The Health Care Conundrum — Part II

What do all these letters mean?

By Matt Haverdink

Following last week’s article on controlling health care costs, I thought I would offer some more information on the different products that are available to employers who provide health insurance to their employees. The most popular options today, that I see, are HRAs (health reimbursement arrangements), FSAs (flexible spending accounts) and HSAs (health savings accounts). It would be very difficult to explain in one article all the differences between the three options. I will say my experience, similar to Priority Health’s, is that FSAs and HRAs outpace HSAs by a large margin.

In theory, the HSA puts the consumer in control. The idea is that if an employee is spending their dollars then they will try to be more proactive in the cost and type of care they receive. I have not heard any convincing statistics that employees are changing their buying habits because of the HSA. What you don’t want is an employee not getting care in order to save money or because they don’t have the money in their High Deductible Health Plan, which is required for an HSA. Also, with an HSA employees lose the much coveted prescription card. Prescriptions are subject to the high deductible before the insurance pays anything.

On the other hand HSAs do seem to be a good fit for the smaller employer or for the young and healthy.

HRAs put the employer in control and they don’t require immediate funding. An HRA is designed to reimburse the employees if in fact they incur a deductible related expense. Like an HSA, HRAs have a high deductible. However, the employer is usually doing an HRA so they can reduce premiums and self insure a portion of the deductible. If the employees are healthy and have few claims then the employer saves more. Res Life of Grandville has experienced a tremendous amount of savings with the HRA concept.

FSAs (Flex accounts) can be offered along with an HRA or on a very limited basis with an HSA. FSAs allow employees to defer a portion of their wages on a pre-tax basis. These monies can then be used to pay for uncovered medical related items such as copays, deductible, co-insurance, dental, vision, over the counter drugs, orthodontics, etc. Many employees find FSAs valuable because of the preferential tax treatment.

I am including a couple links in which you can get some additional information and questions answered. If you have further questions, do not hesitate to call me or your current agent.

http://www.hsa223.com/plandesign.asp

http://www.priorityhealth.com/pdfs/healthplanspdfs/hsahracomparison

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Matt Haverdink has been providing employee benefits for 17 years and is a certified Senior Professional in Human Resources. Matt is also the co-owner of Ottawa Kent Insurance and co-founder of HealthTrack. HealthTrack is a corporate wellness provider in West Michigan of which local companies are offering their employees as a prevention tool to combat rising healthcare costs. Questions can be directed to matth@okins.com or (616) 392-6006.