Consumerism in health care is a model that employers have been slow to accept. However, with the costs of insurance and health care rising dramatically over the previous decade, CDHC plans are a hot commodity. Brokers who offer this option have seen interest increase with companies looking for ways to cut costs and improve patient care—especially with employees who are always complaining about the how much it costs to have insurance.
Offering CDHC plan designs go a long way to increase business opportunities, not only with current clients but also with new customers. Remember, whenever you can help your client save money and still accomplish his health care goals, you'll be a hero.
According to a new study by Prudential, brokers and consultants play a critical role in shaping the changes in the benefits model. Nearly three-quarters of brokers and consultants surveyed (70 percent) say they are recommending, to some extent, that their clients implement consumer-directed health plans. More than two-thirds (68 percent) indicate they're recommending that their clients share more of the cost of contributory benefits with employees. Among plan sponsors, giving more financial responsibility to employees through high deductible health plans and health saving accounts was rated as "highly important" by 34 percent in 2010, up from 21 percent in 2007.
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As health care costs continue to rise and the future of health care reform looks increasingly uncertain, more employers are turning to consumer-directed health care plans as a proven way to save money and motivate employees to stay healthier. Health reimbursement arrangements health savings accounts, offered with a high-deductible health plan, are valuable long-term strategies to curb unnecessary spending, contain costs and promote better health within organizations. Flexible spending accounts, the oldest of the three tax-advantaged accounts, have a long-standing history of providing tax savings while also advocating responsible health care spending, according to Ceridian. These pretax benefits are considered to be one of the best cost-containment measures available in the marketplace today. Businesses are quickly beginning to understand the benefits of CDHC plans.
A consumer-directed health care plan is a combination of a pretax payment account with a high-deductible health plan-a plan that offers lower monthly premiums by requiring a higher annual deductible and out-of-pocket maximum than traditional plans. Employers offer CDHC plans to give employees real incentives to use medical services wisely. Many employers choose to integrate wellness incentives with CDHC contributions to further promote prevention and responsible health care spending. The underlying assumption of a consumer-directed health plan is that employees will make more informed choices and forego unnecessary or excess medical care if they have to use more of their own money to pay for it. The more educated worker can make better decisions for their health care needs.
While all CDHC plans offer tax savings for both the employer and the employee, HRAs, HSAs and FSAs have distinct advantages. An HSA, for example, allows employees to take greater responsibility for their own health care and to save money – both for today, as they cope with rising costs, and for the future, as they face retirement. An HRA, often the plan many employers choose first to "get their feet wet" in CDHC, gives the employer more control over employee spending by allowing them to determine plan rules. An FSA can save employers from 8 percent to 10 percent on payroll taxes as their employees enjoy up to 40 percent in tax savings on certain medical and dependent care expenses. Everyone wins. When combining these CDHC savings with the long-term cost-containment provided by wellness programs, employers are well-positioned to combat rising health care costs. CDHC plans can be even more effective when they work in conjunction with wellness incentives. The money your clients save on health care costs can be used to fund incentive rewards – a valuable way to continue to invest in the employees' well-being of your business clients.
Brokers who promote CDHC plans provide another level of service beyond offering traditional insurance. These days, it's worth your time to educate yourself about consumer directed health care.
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