Consumer-Driven Health Plans

Looking to save 30 to 40% on your health insurance premium?

Insurers have responded to the rising cost of healthcare with new group insurance plans called Consumer-Driven Health Plans (CDHPs). Essentially, these plans provide first dollar coverage for preventive and routine care but have a high deductible for major medical services. Whatever money is "left-over" in the consumer's preventive and routine care budget can be rolled over for the New Year and replenished.

Employers like Consumer-Driven Health because:

• They can save on premium costs - often a CDHP can be 25% less expensive than a traditional low deductible health plan
• It shifts responsibility for healthcare expenses to the employee - employees become much more aware of the cost of healthcare services and appreciate the insurance coverage as part of their overall compensation
• They can gain control of the employee benefit package - employers can combine a CDHP with a Health Reimbursement Arrangement (HRA) or a Health Savings Account (HSA)

We have written a white paper discussion about CDHPs including an in-depth analysis of HRAs versus HSAA's and what factors employers should consider in implementing a Consumer-Driven Health Plan. For a free copy of this white paper, please call or email us and we will be pleased to send you this analysis.

Health Reimbursement Arrangements (HRAs)

Employers can cut their premium dollar expense considerably by adopting an HRA as permitted by the IRS. In essence, the employer self-funds for certain healthcare expenses until a high deductible insurance plan kicks in once the deductible is satisfied. Employers like the cost savings, control and getting employees more involved in their healthcare purchasing decisions. HRAs are characterized by:

• Employer funds the account - the HRA does not have to be pre-funded and the money put into the HRA is tax deductible
• Unused funds rollover - unlike an FSA, unused funds revert back to the employer and the employer can choose what to do with the unused funds
• Employers can opt to administer the HRA funds or hire a third party administrator - the employer chooses what healthcare expenses to pay for based on IRS guidelines

Orca Bay Benefits is a preferred partner with TASC - a third party administrator that specializes in HRA and FSA (Section 125) administration. TASC can assist employers to establish an HRA to meet federal requirements and the employer can reimburse employees for covered expenses. Alternatively, TASC can both establish and administer to HRA. To learn more about TASC, see www.tasconline.com.

Health Savings Account (HSA)

In December 2003 the federal government revised the "Medical Savings Account" legislation to create a new more flexible "Health Savings Account." Small employers in Washington can purchase an HSA health plan for their employees and enjoy the cost savings in premium and tax relief associated with the HSA. An HSA:

• Can be funded by both the employer and the employee - money can be invested into an interest bearing account with a certified HSA bank. The amount invested is limited to 100% of the health plans annual deductible. Money in the HSA can used on a tax free basis to pay for ongoing healthcare expenses permitted by the IRS
• Can be used to pay for healthcare expenses on a tax free basis - unlike an FSA, unused funds in the HSA rollover to the new year and the employee and/or employer can add to the HSA each year
• Is portable - that is, it is the employee's money and they can take it with them when they leave their place of employment. As long as the employee is covered by a qualified high deductible health plan, he or she can continue to contribute to the HSA
• Is also a retirement fund - the money in an HSA can be invested in various tax-deferred investments such as mutual funds or bonds. Like an IRA, the funds are tax-deferred until retirement at which time the employee is free to use the funds to pay for any living expense. However, if he or she uses the funds to pay for ongoing healthcare expenses, the payment is tax free

Orca Bay Benefits is a preferred partner with HSA Bank - one of the leading HSA banking institutions in the nation. See www.msabank.com for more information.

As a broker we work with a variety of insurance plans that offer HSAs. Our exclusive SODOcare health plan includes an HSA that provides employers significant savings (about 30%) off their healthcare premium bill.