HSA, HRA, and HDHP are all acronyms you may have run across as you follow the latest “trends” in the health insurance industry—consumer driven healthcare.  As insurance premiums and the overall cost of healthcare continues to grow, employers, the medical community and insurance carriers are searching for ways to contain costs. One thing agreed upon is the need to engage and educate consumers/employees more directly in the cost of their healthcare.

Consumer Driven Health Plans (CDHP) compel employees, who have been isolated from the actual costs of healthcare by managed care plans, to take a more active role in their personal healthcare.  By shifting part of the responsibility for healthcare decisions, and yes, some of the cost, to employees, the hope is that consumer-driven plans will help to reduce “unnecessary” utilization and ultimately lower costs. 

HRAs and HSAs

While HSAs (Health Savings Accounts) are the current industry focus, consumer-driven healthcare extends well beyond this latest government-approved savings vehicle.  One of the earliest consumer driven concepts was the HRA (Health Reimbursement Account).  HRAs give employers flexibility and control:

• HRAs can be offered with any health plan (no restrictions regarding deductibles, copays etc.)

• The employer determines the amount of money used to fund the plan and can specify how much, if any, unused funds can roll-over from year to year

• Employers can determine, in the plan document, what types of qualified expenses can be paid for with HRA funds

• Only employers can contribute funds to the HRA (employees cannot contribute their own funds)

• Employers maintain ownership of the money (and reclaim any unused amounts if they don’t allow for funds to roll-over)

• Employers can write off their contributions to their employees’ HRAs as a business expense

HSAs are accompanied by more stringent guidelines regarding plan design and contribution amounts and seem to put more “control” in employees’ hands:

• HSAs can only be offered with qualified high deductible plans that meet IRS requirements (currently a $1,000 deductible for single coverage and $2,000 deductible for family coverage)

• Both employer and employee can make tax-deductible contributions to the HSA (subject to IRS limitations)

• Unused funds in an HSA roll over from year-to-year

• HSAs are portable (meaning employees “own” the account and can take it with them if they leave employment)

While the actual success and outcome of HRAs and HSAs remain to be seen, it will likely be years before a significant amount of data is compiled.  Until that time employers will be increasingly interested in the consumer driven concept.   

According to the 2004 Kaiser Family Foundation / Health Research and Educational Trust Survey of Employer-Sponsored Health Benefits, approximately 6% of all employer firms surveyed  indicated that they are very likely to offer some consumer driven option in the next two years while another 21% indicate they are somewhat likely to offer a CDHP option.¹   

Taking Small Steps

What if you and/or your employees are not quite ready to take the leap into something like an HSA or HRA?  You can take small steps towards consumer driven health care simply by implementing an employee education program.  Employees who learn more about the actual costs of health care tend to  better understand their benefits and become more appreciative of the value of the benefits you provide.  A Group Benefits Agency, Inc. representative is available to help you structure an education program and guide you and your employees to available resources. In addition, most insurance carriers offer  members web-based access to all kinds of information regarding providers, prescription formularies and  tools to research specific conditions and treatments.  Some carrier websites  include “cost calculators” so that employees can compare the costs of different treatment options. 

As  attention and focus on consumer driven health care and savings vehicles like HRAs and HSAs increases,  employers may be tentative when it comes to completely abandoning their standard HMO and PPO plans.  Consumer driven plans alone cannot “force” employees to take more control and greater responsibility for their healthcare spending.  In order to ease their employees into consumer driven healthcare, many employers continue to offer a traditional PPO or HMO plan alongside a high deductible plan.

If you would like more information on Health Savings Accounts, Consumer Driven Health Plans or about developing an employee education program, please contact your Group Benefits Agency, Inc. sales representative or account manager by calling  (800) 282.3934 or using our web site to contact customer service.

¹ 2004 Kaiser Family Foundation / Health Research and Educational Trust Survey of Employer-Sponsored Health Benefits: 2004; data from Chart #13

“This document is intended to assist GBA clients. This article is provided only for general instructional purposes; it is not intended as legal advice.  Although reasonable efforts have been made to ensure the accuracy and timeliness of all information in this document, Group Benefits Agency, Inc. makes no express or implied representations or warranties about the accuracy or timeliness of this information.  Group Benefits Agency, Inc. is not a law firm and cannot provide legal advice, and this guide is not intended to do so.” 

Group Benefits Agency April 2005 ©