The Health Opportunity Patient
Empowerment Act of 2006 provides
tax advantages for health care savings. Among its many provisions, it allows
consumers with high-deductible health
plans (HDHPs) to save pre-tax dollars in
Health Savings Accounts (HSAs) for qualified, future medical expenses. The premiums for HDHP/HSAs are less expensive for
employers, and employees benefit by
building tax-free savings, all while gaining
more control over their health care choices.
“When you combine an HDHP with an
HSA, you create a triple tax advantage for
the employee,” says Javier Mendoza, vice
president, Strategic Marketing, Plans &
Programs, AvMed Health Plans, Florida.
“Employers should not discount these
plans because of the words ‘high
deductible.’ Instead, the plans should be
viewed as tax-favored coverage with
attractive ROI.”
Smart Business asked Mendoza how to
successfully roll out an HDHP/HSA plan.
Provide an overview of an HDHP/HSA.
A high-deductible health plan is health
insurance that meets IRS guidelines that
allow it to be combined with an HSA. For
2007, an HDHP must have at least a $1,100
(single) or $2,200 (family) deductible,
indexed annually for inflation. Out-of-pocket expenses cannot exceed $5,500
(individual) or $11,000 (family). HDHPs
represent a move away from a pre-paid
medical plan to one that protects against
major financial loss.
HSAs are owned by the individual and
are portable, so changing employers is not
an issue. HSAs and qualified HDHPs have a
triple tax advantage: they provide tax-free
contributions, growth and disbursement
for qualified medical expenses. If the
money is not used, funds roll over from
year to year. HDHPs/HSAs are evolving as
a way to pay for not only short and mid-term health care costs, but also to save for
health care costs during retirement.
Why should employers consider offering
HDHP/HSAs?
HDHP/HSAs offer a long-term strategic
solution to the continuing high costs of
health care coverage and overall costs.
HDHP/HSAs 1) reduce health care premium
costs, 2) reward responsible employees
who undergo preventive care, 3) increase
employee awareness of health care costs, 4)
motivate employees to change their personal behavior, and 5) give employers another
way to contribute to the long-term, well-being of their employees.
Is the employer required to contribute?
No, but the most successful results will
occur when both the employer and
employee are contributing. There are many
ways employers can contribute. They can
1) make flat rate contributions, 2) structure
some type of match, 3) contribute based on
salary range or tenure, healthy lifestyle
choices, etc. All options should be explored with an independent insurance
agent and a tax professional.
How can an employer determine whether an
HDHP/HSA is a good fit for their organization?
Larger companies are currently testing
the waters, introducing HDHP/HSAs as an option. Some larger companies — but
more smaller ones — are jumping right in
and deciding these are the only plans they
are going to offer. It depends on the company’s philosophy as well as how informed
and engaged their employees already are.
The employer should test for
readiness/resistance. Do employees talk
‘wellness,’ or are they still in the ‘$5 copay/$50 doctor visit’ mindset?
How should the employer evaluate potential
vendors for a plan?
Partner with an agent that understands
and is committed to long-term strategy and
that can provide tax-advantage support. In
addition to considering all the usual factors
such as locality, size of network, cost sharing and client services, consider integration points – factors that will make it easy
for individuals to sign-up and self-manage.
Is there user-friendly, non-financial-oriented Web support? Are there tools such as
hospital and prescription cost estimators
online, as well as reliable, personal assistance? Are targeted management programs
available to help consumers with specific
conditions not only lower their out-of-pocket expenses, but also improve the outcomes of their particular condition?
Once the decision is made to offer a HDHP/HSA
how does the employer get buy-in?
Prepare. Prepare. Prepare. Start to build
the case for change at least six months
ahead of time and communication will be
key to gaining acceptance. You are talking
about a culture change, and if you spring
this on employees, you’ll be met with
resistance. Move away from words such as
‘benefits’ and ‘health plan.’ Position
HDHP/HSAs as tax-favored health coverage. Know your audience and tailor the
message. Target the benefits by knowing
the strong points of interest for each group
of employees.
JAVIER MENDOZA is vice president, Strategic Marketing,
Plans & Programs, AvMed Health Plans, with offices
throughout Florida. Reach him at (305) 671-4946 or
[email protected].