Fri. Jun 9th, 2023
HMO - HRAs Offering a Lid to the Boiling Pot of Medical Insurance That Truly Makes Sense!

When considering Health Reimbursement Account (HRA) products as a strategy for your organizations health and welfare benefits, it is important to understand the features, benefits and potential return on investment (ROI). For example, if you have a manufacturing organization that has a predominately single, healthy, male population, you may want to seriously consider this option. As a fully integrated product, the modern HRA/HMO requires no additional time or resources from a participant and or the Human Resources department.”One of the main things that I like to point out regarding the HRA products, especially the HMO/HRA product is that it is fully integrated, this process makes the administration or usage of the fund, seamless to the employee. When the employee goes to the Doctor, he pays his co-pay etc. If there are other services received, they are sent to the carrier on a claim form, and if there are funds available, the fund is applied (from the carrier) until exhausted, at which point, the employee would have out of pocket responsibility. However, the employee and the doctor will receive an EOB explaining exactly what was utilized from the fund, including remaining balance as well as additional funds required. Once the fund is exhausted, the employee will have a minimum out of pocket for each visit, until the maximum OOP has been met. This now takes the plan to a 100%. Certain services will still require a small co-pay, but the ‘big ticket’ items are covered at 100%. At the end of the year, any remaining fund is rolled to the next year and a brand new ‘fund’ is added for the coming year. Moving into the 3rd and 4th year, this plan allows the employees to build a fund that will not only cover their deductible, but will eventually cover their entire OOP max. This will eventually turn the plan into an HMO with NO DEDUCTIBLE! What other plan offers that kind of option for cost containment?With THIS piece of the pie, there is truly now ‘something for everyone’ with this plan. I say that because, insurance is currently built around the sick. I will explain. On a traditional health plan, a ‘healthy’ employee may go to the Dr. one or two times a year, pay their co-pay, and maybe get a prescription. However, the unhealthy employees that sometimes utilize the ER as their primary care physician; they go to the Dr. all year long, they burn through their deductible, and sometimes even meet their out of pocket maximum. This means that they carrier is now paying for a much larger piece of the services being rendered. Most employees say “SCORE!” However, with the carrier now fully shouldering the brunt of the services, the ‘experience’ of the group is now being directly affected! Fast forward a few months to renewal time. The renewal is approximate 15%-20%, and the carrier throws that wonderful word ‘trend’ into the pot. “Well, this is just our standard TREND renewal for a group of this size.” Those ‘young, single, healthy males that rarely go to the dr., they are now realizing that if they leave the employer group plan, they can more-than-likely get cheaper or maybe even better insurance by going to an individual policy. This causes what we in the industry call an “Adverse Selection” situation. This means that only the ‘sick’ or employees that really utilize the plan are sticking around. With the healthy employee population pulling out of the group plan, it means, sick money in against sick money out. There is no way that renewals can do anything other than skyrocket in this type of scenario. This is a direct effect of the 80%/20% rule. 80% of an employer’s claims experience is driven by only 20% of that same employer’s employee population. This means that with 20% of the employee population truly utilizing the plan, there are approximately 80% of the employees that are not getting a ‘true’ benefit out of the benefit plans being offered. It is absolutely necessary to keep the single, young, healthy, males as part of the employer sponsored plan. Their involvement will help to offset the premium being paid by the carrier for the ‘sick’ or over utilizers of the plan. With this plan, there truly is a ‘benefit’ for everyone!Controlling Medical Costs As medical costs continue to rise, employers are looking for opportunities to save money and control future cost The HMO/HRA combines the most popular features of typical HMO plans, i.e. copays for office visits, with consumer features that help employees increase their understanding and control of their personal health care spending. In conjunction with online tools and support, employees can save money by making better decisions around the purchases they make on health care. Furthermore, the features incorporated in the HMO/HRA provide health coverage employees need at a premium cost that’s beneficial to the employer. When looking at an HRA/HMO plan, consider the following plan benefits:

• A Health Reimbursement Arrangement (HRA) fund

• Traditional HMO medical plan

• Various pharmacy rider options

• Consumerism tools and information”There are only 5 services for which the fund applies, so most of the services are available for only a co-pay. So, if you put a 100% $750 deductible HMO/HRA w/a $250 fund in place, the employee’s max OOP would be $500 ($250 fund + remaining $500 balance of the $750 deductible) before Hospitalization goes to 100% coverage. Hospitalization is the key word here, as that is usually the big ticket item w/health insurance. Now, all of a sudden you have an HMO that offers an extremely low OOP Max for the ‘utilizers’, and a plan that builds for an unfortunate, future ‘rainy day’ for the employees that barely utilize.The 5 deductible services are as follows:

1. Emergency Care

2. Hospital Care

3. Outpatient Surgery

4. Home Health Care

5. Durable Medical EquipmentThe Health fund could range from $250 to $1,000 for individuals and $500 to $2,000 for families. In relation to the fund, it will reimburse covered services and supplies that are applied to the plan’s deductible. “Copays are not eligible for fund reimbursements, just like a regular HMO, as they are not applied to the plans deductible and all fund reimbursements for covered eligible expenses are sent directly to members. At year’s end, any unused fund balance rolls over to the next year, and a new ‘fund’ is applied for the new year allowing the balance of the fund to grow annually. This plan is good for the employer too, as the members forfeit any unused balance when they either leave the employer, or discontinue participation in the plan.Not only is the plan quite unique, but with the majority of the employees remaining within their ‘fund’, for the year, the renewals are significantly lower too. A true win/win!