5.1.A. ERMUSR 10-11-2011 - Laserfiche WebLink

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Typically, the savings in premiums aze contributed by the employee to help fund the deductible and accumulate in the HSA account. However, the savings are not enough to completely fund the entire deductible by the employee. These funds in the HSA account (resulting from the deductible funding component), are used to pay the out of pocket health care costs. If there are not sufficient funds in the HSA account, the employee needs to cover those expenses (much like out-of-network costs or the additional costs in a percentage capped plan.) We would like to propose that (at least the first year) the employer share in this deductible funding component between 50% and 75% of the deductible amount, and fund it on a quarterly or semi-annual basis. For comparison, the AG co-pay plan has a $1,500 per person (in Network) maximum deductible, with most things covered at 100% after a co-pay amount. FINANCIAL IMPACT: A contribution model is attached that shows the impact of the rate reduction in the AG plan at current participation rates. These are displayed in the first two columns. The top section shows 100% of the cost, so the employer and employee costs combined. The middle section shows just the cost of the employer helping fund the deductible ranging from 50% to 75%. The bottom section breaks out the employer portion and the employee portion of the costs. (All scenarios are as if there was 100% participation in the HSA plan, purely for presentation purposes. Also, the employee contributions are shown unchanged because this will probably vary widely from employee to employee, and these numbers will not impact our budget, regardless of their size.) The bottom section is the one to focus on for financial impact. Again, current AG plan rates and the AG renewal rates are in the first two columns. The next four columns show the costs at the various funding levels ranging from 50% to 75% for an HSA plan. At the same premium sharing of 80/20 ERMU/employee, and a 50% contribution to funding the deductible, the employer cost is $387,192, still less than the renewal rate of the AG plan which was $394,297. At a 60% funding, it is only $95 more for the entire year. At 70% and 75% funding it is more than the renewal rate, however less than the current year premiums. The true savings is in the long term use of this plan in subsequent years. Helping fund the deductible at the start encourages participation, incentivizing employees to switch by removing the fear factor of meeting the deductible. And it can be accomplished at the same or lower cost. The HSA accounts would be administered through our current flex provider, Select Account, and would have similar fees, so there would be minimal increased cost for the administration. ACTION REQUESTED: Management is requesting a decision to offer an HSA account option. If it is decided to offer such an option, it needs to be determined if there will be a funding component and what the level of that contribution should be, as well as the timing of the contribution. ATTACHMENTS: Contribution Modeling information sheet Questions and Answers sheet on HSAs