Debit Card Based Health Reimbursement Arrangements

1
Debit Card Based Health Reimbursement
Arrangements Presented to Date
2
Health Insurance Costs Today

• Health insurance costs continue to run out of
  control
• Employers have experienced double digit rate
  increases over the last decade
• 2009 increases are running between 12 and 15
• What does that mean going forward?

3
Health Insurance Costs Today

• At an annual increase of 15, the cost of a
  health insurance program will double every 5
  years.

4
Health Insurance Costs Today

• What does that mean for monthly rates?
• Approximate fully insured premiums for a typical
  plan today
• Today Next Year In 5 Years
• Single 450 517 905
• 2-Person 800 920 1400
• Family 1,300 1,495 2,614

5
Health Insurance Costs Today

• What can be done?
• Solution Debit Card Based HRA Plans
• Develop a long term strategy that introduces a
  fundamental change in the structure of the health
  plan.
• Separate the plan into two parts
• Use insurance for its intended purpose
  unforeseen loss
• Use cash to pay for routine predictable expenses

6
Fundamental Concept

• The concept behind a Choice Care Card HRA plan is
  simple
• Reduce health insurance premiums by moving to a
  higher deductible plan.
• Use some of the premium savings to fund a Health
  Reimbursement Arrangement (HRA) for each
  employee.
• The health plan is in place to provide coverage
  for major illness or sickness.
• The HRA is in place to help the employee pay for
  their out of pocket expenses.
• The combined cost of the higher deductible
  insurance plan and the HRA is less than the cost
  of the current plan.

7
What is an HRA?

• Health Reimbursement Arrangement (HRA)
• An HRA is account established by the ER for
  each EE
• HRA can be used to pay for routine health care
• Office visits, Rx
• Routine lab and x-ray
• Outpatient care
• Any employee out of pocket expense
• Each EE is given a debit card to access the
  account
• Special use debit card health care facilities
  only
• Choice Care HRA is a promise to pay it is not
  pre-funded

8
Employer HRA Strategy

• With the HRA flexibility, the employer develops a
  strategy based on their needs and objectives for
  cost control
• Coverages Med only or Med and RX
• Co-pays covered or deductible only
• Should we have an FSA
• Hierarchy of payment HRA or FSA first
• Rollover all, none or percentage of unspent
  funds
• Multiple buckets with separate limits
• Employer has freedom to choose their plan design
  they are not constrained by Choice Care imposed
  rules

9
HRA Funding

• Where does the money come from to fund the HRA?
• Increase in deductible results in a drop in
  premium
• Machine Company
• Employees 51 single, 9 two person, 27 family
  Total 87 Enrollees
• Old HMO....761,364
• New Deductible Plan586,080
• Premium reduction of175,284
• Employer was able to fund 1000/2000 for each
  employee

10
HRA Funding

• Other Features
• Additional funds are allowed through FSA
• 50 rollover of unused funds up to the OOP
  Maximum of the plan
• HRA pays first, FSA pays second

• Machine Company/Choice Care Plan
• 2,000 Single / 4,000 Family Deductible
• 100 In-Network coverage thereafter
• 25 Primary Care Co-Pay
• Preventative Care covered by the health plan

The employer provides the 1st 1000 Member uses
these funds for healthcare purchases that apply
towards the deductible, co-pays, co-insurance.
Use the Choice Care Card for basic health care
Deductible, Co-ins. or Bridge
Then, the employee pays the next 1,000. In most
cases some of this is funded with FSA money.
Supplement with FSA,HSA, or Voluntary Insurance
Then, the Health Plan pays 100 of medical costs
after the deductible.
Protect against major loss with the ER Health Plan
11
Employer Savings

• Machine Company
• Old Plan New Plan with HRA
• Rates 442, 774, 1257 340, 596,
  968
• Premium 761,364 586,080
• HRA Fund 123,000
• Administration 10,000
• Max. Costs 761,364 719,080
• Guaranteed Savings 42,284
• Actual HRA Usage 57,810
• Actual Savings 107,474

12
Employee Savings

• Old HMO Plan HRA Plan
• OV co-pay 20 25
• Outpatient co-pay 250 0
• Hospital co-pay 500 0
• Rx 10/20/30 15/25/40
• Deductible 2000
• HRA 1000
• Net Deductible 1000
• Ann. Prem Contr. 1326 1020
• Employee saves 306
• With Routine expenses EE is in a better position
  - can use HRA for OVs
• With Hospitalization
• Under HMO employee has 500 cost
• Under HRA he has a 500 increase in deductible
  less prem. savings of 306 for a modest increase
  in exposure of 194

13
Four Year Case Study

• Pouliot Corriveau
• 24 employee trucking company
• In 2004 the plan changed from first dollar HMO
  coverage to the following plan design
• 3,000/6,000 deductible
• 100 co-insurance
• 3000/6000 out of pocket maximum
• 30 office visit co-pay with preventive care
• 50 Rx
• HRA Funding
• 1500/3000 for medical expenses

14
Four Year Case Study

• Pouliot Corriveau
• Results for 2004 through 2007
• HMO premiums that would have been
  paid748,446
• Premiums paid for the high deductible health
  plan463,956
• Actual HRA funds spent...79,250
• Choice Care Card admin fee...10,534
• Total spent with HDHP and Choice Care
  Card......553,740
• Total 4 year Savings...194,706
• Annual Savings per employee.... 2,028

15
HRA Utilization

• Choice Care measures aggregate HRA usage annually
• The most recent analysis of HRAs with a 12 month
  plan year ending in 2008, and including the
  run-out period, revealed the following,
  approximately
• 10 of groups were at or below 20 utilization
• 30 of groups were at or below 35 utilization
• 55 of groups were at or below 50 utilization
• 80 of groups were at or below 65 utilization
• 90 of groups were at or below 80 utilization