Health Care: Your Choice (BIZHealth)

Health insurance is traditionally based on a “whole care” model. An insurance plan that covers every aspect of health—with a deductible for each doctor visit or health event—has been the standard for generations. Increasingly, the expense of this approach has priced it out of the market and thereby left many uninsured.

Since 2004, a new health insurance option has been available to consumers and employers based on a consumer-driven model: a high-deductible plan that covers large medical expenses paired with a Health Savings Account (HSA) for out-of-pocket expenses. Purchase of these plans increases every year, with 487,000 Minnesotans now covered. The participation rate—14.3 percent of all employees in the state—is the second highest in the nation.

Ostensibly, the way these plans work is straightforward: a high deductible insurance plan  is matched with pre-tax contributions to an HSA, which is then available to the insured individual to use as he or she see fit. The HSA can be used to pay out-of-pocket for doctor visits, prescriptions and many procedures. The insurance kicks in only when necessary, usually to cover a major health event once the deductible is met or when the total out-of-pocket limit is reached within the calendar year.

“The key is to treat it like ‘now you get to shop,’” says Doug Panner, a health insurance broker with Onyx Benefit Advisors in Edina. “You get to pick how the money is spent based on your needs. It’s your choice.”

All major insurance carriers in Minnesota offer such plans, including Blue Cross Blue Sheild, HealthPartners, Medica and Preferred One. Each has its own advantages for individual circumstances, but the principles remain the same for all.

Pros and Cons
What makes HSAs attractive is their flexibility, especially for small businesses that want to offer insurance to their employees but feel they cannot afford a traditional plan. A high-deductible plan is much cheaper—usually by hundreds of dollars per month—than a whole-health model. Employers can provide all or part of the difference as their contribution to an employee’s HSA, fitting the cost of providing health care to their budget.

The insured part of the plan covers preventative health care, such as an annual check-up or a mammogram. Other events, such as an illness, are left up to the consumer to handle at a local or Minute Clinic using their HSA. Major providers also have telephone clinics set up for simple diagnosis and prescriptions. Since the consumer is responsible for managing the HSA for their own needs, it is up to them to use it wisely.

The benefits of this system reach beyond simply controlling costs. Many procedures, such as LASIK surgery and chiropractic care, are generally covered by an HSA. Prescription glasses and prosthetics may also be paid for with an HSA.

Despite these advantages, a high deductable plan with an HSA is not ideal for everyone. Those who rely on a large number of prescriptions or ongoing health events, such as diabetics, may find that a traditional plan is more affordable.

“You have to sit down and analyze how you use health care,” says Panner, “You can’t just pick one. The right plan is based on your needs.” Panner advises conducting a complete inventory of health care costs before making your choice. He believes it is important for you to know the perscrptions, services and basic personal health issues covered by the HSA down to the last detail to help you determine the right plan for you.

Maximizing Your HSA
Beyond making the right choice for your own health care, there are several ways to maximize the financial benefits of an HSA. Money not spent from an HSA in one calendar year is rolled over to the next year with no penalty, providing another source of pre-tax investment. Many financial advisors now offer HSA plans of their own that bear interest, much like an IRA.

“You can put it away for you,” says Nicole Middendorf of Prosperwell Financial, a financial services advisor in Plymouth. “It’s another option that is attractive for many people.” She notes that an HSA is also portable, like an IRA, so changing jobs does not affect your account.

For all of these reasons, more employers and individuals are finding high-deductible plans with HSAs to be increasingly viable options every year. More than two million Americans took on these kinds of plans for the first time in 2012—an 18 percent increase from 2011. The majority of purchasers of these plans (58 percent) are large employers with more than 300 employees, but small employers and individual consumers are also switching to this new consumer-driven model of health care.

Despite this rapid growth, many employees and individuals using these plans are still getting used to the system. “The participation increases, but the education does not,” says Panner. “People need to understand that this is consumer-driven. It is their choice.”

Cost Versus Quality
There are other difficulties in switching over to a consumer-driven model for health care as well. According to the Mayo Clinic’s guide to HSAs, one of the biggest problems for consumers is finding the proper trade-offs between cost and quality to meet their own needs.

High-deductible health insurance plans matched with a Health Savings Account are flexible and provide a much more affordable option for employers and individuals. But to use them effectively requires a change in thinking and careful analysis. Check with a health insurance broker and analyze your own health care expenses before you decide if this is the best plan for you or your employees.