HSA 101

[Guest aswolff]

I'm sure this is a dumb question but HSAs/HDHPs are new to me....

We received a proposal for an HDHP plan. It shows the benefits to be a deductible of $1,500/$3,000 and all plan benefits are "covered 100% after deductible". Does that mean that if I have employee only coverage I pay my $1,500 deductible and then will incur no other medical expenses that year other than prescriptions as long as they are covered by my plan?

For example, if I have family coverage and we meet our $3,000 deductible, and then have a high risk pregnancy with an extended hospital stay, we pay nothing other than our deductible?

I assumed all expenses were paid from the employee's HSA. So you paid your deductible out of pocket and then used your HSA balance to pay for health care visits.

The proposal shows a decrease in the employer benfit cost of close to 40%!! I just don't understand how our premium can be so low and the benefits so rich if the insurance company is paying the healthcare costs. I must have it confused.

Help!

[leevena]

You are essentially correct. One word of caution, regarding the family deductible. There are two different types of deductibles for non-singles. Using your example, under the first deductible option the family deductible must be met before any expenses are paid at 100%. That includes expenses for one person. Under the second option, this is not required. Let me use an example. You and your wife are covered. You incur a $10,000 expense. Under the first deductible option you will pay $3,000 (becuase you need to satisfy the family deductible). Under the second option your OOP is $1,500.

As for the second part of your question, that being the reduction in cost, it does seem possible. I am in CA, and BS of CA tells us that the average CA runs up $500 per year in medical expenses. So a reduction of 40% does not seem to far out of possibility. I have seen many proposals such as yours.

[Guest allancoleman]

Leevena is correct , aswolff . My Aetna HSA family plan requires twice the individual deductable before the plan pays anything .

[MARYMM]

I'm sure this is a dumb question but HSAs/HDHPs are new to me....

We received a proposal for an HDHP plan. It shows the benefits to be a deductible of $1,500/$3,000 and all plan benefits are "covered 100% after deductible". Does that mean that if I have employee only coverage I pay my $1,500 deductible and then will incur no other medical expenses that year other than prescriptions as long as they are covered by my plan?

For example, if I have family coverage and we meet our $3,000 deductible, and then have a high risk pregnancy with an extended hospital stay, we pay nothing other than our deductible?

I assumed all expenses were paid from the employee's HSA. So you paid your deductible out of pocket and then used your HSA balance to pay for health care visits.

The proposal shows a decrease in the employer benfit cost of close to 40%!! I just don't understand how our premium can be so low and the benefits so rich if the insurance company is paying the healthcare costs. I must have it confused.

Help!

Sounds like the plan design that we have. Does yours cover preventive care at 100% ? That is an option in plan design which we do have. My employer saved so much with this plan that they funded the deductibles in our HSA the first year. We amended our Sec 125 Plan so that employees could contribute pre-tax to the HSA if they wanted to.

[Jacmo]

It depends on the insurance carrier quoting. We see anywhere from 15-40% reductions in first year HDHP quotes, although the 40% ones are rare. However--we have also noticed that those employers who got the greatest reduction first year, will also, for the most part, get the highest 2nd year renewals. So there's a little bit of a game going on here. Is the carrier that's quoting the 40% reduction also after your HSA deposits (via their own bank)? They're willing to give up a little more premium in the insurance quote if they think they can get it back with your HSA deposits.

The same type of thing is happening with HDHP/HSAs that I saw happen during the early '80s when PPOs first came into our area. There were fantastical 40% rate reductions to move to the PPO platform (off of traditional non-PPO platform). Everybody jumped for it. Of course, employees were traumatized with all of the new rules, and utilization dropped off dramatically. For about 18-24 months. Then the flood gates opened back up. And of course PPOs are not seen as anything special these days as far as cost control. It's basically back to business as usual in regards to claims. Now we have the new kid on the block, and the same game is starting all over again.

[GBurns]

aswolff

I advise that you put pen to paper and plug in some figures so that you can compare alternatives.

40% premium reduction versus what coverage ?

A reduction in premium is not the same as a reduction in costs ?

Did you factor in the HSA contribution ?

It is possible to greatly reduce premiums by placing internal caps or limits on various illnesses and treatment. Maximum out-of pocket could be quickly exceeded by 1 major illness but if the internal limit for that illness is then met you have no further coverage for that particular illness.

Premium is sometimes not as important as policy maximums and specific limits.