I’ve been in the health insurance business for the past 20 years and have seen its evolution from the front lines. From the advent of health maintenance organizations, preferred provider organizations and exclusive provider organizations to today’s landscape of high-deductible health plans and consumer directed health plans, the business has become more complicated than ever.
Add to this health savings accounts, health reimbursement accounts and flexible savings accounts, and banking is as much a part of being a health insurance broker as the plans themselves. As a broker, you have to ask yourself a question — am I in the health insurance business or do I just say I am? If you are committed to the business, understanding these new health care options is a must.
As the market has evolved and changed over the years, so have many insurance brokerages. At our firm, we chose to focus our efforts — on behalf of our clients — on consumer driven health plans combined with health savings accounts. With the continued double digit growth in health care costs, CDHPs combined with HSAs offer our clients the most value for their health care dollar.
CDHPs and HSAs Defined
For those of you who are not familiar with CDHPs or HSAs, you’d better get on top of them soon. Otherwise, you’ll quickly find yourself on your way out of business, as the BlueCross BlueShield Association reports that the adoption of CDHP/HSA plans are growing at 30 percent a year.
In the simplest of definitions, CDHPs are traditionally high deductible health plans which encourage individuals to become actively involved in making their own health care decisions. At the minimum, CDHPs engage individuals in choosing their own health care providers, managing their own health expenses, and improving their own health. A key component to CDHPs, HSAs, are a tax-favored bank account from which funds are used to cover the cost of an individual’s health care expenditures. As stated, these are simplistic definitions. CDHPs and HSAs are so much more.
Nationally, 19 percent of large employers are currently offering HDHP/HSA plan arrangements. That is up from 10 percent just two years ago. Right now, 45 percent of employers are contributing to the HSA accounts they are offering to their employees. More than 11 percent of the contributions are in excess of $1,000 annually.
How to encourage CDHP success
So how do you use these health plan options in the field, rather then just discuss them?
CDHPs are gaining popularity as fast as the premiums for traditional plans are rising. While the demand is high, there is a significant amount of education that employers need before making the commitment to CDHPs. When offering CDHPs to their clients, brokers will find themselves in the role of sales person, educator and implementer.
From a practical standpoint these plans can be scary to individuals because of the unknown cost at the doctor’s office. In order to combat this, we empower our clients by giving them tools to use to enhance their user experience. We know from experience — if it’s not easy they won’t do it — employees are very resistant to change and the plans we are implementing carry a big change factor. So let’s get started.
As stated before, the BlueCross BlueShield Association claims the adoption of CDHPs and HSAs are growing at 30 percent a year. Most health insurance providers have developed their own version of a CDHP. They also have partnered with large national banks to help ease the administration on the banking side of the plan or the HSA.
First, as a broker you have to help simplify administration of the plans themselves. We see one of the biggest obstacles of a CDHP/HSA model being education — the employer does not have the time or knowledge they need to help their employees navigate a system where the employees are in charge of their own medical accounts.
At Wingate Insurance Group we start with the basics of employee information. Wingate employs a single Web-based portal that houses all an employers’ information. For the portal we use Benefitfocus, an employee benefits software company in South Carolina. The software is a proven commodity for us, and was chosen for its simple interface, ease of navigation and the independence of the platform.
Our goal was to implement a system for our clients, which does not tie them to any one health carrier, as we use independent HSA vendor Health Equity. While any bank can sell HSA accounts, Health Equity stands apart with an understanding of health care. They are there to answer the call if someone needs help getting the lowest cost prescription at 2:00 a.m.
Getting the buy in: Showing employers the cost savings
Once we had the system in place, we needed the employer to buy in — literally for them to buy into the plan. The question that needs to be asked is; how much are they willing to, or have been, spending? We always begin by offering the CDHP/HSA as an option to their available plans. As with most financially-based decisions, saving money is the main motivator. The employer savings in implementing a CDHP is significant enough for them to fund a portion of the HSA that would be implemented alongside it.
A traditional HMO co-pay health plan costs the employer on average $350 per month. Currently, those same employers are looking at a renewal rate increase of 22 percent. This is a familiar story across the country. A simple spread sheet with the traditional options compared with a CDHP plan effectively gets across the cost savings. For example: If the employer were to renew its HMO option, they would be looking at a rate of $427 per month. However, if they change over to a CDHP plan with a $2,000 annual individual deductible, they will see a rate reduction to $290 per month.
Once the decision is made to offer a CDHP, it’s now time to determine a funding strategy. In most instances, Wingate Insurance encourages employers to determine how much they are willing to continue spending on health insurance. By establishing a baseline, we work backward to determine the funding strategy.
As employers continue to navigate high cost health insurance, the CDHP/HSA plans allow them to come up with premiums they can budget for, while employees can fund their HSA plans as deemed necessary.
Continuing with the previous example, the employer may decide that they are willing to contribute 10 percent more than the current year, or $385 per month per employee. For the employee, that means that the cost of their health care increases by $82 per month in a traditional HMO. If that same employee opts for the CDHP/HSA plan, they incur no increase in costs and have $95 per month deposited into their HSA account by their employer. The employer pays $385 per month in each situation, while the employee in the CDHP/HSA plan has money deposited into their HSA account, and incurring no additional costs.
While the math is simple and the potential cost savings is appealing to the employee, the task at hand is helping the employee understand and navigate their plan options.
To truly get employees to buy in, showing them the cost savings is simply not enough. As never before with a traditional HMO, employees are now responsible for making decisions about their health plan that has significant costs and health implications. In the past, employees would normally spend less time reviewing their health insurance plan, than picking a restaurant for dinner on a Friday night.
From a broker standpoint, this is where your electronic portal needs to stand out. Employees need the ability to log on and see plan comparisons, watch videos of the different plans offered, enroll in their benefits, and choose how much money they want in their HSA account.
This CDHP/HSA model is probably not the end-all fix for run-away health insurance costs, but it is a viable solution for today, and into the immediate future. I would encourage you to apply these concepts to your company, including the use of a benefits portal, because there are more brokers calling on your accounts that are offering these customized solutions to your clients than ever before.
Owen Wingate is the co-owner of Wingate Insurance Group in Ponte Verda Beach, Fla., along with his brother West. Owen began his insurance career with the Massachusetts Mutual Life Insurance Company as a life insurance career agent, later specializing in employee benefits. He is a 19 year member of National Association of Financial Advisors and a 17 year Life and Qualifying Member of the Million Dollar Round Table, the insurance industry’s leading sales achievement organization. Wingate is also a member of the National Association of Health Underwriter’s Leading Producers Round Table organization, and an active member of the Jacksonville Association of Health Underwriters, currently serving as president. Born and raised in Jacksonville Beach, Fla., Owen is a graduate of Florida State University, holding a Bachelor of Arts in Political Science. For more information please visit www.wingateinsurance.com.