A move in the right direction

By Barton Halling

Winston Churchill once said, “There is nothing wrong with change, as long as it is in the right direction”. Much is currently in flux within the employer-sponsored health benefits world and participants in this market live with a rapid pace of change that has almost become accepted as the norm. In the midst of this whirlwind, the need for well thought out, courageous benefit strategies has become paramount for companies that wish to continue driving positive transformation instead of becoming a victim of any and all changes that come their way.

“Without material dispute, consumers continue to play a greater and more influential role in creating a positive impact on health benefits expense trends.”
-Barton Halling

Many employers have constructed a false perception that the most recent manifestation of healthcare consumerism (2000 through today) represents a radical change and drives hesitation from decision makers who are considering a consumer-driven health (CDH) strategy. Heaped on top of that perception is a growing concern about how 2010's healthcare reform legislation will reshape the benefits landscape, materially altering how CDH plans can be used. In response, it is worth the time to investigate how reform has impacted consumer-driven strategies, specific to the member/account holder.

When the reform dust settled in late March 2010, it resulted in minimal impacts to CDH plans. HRAs, HSAs and FSAs are still viable products, which are expected to experience continued growth and remain strikingly similar to their pre-reform versions. Here is a summary of the reform changes:

Qualified High Deductible Health Plan (QHDHP)/ Health Savings Account (HSA)

Consumers will no longer be able to pay for over-the-counter (OTC) medicines with their HSAs starting Jan. 1, 2011, unless they have prescriptions. Copies of the prescription and receipts should be saved for tax records.

The penalty for using HSA funds for non-qualified medical expenses will increase from 10 percent to 20 percent beginning Jan. 1, 2011.

Health Care Flexible Spending Account (FSA)

Beginning Jan. 1, 2011, consumers will no longer be able to use health care FSA funds for OTC medicines, unless prescribed. In order to be reimbursed for a prescribed OTC medicine, a claim form and supporting documentation must be submitted rather than using an FSA debit card to pay.

The pre-tax contribution limit per plan year will be $2500 beginning Jan. 1, 2013.

Health Reimbursement Account (HRA) and Retirement Reimbursement Account (RRA)

As of Jan. 1, 2011, consumers will no longer be able to use HRA/RRA funds for OTC medicines, unless prescribed. In order to be reimbursed for a prescribed OTC medicine, a claim form and supporting documentation must be submitted instead of using an HRA/RRA debit card to pay.

In conclusion, changes enacted by the reform will be nominal, or even unnoticeable to many CDH plan members. The foundational concepts of consumerism within the healthcare delivery equation have not fundamentally changed for quite some time and remain grounded in simple economic principles.

At the crux of every health expenditure is a consumer who has tremendous influence over medical costs.  Members play a decisive role regarding where, when, from whom and at what price they seek medical products/services. Bringing members into the center of the "decision making ring", exposes members to the true cost of health care instead of insulating them from it.

Reform has not changed these simple principles, nor has it changed the ability to utilize CDH plans and capitalize on the inherent benefits consumer strategies provide to employers and plan members alike.

Without material dispute, consumers continue to play a greater and more influential role in creating a positive impact on health benefits expense trends. Although some may argue the finer points of how, when and within what context a consumer strategy should be pursued, evidence is certainly arriving with each quarter and each plan year, confirming that this change in the health benefits environment may well be in the "right" direction.

Biography

Barton Halling is Vice President of product management for consumer driven and emerging markets for UMR, the third-party administrator (TPA) unit of UnitedHealthcare. Halling leads efforts to aggressively leverage the unique competitive position of UMR with core functionality and capabilities at the convergence of the health and wealth industries.