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Health Reimbursement Accounts
We all agree that healthcare costs are
out of control.
- Employers are paying too much,
- Employees are not getting enough value,
and
- Healthcare Providers have already reduced
their fees as much as they can
The rising healthcare costs are affecting
everyone-and everyone wants the problem fixed now. However,
what is the problem, and how do we fix it? The answer is that
there is no one thing that is causing the spiraling costs;
it is a combination of factors. Only by identifying the factors
and tackling them one at a time can we begin to gain control
of healthcare costs.
A primary factor is that employees have
lost touch with the cost of healthcare. They go to the doctor,
pay their co-pay, and get treated. The remaining costs are
filed through the insurance plan provided by their employer.
If the insurance doesn't cover it all, the employee pays the
remainder, either out-of-pocket or out of their § 125
Health FSA.
As consumers, the employees can be paramount
in controlling healthcare costs if we can
- Empower the employees by giving them
choices in their healthcare options,
- Furnish incentives for them to conserve
healthcare dollars, and
- Provide them with the information they
need to choose their options and to save money on healthcare
delivery
Employers are turning to the new Consumer
Driven Health Plans (CDHPs), which allow employees to choose
between multiple health plans supplying different levels of
benefits. This choice gives the employees more control over
both the level and cost of their healthcare.
A crucial component of the CDHP is the
Health Reimbursement Arrangement (HRA). For instance, a properly
designed HRA encourages the employees to conserve healthcare
costs by allowing unused employer contributions to be rolled
over to be used in future years or at retirement.
While employers can achieve savings the
first year by purchasing High Deductible Health Policies and
creating different levels of coverage through HRAs, the savings
incurred through employee choices will build over years. The
following changes will take place:
- Employee attitude will change when employees
are given choices.
- Employee behavior will change because
they have incentives to conserve healthcare costs.
- Healthcare consumption will decrease
as employees conserve on healthcare costs.
- Overall healthcare costs will decrease
as individual employee healthcare costs decrease .
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