Since the arrival of high deductible health insurance plans (HDHP) coupled with tax preferred spending accounts (SA) on to the employee benefits scene nearly 22 years ago, a number of “best practices” have emerged to assist employers and brokers/consultants in deploying them. These types of plans, often referred to as “consumer driven health” plans…or CDH, have five (5) specific employer best practices I have developed for successful introduction/open enrollment of such plans.
(Note: The three (3) prevailing tax preferred spending accounts typically coupled with high deductible plans, are Flexible Spending Accounts (FSA), Health Reimbursement Arrangements (HRA), and Health Savings Accounts (HSA).)
Here are my employer best practices for introduction and open enrollment of CDH plans…
1. Generous/Attractive HDHP plan design – if coupling with an HSA, the ideal plan design consists of deductible only, no coinsurance or post deductible copays. If coupling with an HRA, there are more design considerations relative to copays and coinsurance.
2. Competitive/generous employer contribution amounts – In order to mitigate the relatively higher exposure associated with higher deductible plans, ideally employers provide some level of funding in the spending account(s). As a point of reference, the 2017 national annual average for HSA contribution amounts was $608 for single coverage, $1,086 for family coverage*. (Note: the 2019 maximum allowable HSA contribution amounts are $3,500 (single coverage); $7,000 (family coverage).
Since unused HRA allocations can return in part or whole to the employer, HRA amounts tend to be higher than the aforementioned HSA amounts, which remain with the employee whether spent or not. (Note: 2017 HRA averages were $1,351 single/$2,44 family*.)
3. Employee education/engagement on the HDHP/Spending Account – employees need to understand how the HDHP operates, how the spending account complements the insurance plan(s), and most importantly, how to maximize use of the healthcare system and keep more money in their pocket!. These sessions can be done on a group, individual, or combination basis.
4. Reputable/low cost HSA custodian and/or third party administrator – almost every bank and credit union in the U.S. offers some type of HSA offering, and there are TPAs aplenty to do FSA and/or HRA administration. Some are better, and less expensive, than others, so it pays to shop and compare service providers.
5. Meaningful (at least 25%) premium differential between the HDHP/Spending Account option(s) and any available traditional/copay plan option(s) – if the HDHP/SA plan is offered in conjunction with other, traditional/copay plans, it’s best to have a lower employee premium contribution for the HDHP/SA option(s) to incentivize take up rates.
* Source: Kaiser Family Foundation; Average Annual Employer Contributions to HSA and HRA accounts, 2017
CDH plans have been in existence for nearly 22 years, and we have plenty of data to support the contention that these types of plans save employers and employees money! And when coupled with a partially self-funded arrangement at the employer level, the realized savings remain with the employer. If you’re not sure if your organization is “CDH ready”, here’s a readiness checklist to assist you – https://sstevenshealthcare.blogspot.com/2013/11/is-your-company-cdh-ready.html