Monday, December 17, 2007

Health Care and Consumer Driven Plans

Americans like choice. We like that our freedom allows us to make lifestyle decisions for where we live, what car we drive, where we go to church, and what type of health coverage we want. Health care in the U.S. continues to be challenged from every corner--including members from Congress, individual consumers, politicians at every level, business owners, and HR professionals. Many surveys have been taken to find out what are the most important aspects of choosing a plan that works best for the individual consumer. The selections are myriad when it comes to various parts of the country, the demographics related to specific regions, the costs associated with all the available plan designs, and a host of other criteria.

Yet with all the numerous options for health care available in the market place, the bottom line issues related to choice come down to cost and availability. How much will I pay when I purchase the health plan, and where can I use it? This is especially true when small business owners and companies are considering health insurance coverage for employees. With the cost of insurance premiums almost 75% higher than in 2000, many employers are starting to offer high deductible health plans combined with health savings accounts in order to keep costs lower. The Nashville Business Journal this month has reported that the current number of Americans who have this type of plan are at 4.5 million. The consensus is that the number of people who may purchase this consumer directed health plan will double in 2008 as they become more popular.

This type of plan reduces the cost of health care over traditional insurance. There are a number of plan administrators in the insurance world that provide the option to purchase the HDHP, but often the HSA is the missing component. Bank of America is one institution that has developed a consumer friendly product that will allow their HSA to be used with any high deductible health plan. Through their Benefit Solutions platform, both companies and individuals can purchase an HSA to work along with their HDHP. Additionally, the plan design is very consumer friendly and allows members to manage their account with relative ease. Often, employers will incentivize employees by contributing funds to the HSA for specific health services, needs, and goals. Employees are empowered to be more responsible for making health care choices and being more preventive with medical issues.

The concept of Consumer Directed Health Care was designed to encourage consumers to spend health care dollars wisely by requiring them to spend more of their own money for medical services before insurance kicks in. The theory is that consumers will not seek unnecessary care if they have to spend their own money, so the rate of health care inflation will slow down. According to Health Affairs, total health care spending is reduced when consumers have more responsibility for their health care expenses. The consumer is given a greater role in making decisions with their health care and paying for expenses. The consumer is more informed and has more choices with the aid of more information and available tools at their disposal.

According to the US Treasury website, Health Savings Accounts will change the way millions meet their health care needs because they are designed to help individuals save for qualified medical and retiree health expenses on a tax-advantaged basis. To encourage saving for health expenses after retirement, individuals age 55 and older are allowed to make additional catch-up contributions to their HSAs. Once an individual enrolls in Medicare they are no longer eligible to contribute to their HSA. Amounts contributed to an HSA belong to the account holder and are completely portable. Funds in the account can grow tax-free through investment earnings, just like an IRA. Also, funds distributed from the HSA are not taxed if they are used to pay qualified medical expenses. Unlike amounts in Flexible Spending Arrangements that are forfeited if not used by the end of the year, unused funds remain available for use in later years.

Consumer Directed Health Care is the wave of the future for those who want to take control of their health care issues. Ask your employer to check it out if that is not a current option, and do some research on what plan works best for you. After all, it's your money. Make the best of it.

Until next time. Let me know what you think.

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