How to Find Qualified Prospects for Health Savings Accounts

Health savings accounts in action
I had a 40-person company with which we worked. They wanted to save money, but not at the expense of their employee benefits. They had 23 single employees and 17 assorted dependents covered on the plan; in their industry, a competitive health benefit package is a must, and they had low employee turnover. The employer picked up 75 percent of the total premium for employees and dependents. Their current plan had $3,000/$6,000 out-of-pocket for deductibles and co-insurance, plus all office visit and prescription copays on a three-tier system of $20/$40/$60.

Prescription copays can be a large out-of-pocket expense for an employee; on this plan, if an employee was on two $40 prescriptions and two $60 prescriptions, they would face an additional $2,400 of out-of-pocket per year. If an employee had a hospitalization the same year that they took the above medications (for example, a typical bypass surgery) their total out-of-pocket would be more than $5,400, plus office visits.

Our solution was to place them in an HSA/HRA plan. Even though the employer was paying most of the premium, their desire and need for a competitive benefits package pushed the HSA to the front of the design agenda. We chose a $3,000 embedded-deductible CDHP-qualified plan with their current carrier (they did an agent of record to us). Through the summary plan description, we set up the first $2,000 of this deductible as an HSA corridor and the last $1,000 as an HRA corridor. The gross premium reduction was almost $115,000. This allowed us to fund $1,000 per worker into the HSA for single coverage and $2,000 for family coverage. The last $1,000 of the deductible we split 50/50 with the employee through an HRA. The total out-of-pocket on the new hybrid plan was $1,500, compared with the $3,000 out-of-pocket on the previous plan. If you throw in prescriptions as in the example above, the employee out-of-pocket was reduced from $5,500 to $1,500 — a 375 percent reduction.

How did cost savings work out? The premium, funding, and administration costs came in at more than $42,000 under their renewal on the old plan design with the same carrier after the first year (this was split 75/25 employer/employee), but still comes out to more than $1,000 per employee per year in savings. This also doesn’t include the more than $30,000 that wasn’t spent out of the employees’ HSAs.

In the end, the key to marketing HSAs is education, education, and education — first with the employer/management team, and then with the employees at enrollment (with most groups, we offer a dual choice, with the employee paying the full extra premium difference between the CDHP plan and the traditional copay plan). If the employer is averse to change or too paternalistic in their viewing of their employees, then they are a suspect — not a prospect for an HSA.

Ron Dobervich is chief benefit consultant for Sage Benefit Group. He can be reached at [email protected].