The number of small-business employers choosing consumer-directed health plans (CDHPs) grew from 8 percent to 13 percent in 2008, according to a survey by the Kaiser Family Foundation and the Health Research & Educational Trust (HRET).
High-deductible health plans coupled with a tax-preferred savings option, CDHPs such as health savings accounts (HSAs) or health reimbursement arrangements (HRAs) are undeniably more popular than ever — and not surprisingly, the survey also found that 60 percent of the employers who have moved to these plans cited cost as the primary reason behind their decision. It has been widely reported that fewer and fewer small businesses offer group health insurance as companies find themselves priced out of the market. As a result, employers are increasingly asking their agents about CDHPs.
Still, they have questions and concerns. Aren’t these solutions only for the young and the healthy? Isn’t this just cost shifting? How does an HSA really work?
Fortunately, most of these objections can be surmounted with proper attention paid to planning and communications.
1. Plan designs that make sense
First, help your client select a CDHP that makes sense for their group. A plan that drastically increases deductibles while not limiting out-of-pocket expenses or that does not provide for preventive care can have severe consequences on employees. Look for plans that provide 100 percent coverage once the deductible has been met and that cover preventive care, such as annual physicals. Those who use these plans frequently can actually receive better coverage than those who utilize conventional PPO plans, which typically come saddled with a co-insurance corridor after the deductible has been met and perpetual prescription drug copays. Good plan selection that addresses needs will help eliminate any objections that CDHPs are only for the healthy.
2. Determine the employer contribution
After selecting a CDHP, even one with reasonable benefit levels, your client should see some significant savings in premiums rates compared with the renewal rates for plans they currently offer their employees. The online insurance seller eHealth reported that the average monthly premium for a non-group individual with an HSA-qualified plan in 2008 was $133 versus $161 for a non-HSA plan. Likewise, the non-group family premiums were $302 versus $380. Since premiums for groups are likely to be much higher, there should be some significant premium savings compared with a non-HSA plan.