As employers continue to battle healthcare costs, many are changing to consumer-driven plans, such as health savings and health reimbursement accounts. For the shift to be successful, employees must understand it is more than shifting costs on to them.
That responsibility falls on the employer and broker, who are critical to their successful rollout and execution of these plans. To understand more, EBA spoke with John Young, senior vice president of consumerism and strategy at Alegeus. What follows is an edited version of the conversation.
EBA: What are the latest trends in HSAs?
John Young: Beyond just the regular adoption of HSAs as the most popular employee benefits strategy, the biggest and greatest trend is that employers are consistently moving towards a full replacement of these types of plans with their employees.
Currently, 10% of employers with 500 employees and above are offering a full replacement type of strategy with HSAs or HSAs and HRAs. Within three years it is expected to grow to one out of five employers offering only consumer driven healthcare.
The major trend is the move from people using HSAs as an option against a traditional plan. Employers are now moving to more of a full replacement where that is the only plan that they offer their employees. That has some significant responsibilities attached to that.
EBA: What are some of the responsibilities? And who is that for, the broker or employer?
Young: We are asking employees to have more of a financial responsibility with these types of programs, meaning their choices have consequences relative to how they spend healthcare dollars.
The responsibility that all stakeholders have is to help individuals really understand how these plans work. Help them every which way to understand how the healthcare system operates. Help them understand that they have choices in the marketplace.
The low hanging fruit is brand name versus generic drugs. People have choices of where they get their care. They might choose convenience care versus primary care. They might choose urgent care versus an emergency room. There are financial consequences to … decisions in healthcare.
These plans provoke the necessity of employers and brokers to help employees understand the alternatives and how to better navigate healthcare.
EBA: Why is full replacement becoming more popular?
Young: When they look at the financial pressure of medical plans, employers are seeing that consumer driven plans are in fact reducing healthcare costs because people’s behavior changes when they have financial incentives to care about consumption.
EBA: What type of benefits do HSAs offer?
Young: The statistics are mind boggling to me. Consultancy Aite Group forecasts that consumers are going to spend $477 billion in out of pocket for medical expenses in 2018. The crazy piece is they are only running about 17% of those expenses through tax-free accounts like FSAs and HSAs.
We have such an opportunity to get people that are eligible, that are going to have these expense, to understand these things are not difficult and not risky. We can get people to understand these are the perfect vehicle for them to use to spend their out of pocket costs and the real benefit here is that they can start putting money away and let it grow to pay for expenses in the future.
The real responsibility that we have today … is making sure employees understand how to optimize the saving and spending in these plans.
EBA: What role does an employee benefit broker play in implementing HSAs?
Young: The adviser is absolutely critical to the success of it. Obviously, the employer is critical. But for the broker, the adviser is critical to the success of the consumer driven plan.
Here’s how and why. No. 1 is making sure the strategy is solid by designing a consumerism plan that gives employees the opportunity to win. What I mean by that is designing the consumer driven plan in such a way so there is an employer contribution to the HSA. That the plan is designed in such a way that it doesn’t feel like a cost avoidance plan where someone looks and says, ‘I have to have so much out of pocket.’ That’s not consumer driven. That’s cost avoidance.
What consumer-driven does is it gives people enough of an incentive upfront within these accounts, like HRAs and HSAs, where someone can feel like that they can win. Where someone knows that there they are protected but they are also given incentives to preserve an account and avoid paying endlessly.
What role will advisers play?
Young: I know a broker has to balance the objectives of an employer, which might have some cost-saving objectives. But, a good adviser is going to know how to look at the marketplace, look at the options and help the employer get into right mix of account value and that high deductible health plan that goes along with it.
The adviser is so critical to helping train the HR staff within employers because it is really true that most employees when they have a question will go right to the HR department and say, ‘I don’t understand this nuance.’ A well trained HR department is going to be able to hold the hand of that employee and walk them through the enrollment process so they understand it and see the value. The only way that is going to happen is when the HR department is pretty savvy on consumer-driven healthcare and an adviser has such an amazing position to help build that strength within the employer.
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