what is a health savings account

What is a Health Savings Account and How Can it Benefit Your Staff?

2003 was a strange time for the United States. It was a year that gave us a lot of sad news: the invasion of Iraq, the deaths of Gregory Peck and Johnny Cash, and the explosion of the space shuttle Columbia. But, 2003 gave us a lot of happy news too. Beyoncé released her first solo album, the Chappelle’s Show premiered, and SARS was declared officially contained by the World Health Organization.

Also, in December 2003, the U.S. government established health savings accounts (HSAs) through federal law. The creation of HSAs would go on to change America’s healthcare landscape. In this article, we’ll answer the questions of what is a health savings account, what advantages do they offer employees, and how can they improve your business.

 

What is a Health Savings Account?

A health savings account is a savings account that can be used to cover eligible medical expenses in the current year or in the future. Unlike Flexible Spending Accounts (FSAs), HSAs have no deadlines and funds roll over annually. There are four federal requirements an individual must meet to be eligible for an HSA:

  1. The individual must be covered by a qualified high-deductible health plan. (A high-deductible health plan is a health insurance plan with lower monthly insurance premiums and higher deductibles than the traditional health plan.)
  2. The HSA enrollee cannot be covered by another health insurance plan, such as a spouse’s plan.
  3. The individual must be under the age of 65.
  4. The HSA enrollee cannot be claimed as a dependent on someone else’s federal income tax return.

 

What Advantages Does an HSA offer?

1. Triple Tax Advantages

The first, and arguably greatest advantage of HSAs are the triple tax benefits these accounts offer. A triple tax advantage means:

1. Contributions to HSAs aren’t taxed.

2. The balance grows tax-free.

3. The funds are available for tax-free withdrawals if used to pay for eligible healthcare expenses.

Unlike traditional retirement savings vehicles, employees can withdraw money from an HSA at any time between today and their retirement with no tax deductions, provided the funds are used to pay for healthcare.

triple taxes

 

2. Portability

The second advantage of health savings accounts is their portability. Unlike FSAs, HSAs are portable.  Being portable means the accounts travel with you even if you change employers or exit the job market permanently. This portability means employees don’t have to worry about investing in an HSA and losing it all if they have to change jobs.

 

3. Savvier Healthcare Consumers

Utilizing a health savings account helps your employees become savvier healthcare consumers. According to a 2018 study by Alegeus HSA, employees with HSAs are smarter and more engaged in healthcare decision-making than their peers.

Health savings account holders are 54 percent more confident in forecasting out-of-pocket healthcare costs. They are 46 percent more likely to research and compare costs. Additionally, they’re 37 percent more likely to seek alternatives. Plus HSA holders are 68 percent more likely to have a savings goal. Finally, HSA users are 80 percent more likely to be saving aggressively for their future healthcare savings.

 

4. Improves Financial Wellness

In 2017, one in five working-age Americans with insurance experienced problems paying medical bills. So, even with coverage, healthcare is expensive for a large portion of the country. And, every year employers are placing more and more of the cost burden on the individual consumer. This cost shift only increases the chances of medical expenses negatively affecting your workforce.

Per BenefitsPro, employees who reported some level of financial stress, find an average of 45 minutes a day at work managing their finances. Similarly, according to a 2017 Mercer survey, employers are losing up to $250 billion a year due to employees’ stress about their finances.

Mercer found approximately 5 percent of an organization’s total payroll is at risk, at any given time, from time unproductively spend worrying. But, through health savings accounts, your staff can guard against financial stress caused by excessive medical costs.

 

5. Healthier Employees

Utilizing an HSA can help your staff stay healthier throughout the year. First, having money saved in your HSA allows employees to seek treatment right away instead of delaying a doctor’s visit until they can afford it. Second, HSAs can decrease financial stress, which in turn improves physical health.

As previously discussed, financial stress can have a tremendous, negative impact on productivity, but also has a significant adverse effect on an individual’s physical health. According to a study by Northwestern Mutual, of the 85 percent of Americans who feel financial anxiety, 67 percent say this stress is negatively impacting their health.

Additionally, per the European Society of Cardiology, those with significant financial stress are 13 times more likely to suffer from a heart attack. So, if an HSA can help to relieve financial stress, these accounts can subsequently reduce the impact of this stress on your employees’ physical health.

 

Building Your Business

As you can see, via the previous section of this article, there is a multitude of ways HSAs can positively impact the lives of your employees. The cumulative effect of this positive impact helps give a boost to your business, overall.

First, the savvier your employees are as healthcare consumers, the more they can save your firm. Integrated Benefits Institute, a health research group recently reported U.S. employers spend a total of $880 billion a year on healthcare benefits for their workers and dependents. Every time an employee picks the lowest cost facility for treatment or a procedure, your company saves.

Similarly, healthier employees can save your company thousands to millions of dollars. Poor worker health costs U.S. employers $530 billion a year from lost productivity due to worker absence and impaired performance. Healthy employees can help reduce this strain on productivity caused by poor worker health.

Finally, the more financially well your staff is, the less stressed they are. An HSA can allow your employees to focus more on their job and less on their financial woes. And, the more engaged your staff is, the more productive they tend to be.

 

The Wrap

The year 2003 gave us a lot of good and a lot of bad. But health savings accounts are a clear positive for both employers and employees. Use this article to tell your employee what a health savings account is. Also, how it can help them, and your business as a whole.

direct primary care

How Direct Primary Care Can Save Money and Boost Employees’ Health

Health insurance and healthcare costs overall have risen over the course of the past 50 years with a steady consistency. Neither the Affordable Care Act nor regulations from the Trump administration have been able to make a dent in the growth of these costs.

In 1960, national health spending equaled five percent of the country’s gross domestic product (GDP). This figure ballooned to 17.9 percent of the United State’s GDP in 2016. Private-sector employers, alone, paid $665 billion in 2016 in health-related costs.

Of this total, $504 billion went to subsidize employees’ health insurance premiums. Employers typically pay about three-quarters of these premiums, according to the Society of Human Resource Management. And, the rise in the cost of health coverage is set to reach an all-time high next year.

According to BenefitsPro, the cost of employee health insurance will increase to $14,800 per worker next year. This exorbitant price has pushed spending on benefits to absorb compensation that could otherwise go to higher wages.

Fortunately, there’s a relatively new way for employers to keep from overpaying for employee health benefits. This new method of cost-containment is called direct primary care (DPC). Below, we’ll detail what direct primary care is, its advantages and disadvantage, and how it can help your employees and business overall.

 

Direct Primary Care Definition

Direct primary care is a form of health coverage but isn’t health insurance. Under DPC, plan participants pay a flat membership fee, which typically ranges from $25 – $85 a month. DPC differs from standard health insurance through its alternative payment model.

Because it technically isn’t health insurance, claims under direct primary care aren’t sent to insurance companies. By avoiding insurance contracts and third-party billing, DPC providers can give patients more time with a doctor, as well as a more customized and personalized service.

 

Advantages of Direct Primary Care

1. More Time with a Physician

The first advantage of direct primary care is it gives patients more face-to-face time with a physician. Studies have shown, in the traditional system of care, 43 percent of physicians spend more than one-third of their day on data entry and other administrative tasks.

doctor with stethoscope

Similarly, other studies have found primary care physicians spend upwards of 50 percent of a patient’s office visit on the computer. And, a whopping 87 percent of surveyed physicians feel professional burnout due to these administrative demands.

Today, doctors must see more and more patients, to generate a healthy revenue. The more patients a doctor must see, the less time they spend with each one. Now, family doctors must see 25 to 30 patients a day. And, the average physician has 3,000 total patients.

This number of patients increases the amount of administrative work they must do and decreases the time they get to actually spend with their patients. In 2017, the average length of an appointment with a primary care physician was only 15.7 minutes.

 

2. No More Insurance Hassle

Again, direct primary care isn’t insurance. While this feature may seem like a negative, it helps DPC providers stay more profitable and effective. Healthcare’s conventional system of insurance demands and limited patient interaction make it difficult for physicians to practice to their full capabilities.

form

Because direct primary care isn’t insurance, care providers can opt out of traditional insurance contracts. Instead, direct primary care providers receive a retainer fee. DPC practices, through their compensation structure, can pay physicians to provide comprehensive care rather than only care during a visit.

Under direct primary care, claims aren’t sent to an insurance provider. This lack of insurance allows providers to not only eliminate insurance contracts, which eliminates third-party billing, fee-for-service payments, and insurer relationships.

Without the costs associated with the traditional insurance system, DPC providers can cut their spending on administrative overhead by 30 to 40 percent. Consequently, direct primary care physicians can see four to six times fewer patients and remain profitable. Having less patients allows DPC physicians to spend more time with each patient, as detailed above.

 

3. Better Quality of Care

Another advantage of direct primary care is an increase in the quality of care for patients. For a broad swath of the country, visiting a primary care physician is difficult. Thirteen percent of Americans, or 44 million people, live in a county with a shortage of primary care physicians, according to a 2018 UnitedHealthcare study.

Without a nearby or available primary care physician, many people struggle to receive thorough and timely care. Luckily, direct primary care can help. For a monthly DPC membership fee, employees get a direct relationship with a primary care physician.

doctor with patient

And, as previously mentioned, DPC physicians can spend more time with their patients which improves quality of care. Similarly, patient panel sizes for direct primary care doctors are 70 to 80 percent smaller than those for traditional primary care physicians. DPC doctors can spend more time with their patients, and have more availability, overall.

Those who suffer the most due to a lack of a primary care physician, are patients with a chronic disease. A 2017 RAND study found 60 percent of Americans live with at least one chronic condition. And, these people account for hundreds of billions of dollars in healthcare spending, every year.

These patients with chronic conditions would benefit the most from access to direct primary care. Because DPC physicians have more time, and fewer patients, they can better coach and monitor patients with chronic conditions.

According to Qliance Medical Management, Inc., the use of services rendered outside of a primary care facility, drop precipitously once direct primary care is introduced. Patients enrolled in a DPC program have 59 percent fewer ER visits, spend 30 percent fewer days admitted to a hospital, are referred to specialists 62 percent less, and have 80 percent fewer surgeries.

 

4. Reduces Cost of Care

One of DPC’s most significant advantages for employers is that it can help reduce the cost of care for your employees, and consequently, your business itself. Healthcare in the U.S., according to BenefitsPro, is expensive because third-party insurance carriers obscure the actual cost of healthcare.

This price obfuscation prevents consumers from comparison shopping. Overutilization is another driver of the price of healthcare. In 2010, for example, $29.7 billion was spent on hospitalizing patients for potentially preventable complications. As previously stated, DPC can help patients avoid unnecessary treatments and procedures.

When combined with a transparent Rx program, direct primary care can reduce your firm’s healthcare spend by 15 to 20 percent in one year. Similarly, some self-insured employers who implement a DPC program, have saved as much as $260 per member per month.

 

Not Actual Insurance

It’s important to note one of the advantages of direct primary care can also be a disadvantage. We’ve already covered the fact that DPC isn’t insurance. This status allows DPC providers to avoid all the expenses associated with insurance.

But, it also means an employee with DPC only would be on the hook for all the expenses due to seeing a specialist or being hospitalized. It’s essential for any employer implementing a DPC program, to educate your employees about the differences between DPC and traditional health insurance.

 

The Wrap

Direct primary care isn’t a cure-all for the rising cost of health insurance premiums and healthcare overall. But, DPC does offer your business the opportunity to cut down on healthcare overutilization, save money, and improve your employees’ health.

healthcare supply chain management

How Healthcare Supply Chain Management Can Enhance Your Benefits [Video]

*Download a white paper detailing the importance of healthcare supply chain management. 

Think about the phrase supply chain. What do you picture in your mind? An actual chain, a pile of unmarked boxes, UPS? My guess is you’re not thinking about the healthcare industry.  Yet, for many business owners, your healthcare supply chain could be the difference between a marginal and robust bottom line. In this article, we’ll examine what exactly the healthcare supply chain is, and how managing it can grow your company’s performance.

 

What is the Healthcare Supply Chain?

The healthcare supply chain, according to Employee Benefits Adviser, is the quality and cost of medical treatments. Managing this supply chain involves obtaining resources, managing supplies, and delivering goods and services to providers and patients, per RevCycle Intelligence. Through healthcare supply chain management, your firm can produce significant cost-reducing opportunities.

 

Healthcare Supply Chain Management

According to MarketsandMarkets, the total value of the healthcare supply chain management market will reach more than $2.2 billion by 2021. This would represent an increase of over 53 percent from 2016. This trend demonstrates the continued rise of healthcare costs overall, and the need for managing this industry’s supply chain.

man on laptop

So, we’ve established the importance of healthcare supply chain management. But what can you actually do to manage your healthcare supply chain? Well, there are several options to help reduce your healthcare supply chain’s cost. Important tools for positively influencing your healthcare supply chain include:

  • Medical management
  • Fiduciary PBMs
  • Specialty Medical Cost-Mitigation Programs
  • Bundled-price Surgery Centers
  • Surgical Bidding
  • Direct Contracting
  • Reference-based Pricing

Each of these strategies focuses on the misaligned incentives that dominate the healthcare system. These tactics, all important for improving your health supply chain, are patient-centered. They work to guide and improve an individual’s journey through the healthcare landscape.

But they aren’t the end-all and be-all some may tout them as. Still, to maximize your health supply chain’s effectiveness, there are two facets your organization should focus on.

group meeting

According to benefits consultant Bob Gerhart Sr., you need to double the amount of employee engagement and communication of a typical advisor. These two actions, employee engagement, and communication are crucial for improving your healthcare supply chain. Every solution listed above must be supported by employee engagement and communication.

As previously stated, these strategies focus on developing a more patient-centered healthcare supply chain. Similarly, employee engagement and communication both work to build a patient-centered supply chain. Without this support, it doesn’t matter how many of these solutions you implement; their effectiveness will be severely limited.

 

Benefits of Healthcare Supply Chain Management

The key to supply chain management savings lies in your firm’s EBITDA. EBITDA stands for earnings before interest, taxes, depreciation, and amortization. It’s likely, at this very moment, your company has a sizable chunk of EBITDA tied up in your benefits budget.

Mark Krogulski explained this scenario best in last year’s Breaking Through the Status Quo (featuring myself and TOG’s own Tim Olson). According to Krogulski, healthcare is like an iceberg. And most employers and employees only see what’s on the surface, the tip of the iceberg. This tip consists of the “discounted” cost of healthcare.

iceberg

The problem is that the “discounted” cost, like the tip of an iceberg, is only a tiny fraction of the total. The total cost of healthcare lurks, like the body of an iceberg, below the surface where a majority of consumers can’t see. Luckily, focusing on the healthcare supply chain helps your firm deal with the body of the iceberg or the total cost of care.

Focusing on the total cost of care, as opposed to the discounted cost, can give your firm tangible and significant cost savings. Supply chains now account for 25 percent of Rx costs and more than 40 percent of medical-device costs. These two pieces of healthcare total $230 billion and $122 billion respectively in annual costs. The size of these totals makes, even minor gains in efficiency, potentially worth millions.

If the healthcare industry were to adopt better supply chain practices, both employers and employees would benefit. A 2013 article from McKinsey estimates the healthcare industry could save $130 billion if the sector adopted advances that are common in other industries.

Similarly, a better-performing healthcare supply chain assists individual companies. According to McKinsey, improvements to your health supply chain could boost profitability between 6 and 20 percent.

 

The Wrap

Healthcare might not be the first word your brain associates with the phrase supply chain. Still, your healthcare supply chain can have a huge impact on your firm’s bottom line. In fact, properly managing this supply chain could be the difference between drowning in healthcare costs and floating above the rest of your competition.

2019 open enrollment

2019 Open Enrollment Guide: 7 Healthcare Trends You Need to Know

This year in healthcare has been both interesting and tumultuous. In 2018 alone, the Affordable Care Act has undergone significant changes at the hand of the current presidential administration. First, the Cadillac Plan tax was delayed from 2020 to 2022, in January.

Then, in April the administration announced two new exceptions to the individual mandate and gave states the authority to cut back on the 10 essential health benefits mandated by the ACA. Later the government released new rules that expanded both association health plans, and short-term ones, in June and August, respectively.

These rules, in addition to multiple cuts in government funding, have worked to cripple the ACA. Still, until the act is officially repealed, it’s the law of the land. As such, you’ll need to know how these changes will affect your 2019 open enrollment.

Luckily, The Olson Group is prepared and ready to help. Here’s a list of top seven healthcare trends and changes you need to be aware of for your 2019 open enrollment.

 

Learn more about the recent expansion of association and short-term health plans. 

 

1. Plan Changes and Limit Increases

The IRS, in May of this year, announced new annual contribution limits for Health Savings Accounts (HSAs) for the upcoming plan year. For 2019, the annual limit on deductible contributions to a health savings account will rise by $50 for individuals and $100 for families.

one dollar bills

Now, the annual contribution limits will be $3,500 and $7,000 for individuals and families, respectively. On the other hand, the minimum deductible of a high-deductible health plan (HDHP) is unchanged for 2019. The deductibles for these health plans, the only type that can be paired with an HSA, will remain $1,350 for individuals and $2,700 for families.

Conversely, the annual HDHP out-of-pocket maximums, for 2019, will increase. Next year, out-of-pocket maximum’s for HDHPs will be $6,750 for individuals and $13,500 for families.

 

2. Penalties Are Still Relevant

Beginning late last year, and continuing through this summer, the IRS sent over 300,000 proposed-penalty letters to employers for violations of the ACA’s employer mandate in 2015. Some of these letters proposed penalties for large employers that exceeded $1 million each.

And, as an employer, you shouldn’t predict these letters to stop. Mark Spittell, managing director at KPMG’s Compensation & Benefits Practice, expects 2016 assessment letters to be issued before the end of this year.

Penalties for violating the “employer shared responsibility payments” (ESRP) come in the form of a 226-J letter. An employer has only 30 days to respond to this letter. And, they must complete and return their response, via Form 14765, to challenge any part of the IRS’ assessment.

document

It’s important your firm handles these letters and responses as quickly as possible. Because the penalties can be significant. In a worst-case scenario, an employer with inadequate health coverage could pay for the cost of this coverage, in addition to penalties up to $2,000 a year for every full-time employee.

In addition to ESRP penalties, employers need to be aware that Forms 1094-C, 1095-C, and Summary of Benefits Coverage (SBC) all still need to be filed. Employers that fail to complete Forms 1094-C and 1095-C, or complete them with errors, could face both reporting-related penalties and ESRP penalties.

Additionally, the penalty for a failure to provide employees with an SBC is less punitive but still significant. For 2018, a penalty of $1,128 per participant can apply to the failure to provide an SBC as required.

 

3. Utilize Big Data

Every year, through benefits technology, your organization can collect a treasure-trove of health data. This data, with the help of online resources, can provide an analytics-based guideline for improving employee’s health outcomes.

Employers should use this information to implement personalized clinical management and employee engagement programs. These programs let you maximize your healthcare dollars.

 

4. Digital Tools

Digital tools today, play as important of a role as ever, in both open enrollment and benefits in general. Online enrollment platforms let employees easily pick and enroll in their benefits plan. As mentioned above, they can also help your firm analyze important health data.

digital tools

Similarly, digitally-driven benefits such as telemedicine, are growing in importance and utilization. So, it’s crucial your firm both understands and takes advantage of these digital tools, for your 2019 open enrollment. Because the role of this online equipment will only continue to grow.

 

5. Incentives for Comparison Shopping

Modern consumers are no strangers to spending hours online searching for the best deal for a particular product. Yet, this propensity to comparison shop doesn’t extend to healthcare. According to Employee Benefits Advisor, only a little more than one-third (36 percent) of Americans say they’ve used the Internet or mobile apps during the last year to comparison shop for healthcare.

This number is a huge improvement, since 2012. That year, only 14 percent of consumers said they comparison shopped for healthcare. Still, your business should do all it can to promote comparison shopping for healthcare among your employees.

To encourage your staff to participate in this trend, your firm should consider offering incentives. Even small financial incentives, such as $50 gift cards, can push employees to use these healthcare transparency resources.

The quality and cost of healthcare can vary widely within the same city or even the same neighborhood. So, utilizing these transparency resources can result in significant savings for both your employees and your organization overall.

You wouldn’t expect someone to buy a car without them researching the vehicle first. So, why wouldn’t you expect your staff to do the same for healthcare. Especially, as the cost of healthcare and health benefits continues to rise. In 2019, the cost to provide healthcare coverage is expected to rise to $15,000.

 

6. Integrate Enhanced Benefits

Enhanced benefits, also known as voluntary or ancillary benefits, are more important to your health plan’s success than you may realize. Benefits such as vision and dental care, identity theft protection, or short-term disability all affect the outcomes of your overall benefits plan’s success.

These ancillary lines of coverage help maximize the effectiveness of your firm’s healthcare dollars. Combining medical and enhanced benefits under a single health plan may enable your company to analyze a wider range of data.

As previously mentioned, the more data you have, the better you can engage in proactive outreach and clinical support for employees. Especially for those with chronic conditions.

Those with chronic conditions, often known as high utilizers, cost billions of dollars themselves. The sickest five percent of patients use a full third of Medicare’s budget. Similarly, this five percent consumes over half the spending of Medicaid.

 

7. Employee Education

Employee education is or should be, the most vital component of any open enrollment. According to a 2018 poll by Unum, the average employee spends 30 minutes or less reviewing benefits materials before open enrollment.

Despite this fact, 77 percent of employees say they’re prepared for open enrollment, according to a UnitedHealthcare Survey. But, according to the same study, only 6 percent of these respondents could successfully define all four basic health insurance concepts.

And, per an HSA Bank white paper, just 10 percent of employers believe their workers understand their health plans. Clearly, most employees aren’t taking the time to completely understand their benefits plans. It’s an employer’s responsibility to ensure your staff has a thorough understanding of their benefits.

Your broker or HR team can help employees with their benefits selection. But, holding employees’ hands through the process doesn’t actually help these individuals. To get the most from your healthcare dollars, all your staff must know what benefits are available to them, and how they can affect themselves and their family.

 

The Wrap

Open enrollment is critical for establishing a baseline of prosperity for your employee benefits plan. Follow these seven trends to maximize the success of your company’s 2019 open enrollment.