Consider supplemental health insurance when moving to a high deductible health plan
The employer sponsored health insurance marketplace has been under a very bright spotlight lately, with the focus on provider costs, insurance premiums, access to quality care, and employer provided coverage. In response to this, many insurance brokers are providing their clients alternative options to fully insured PPO and HMO plans. The most common alternative options are High Deductible Health Plans (HDHP’s), with the employer funding a percentage of the deductible, or Self Insured options. Here we focus on HDHP’s and their funding arrangements.
What is the most effective way to assist employees with funding their high deductible health plan? The most common solution is to simply provide Healthcare Reimbursement Accounts (HRA’s) or Health Savings Accounts (HSA’s). These two savings account options have proven to be an effective means of funding high deductibles and are clearly the most popular, but what about providing an insurance option for the high deductible plan through a limited benefit medical plan? By providing a Limited Benefit Medical Plan as a supplement to the comprehensive high deductible medical plan, the employer reduces their cost volatility that exists within funding HRA’s and prohibits their employees from abusing employer funded HSA’s. The Limited Benefit Medical Plan protects employees against out of pocket costs by providing dollars to employees for services typically subject to deductibles. The employer pays a level premium, thus stabilizing their costs, and is assured that the money is being used for health services.
Limited Benefit Medical Plans pay employees directly for specific health services. Examples of payment for services include:
- surgical and anesthesia
- outpatient physician office visits
- outpatient diagnostic x-ray and labs
- off-the-job accidental injuries
- wellness visits
- emergency room services
- prescription drugs
As you may conclude, these are the most common services subject to out of pocket deductibles. The benefit amounts, or benefit payments, can be adjusted depending on the deductible exposure and the employer budget. These plans can also be offered on a voluntary employee funded basis, with no impact to the employer’s bottom line.
The last, and most often overlooked, advantage of a Limited Benefit Medical Plan is the way they pay benefits. Employees will receive indemnity payouts for covered services, or essentially be paid for going to the doctor or receiving medical services. This method of payment encourages consumerism as well as increases the intrinsic value of the health insurance plan. The more cost conscious the employee is with where they receive the care, the more benefit dollars they can keep in their bank account. And when the deductible is satisfied, the employees enjoy payments that can be used for hidden costs of seeing healthcare professionals (i.e. missed work, travel expenses, etc).
As health insurance continues down the path of increasing costs and changing plan designs for affordability, ask your consultant about Limited Benefit Medical Plans. These plans are a great solution for bridging the gap between first dollar coverage and HDHP’s.
William Gallagher Associates is a leading provider of insurance brokerage, risk management and employee benefits services to firms with complex risks and dynamic needs, within industries that include technology, life sciences, financial risks, health care, renewable energy & clean technology, and environmental services. WGA has offices in Boston, MA; New York, NY; Hartford, CT; Princeton, NJ; Columbia, MD; and Atlanta, GA.