FOR EMPLOYERS
You have heard the buzz in the marketplace about the cost savings of Consumer-Directed Healthcare (CDH), but you may have some questions about plan design, implementation and effects on employees. Rely on ConnectYourCare, a leader in CDH administration, for answers.
CDH Account Basics & Benefits
What exactly is CDH?
How does CDH work?
How do I realize cost savings from implementing CDH?
What actually happens to my healthcare costs when I switch from a traditional PPO plan to a CDH Plan?
How do account-based health plans work with insurance?
What’s the big deal about HSAs?
Why should I seed HSAs?
Who is eligible for a CDH plan?
How do CDH plans help increase the health of my employees?
How do CDH plans decrease health care utilization?
How much lower will my insurance premiums be?
Benefits to Employees
What excites employees about CDH?
What benefits will my employees see?
What benefits will they lose from their traditional plan?
What will employees’ long term savings be?
What about employees with families?
What about employees with long term illnesses?
What if employees are discouraged to use healthcare or take prescriptions because they don’t want to spend their HSAs?
CDH Implementation
I need to curb my healthcare costs, but how do I offer a CDH plan so that my employees will feel like they are getting a good deal?
My company already has a CDH account administrator. How can I switch to ConnectYourCare’s CDH Solution?
When should I start planning for a CDH plan?
What does the typical implementation process look like?
What are common risks of implementing a CDH plan?
How can I mitigate those risks?
How do I increase uptake among employees? How can I convince my employees this change is beneficial to them?
What is the process for enrolling employees?
How do employees manage their accounts?
How do employees pay for co-pays, prescriptions and other health costs?
How are purchases adjudicated?
How do employees submit claims for reimbursement?
General CDH Questions:
What exactly is CDH? (Back to top)
CDH is a broad term given to a new trend in healthcare offerings that employs economic principles behind consumerism. The idea is that if a consumer is a) conscious of the cost of care and b) has to manage the money he or she spends on healthcare, whether it’s subsidized by an employer or their own money, then the consumer will be more sensitive to prices, quality and overall spending.
How does CDH work? (Back to top)
The “healthcare account” is central to the mechanics of CDH. Various forms have existed from Medical Savings Accounts (MSA) to Health Reimbursement Arrangements (HRA), introduced in 2002. But the account fueling the recent interest in and growth of CDH is the Health Savings Account (HSA), created in December 2003.
How do I realize cost savings from implementing CDH? (Back to top)
- Payroll tax savings. Health Savings Accounts and Flexible Spending Accounts present an opportunity for pre-tax payroll deductions. If your employees obtain HSAs outside of your employer-sponsored plan, you will not receive the payroll tax relief. The savings in payroll taxes represent an immediate ROI and pay for the administration expenses of CYC each year.
- Premium reductions. If you implement HSAs with a compliant high-deductible health plan (HDHP), you will likely see a reduction in your monthly premiums (this varies state by state and HDHPs will become more competitive over time).
- Decreases in healthcare utilization. Over time, as your employees take control of their healthcare spending, evidence suggests that they will use less healthcare compared to their utilization with many models of group health insurance today where every procedure costs them a fraction of the actual cost. For example, your employees may consider going to a lower cost provider, such as RediClinic, for a minor problem versus their regular doctor or emergency room!
See ConnectYourCare’s Employer CDH Cost Savings Calculators and modeler tools online at www.connectyourcare.com for a full picture of potential trended cost savings.
What actually happens to my healthcare costs when I switch from a traditional PPO plan to a CDH Plan? (Back to top)
For employers in the market for group insurance, an insurance company simply has less financial risk selling higher deductible health plan; unnecessary utilization is not encouraged because employees do not have “first dollar coverage” but rather have to pay their deductible before the health plan offers coverage. Therefore, the premium cost is typically lower.
How do account-based health plans work with insurance? (Back to top)
For HSAs, you must have High Deductible Health Plans (HDHP) that specifically comply with HSA regulations. For example, one might have a deductible that meets the HSA regulations, but also offer a prescription plan that would disqualify it. With an HDHP and CDH Account (HRA/HSA), insurance becomes more like car insurance for the employee – it is only accessed when the employee has a major medical challenge. For maintenance, most expenses come out of the employee’s healthcare account. For an HSA, if the employee maintains good health – he or she can save dollars for retirement. For expenses, the employee would use his ConnectYourCare Health Payment card. The employee would present his card at the doctor for copays, at the pharmacy for prescriptions and pay for medical or dental expenses out of his or her account. HRAs require substantiation just like FSAs, however, HSAs require no substantiation. ConnectYourCare’s healthcare payment card technology is the most advanced on the market and auto-substantiates purchases based on merchant code intelligence, plan data that CYC has collected from the Employer, and relationships CYC has with PBMs.
What’s the big deal about HSAs? (Back to top)
A Health Savings Account is sometimes referred to as the “401(k) of Healthcare”. It’s true – the money goes in the account pre-tax and if the funds are spent on healthcare, there are no taxes on the funds withdrawn from the account. At the age of 65, an account holder (often referred to as an HSA Saver) can withdraw the funds for any expense – healthcare or non-healthcare – with no penalty, taxed at his current rate.
One critical differentiator between IRAs/401(k)s and HSAs is that an HSA participant can redeem money from his HSA for his expenses at any time in the future with no tax or penalty implications. The HSA participant can seek reimbursement immediately after an expense is incurred or he/she can save the medical receipts, while putting money away in the HSA, tax free, earning interest tax free, and access the account for reimbursement at a later time.
In 2008, maximum contributions to an HSA per year are $2,900 and $5,800 for individuals and families respectively. In 2009, maximum contributions to an HSA per year are $3,000 and $5,950 for individuals and families respectively.
Why should I seed HSAs? (Back to top)
HSAs are commonly implemented as a “slice” plan or an option compared to a PPO or other traditional plan. HSAs are better for you and your employees in the long run; however, it is a big jumping off point for many employees to incur a risk of paying for first dollar medical expenses, while building an account. Seeding the HSA provides an incentive to make the HSA and underlying HDHP in parity with a traditional plan. Use the ConnectYourCare Employer HSA Calculator to see how your savings will build. Your seed funding of an HSA will pay for itself in two years or less.
Who is eligible for a CDH plan? (Back to top)
All employers, regardless of the number of employees, are eligible to set up a CDH plan. Any employee can enroll in a CDH plan. HSA holders are required to also have a High Deductible Health Plans (HDHP).
How do CDH plans help increase the health of my employees? (Back to top)
The nature of CDH plans encourage people to maintain and increase their health by rewarding them financially. HSAs are portable and employees can build wealth by saving pre-tax dollars in their HSAs and staying healthy. CYC provides extensive health education with every plan to help employees achieve better health.
How do CDH plans decrease health care utilization? (Back to top)
With an increase in the health of employee population, healthcare usage will be driven down. Early data already shows a significant decrease in emergency room visits by those with CDH plans.
How much lower will my insurance premiums be? (Back to top)
Though it varies by plan, state and even region due to differing levels of competition with the CDH plans; most CDH plans offer premium savings up to 15 - 25% compared with traditional plans. You can be assured actuarially that the rate of increase in premiums is significantly lower than traditional plans’ double digit growth.
Some regions have high penetration of CDH plans and thus very competitive prices while others are just introducing these plans to the market. Over time, the competition will spread as carriers begin to aggressively price CDH to take over business.
Benefits to Employees
What excites employees about CDH? (Back to top)
The real carrot in CDH is the ability for employees to build wealth in their HSAs. For most individuals, if they have the opportunity and education on how to do this, it becomes a no-brainer. Coupled with education tools and a sound employer-sponsored Wellness initiative, CDH is a terrific benefit package for employees.
What benefits will my employees see? (Back to top)
Among dozens of benefits, employees will have more control over how their healthcare dollars are spent, a better understanding regarding how much healthcare costs, have access to reliable health education tools that will enable them to make better healthcare decisions, and can potentially save thousands of dollars – tax free – for retirement.
What benefits will they lose from their traditional plan? (Back to top)
Since HSA plans are coupled with High Deductible Health Plans (HDHP), they will not have first dollar coverage as they would on a traditional plan. Some employees will see an increase in their deductible and some employees will have to pay more out-of-pocket for items like prescriptions and co-pays. However, they can typically use their healthcare account to cover these costs.
Why would an employee want to switch to a CDH plan if it appears to cost more out-of-pocket?
Though employees may now have to pay for coverage under their deductible out of pocket, they can use their tax advantaged healthcare account to do so. Long term savings pay off as their accounts accumulate savings and interest in the case of an HSA. Employees can determine specific savings through our CYC CDH Savings Calculator.
What will employees’ long term savings be? (Back to top)
Earnings through investments on money in HSA grow tax free. Additionally, once a person turns age 65, they can continue to use the account tax-free for out-of-pocket health expenses. It is a great resource to save money for healthcare expenses one may incur during retirement. It can be used to pay Medicare premiums, deductibles, copays, and coinsurance under any part of Medicare. It can also be used to pay for a person’s share of retiree health insurance premiums under a former employer.
The HSA can also be used to pay for things other than medical expenses. If used for other expenses, the amount withdrawn will be taxable as income but will not be subject to any other penalties.
Employers can determine specific savings through our CYC CDH Savings Calculator.
What about employees with families? (Back to top)
Employees can include family members on their CDH accounts and use tax-free contributions to pay for their health care costs.
What about employees with long term illnesses? (Back to top)
CDH plans are not for everyone. These accounts encourage employees to take steps to maintain and improve their health. For companies with critically ill employees, we recommend offering CDH as a slice option. Those employees best suited for traditional plans can still access CYC’s health education tools and information.
What if employees are discouraged to use healthcare or take prescriptions because they don’t want to spend their HSAs? (Back to top)
CDH Plans can include measures for preventive care, where regular checkups and certain screening tests are not subject to the deductible; your employees typically pay a nominal copayment or have no charge at all. With respect to pharmaceuticals, it’s becoming common knowledge as a CDH participant, that “if you see it on TV, you want to get the generic drug”. CYC provides a prescription drug comparison tool at the dosage level so an employee can search for their prescription and see all approved alternatives including costs for pill splitting. Your employees can even look up drugs prescribed for common conditions before going to see the doctor.
At the end of the day, your account-based plan design and contributions must be consistent with your desired outcomes. CYC can assist you and your consultant with creative ideas based on our experience in these areas.
CDH Implementation
I need to curb my healthcare costs, but how do I offer a CDH plan so that my employees will feel like they are getting a good deal? (Back to top)
A best practice suggests a portion of the money saved on premium should be diverted into employee healthcare accounts. Otherwise, employees clearly notice their benefits are being depleted. To alleviate this notion, we recommend that you seed accounts to make them competitive with traditional offerings and offer wellness programs that educate, and frankly, nudge employees into healthier lifestyles, precluding healthcare spending.
My company already has a CDH account administrator. How can I switch to ConnectYourCare’s CDH Solution? (Back to top)
If your company already has a CDH account administrator, but your administrator cannot offer a multi-purse healthcare card, CDH Portal, health education tools, wellness options, employee communications and access to experienced customer service representatives, we can help you quickly and easily upgrade your CDH program. The first step is to contact your benefits consultant and direct him or her to the consultant section of the ConnectYourCare website. We will work with your benefits consultant to create a proposal customized to your company’s needs. Once you and your consultant have selected which plan(s) best suit your company’s needs, the onboarding process is quick and easy. In fact, we can have you up and running in as little as 15 days!
For onboarding, we will provide an implementation guide complete with timelines, checklists and appropriate set-up and enrollment instructions and forms. We will also provide employee communications designed to drive understanding of CDH and increase enrollment. Our experience in onboarding clients and communicating to employees make the entire process a snap for your busy HR department.
When should I start planning for a CDH plan? (Back to top)
To ensure enough time to select the right plan for your employee population, distribute employee communications and answer employees’ questions, CYC recommends you begin planning for CDH 6 months before open enrollment.
What does the typical implementation process look like? (Back to top)
Implementation can happen in a matter of weeks. The process includes plan design selection, employee education, enrollment, and ongoing customer service and HR support.
What are common risks of implementing a CDH plan? (Back to top)
Some employers implement a plan that does not suit their employee population, and some do not adequately communicate plan benefits to employees. These pitfalls can lead to low employee enrollment.
How can I mitigate those risks? (Back to top)
ConnectYourCare’s plan design experts help you select the plan that best suits your needs and the needs of your employees. We offer pre-enrollment education materials and enrollment tools such as a plan cost modeler that help communicate the benefits and potential savings of CDH plans to your employees.
How do I increase uptake among employees? How can I convince my employees this change is beneficial to them? (Back to top)
Change is usually met with resistance. Employers must position the change as an increase in choice and control in their healthcare spending, rather than as a shift in costs. To do this, they should develop a communication strategy that helps employees understand the myriad benefits of CDH plans, including significant tax advantages. To this end, CYC provides communications that clearly spell out the financial, convenience and educational benefits. Savings calculators help employees realize how these plans can save them money.
What is the process for enrolling employees? (Back to top)
CYC automates the enrollment process to eliminate unnecessary extra work from HR staff. Employees are usually enrolled in a matter of hours.
How do employees manage their accounts? (Back to top)
Employees access their account balance and investment option through one easy online portal. The portal also gives them access to claim information, health education tools and enrollment options.
How do employees pay for co-pays, prescriptions and other health costs? (Back to top)
Employees are issued a healthcare payment card with which they can pay for any medical cost. If an employee has multiple accounts (HSA and HRA for example), the card automatically pulls money from the appropriate account. See Healthcare Payment Card FAQs for more detailed information.
How are purchases adjudicated? (Back to top)
Most purchases are auto-adjudicated at point of sale, but some require employees to submit receipts through a simple claims filing process.
How do employees submit claims for reimbursement? (Back to top)
The claims process is quick and easy. Employees fax in claims with receipts and receive approval notice in minutes. See Claims FAQs for more detailed claims information.
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