for making health care decisions that have significant costs and health implications.
In the past, employees would normally spend less time reviewing their health insurance plan, than picking a restaurant for dinner on a Friday night.
From a broker standpoint, this is where your electronic portal needs to stand out. Employees need the ability to log on and see plan comparisons, watch videos of the different plans offered, enroll in their benefits, and choose how much money they want in their HSA account.
This CDHP/HSA model is probably not the end-all fix for runaway health insurance costs, but it is a viable solution for today, and into the immediate future. I would encourage you to apply these concepts to your company, including the use of a benefits portal, because there are more brokers calling on your accounts that are offering these customized solutions to your clients than ever before.