High Deductible Health Plans Health Savings Accounts

1
High Deductible Health Plans Health Savings
Accounts

• A Benefit Solution

October 3, 2007
2
Health Care Cost Inflation
The Local Perspective

• Example of Current WNY Carrier Rates

Assumes typical plan design 10 co-payment 0
in-patient 7/15/30 Rx student age to 23 Note
Average family/single 6,819
3
Health Care Cost Inflation
The Local Perspective

• Example of Future WNY Carrier Rates

Assumes typical plan design 10 co-payment 0
in-patient 7/15/30 Rx student age to
23 Average approx 13 per year during the next
5 years
4
Future of Healthcare

• If we do nothing, we can expect continued
  double-digit rate increases
• Continued increase of experience rating a rate
  determined on the specific companys health risk.
• More emphasis on healthy lifestyles
• HMOs with comprehensive benefits and low co-pays
  become historic.
• Consumer Driven Healthcare HSAs (Health
  Savings Accounts) will become the norm
• Emphasis on increased generic use
• Employees will transition from passive consumers
  to active consumers

5
Community Rate

• Pros
• Rates are known and guaranteed for 12 months
• Attractive premium for groups having higher than
  average claims experience or an older population
• Spreads risk over a broader group

Description
A fully insured methodology that encompasses the
historical claims experience of all groups in the
community Risk is allocated across the entire
population vs. the groups specific experience

• Healthier than average employer groups pay higher
  premiums than necessary
• No adjustments are made for individual group
  experience
• Health plan is less accountable for group cost
  management
• Community rate will become more expensive as
  smaller groups 51-100 are experience rated
• Community pool should be strengthened, not
  weakened

Cons
6
Health Savings Accounts (HSA)The Amherst Chamber
of Commerce Solution
7
Definitions of the HSA

• High Deductible Health Plan - A qualified benefit
  plan defined by the IRS. Guidelines define
  deductibles, out-of-pocket maximums and annual
  indexing.
• Health Savings Account - A savings account
  established through a financial institution used
  to cover qualified medical care expenses. Funds
  can be invested like an IRA, and are owned by the
  individual.

8
How Do HSAs Work?
9
How do People use their Health care?

• The following chart shows annual medical expenses
  for the United States population by percentage
• Dollars Spent on Medical Care Annually Percentage
  of U.S. No Medical Expenses 13
• 1 - 500 33
• 501 - 1,000 19
• 1,001 - 2,000 17
• 2,001 - 5,000 9
• 5,001 - 10,000 3
• 10,001 - 25,000 3
• 25,001 And Up 2
• Health Savings Accounts provide coverage for
  preventative care,
• not subject to deductibles or co-pays

65 of Americans spend less than 1,000 annually
on healthcare
10
Low Co-Pay vs. HDHP with HSA

• Scenario
• An average, healthy family of four who uses
  their medical plan regularly throughout the year.
  Their main objectives when selecting the right
  medical plan is cost, coverage, ease of use and
  peace of mind.
• Medical Usage Annually for Average Family
• 2 Adult Primary Care Sick Visits
• 1 Gynecological Office Visit
• 1 Mammogram
• 4 Chiropractic Visits
• Monthly Maintenance Drug, Tier 2
• 6 Pediatric Visits
• 2 Immunizations
• 6 Prescription Drugs, Tier 1
• 1 Emergency Room Visit
• 1 Diagnostic X-Ray

11
Low Co-Pay (HMO) Plan

12
Health Savings Account
13
Low Co-Pay vs. HDHP with HSA Cost Comparison
14
Low Co-Pay vs. HDHP with HSAComparison Summary