The newest trend in medical plans appears to be increasing co-insurance, out-of-pocket expenses, and/or deductibles. This can cause additional out-of-pocket costs to employees and lower employee moral. The solution to this type of situation is a fully insured product, such as a Gap, plan to cover those expenditures. By increasing deductibles and co-insurance and offering employees a "gap" plan, employers can minimize their annual health care costs while improving an employee's net out-of-pocket expenses. These plans can be employer-paid or employee-paid.
Alternative Solutions to Controlling Costs:
Employers today are asking for health plan alternatives to help them control costs and manage spending while providing coverage that balances personal responsibility with freedom of choice. Small businesses are being squeezed to find new ways of reducing their health care contributions. HSAs, HRAs, and FSAs offer a new viable alternative.
Health Reimbursement Arrangements are funded with employer dollars to pay expenses not covered by another health plan. An employer can opt for its HRA to pay some or all of the health expenses allowed by the IRS. For example, an HRA could pay all eligible medical expenses, including premiums for health and long-term care insurance; or the HRA could be limited to cover only dental or vision expenses. Although an HRA can have an option to carry forward unused funds to the future or for retirement, an employee cannot take their HRA funds to a new employer. This is a unique way to fund health costs while controlling increases in cost to the employer.
Health Savings Accounts allow employees to set aside a portion of their paychecks (before taxes) into an "IRA-like" custodial account to pay expenses not covered by another health plan. To contribute to an HSA, the employee must also be covered by an IRS-qualified high-deductible health plan. Employers may contribute to employees' HSAs. Unlike FSAs, unused funds can be carried forward to the future. HSAs are also portable and can be taken to a new employer or used at retirement.
Flexible Spending Accounts allow employees to set aside a portion of their paychecks (before taxes) into an account to budget for expenses not covered by another health plan. The participant can use the account to pay for over-the-counter medicines, co-pays at the doctor or pharmacy, chiropractic, eyeglasses, contacts, Lasik, orthodontics and more.