HSAs Can Make You “Carrier Agnostic”
Originally Published in RMP Advisor, August 2009What Is Carrier Agnostic?
There are certain purchased products or services where the seller is relatively unimportant. That product or service is a COMMODITY, or an easily interchangeable part. For example, if the cost of purchasing your office copy paper from Staples is too high, you can easily go instead to Office Max to buy the same product at a cheaper price. It’s no big deal because copy paper is a COMMODITY. Wouldn’t it be great if the health insurance purchased for your employees could become a COMMODITY? That is the principle behind becoming Carrier Agnostic.
How Does My Business Benefit from Being Carrier Agnostic?
You probably don’t worry about purchasing copy paper, because you have choices. We find that most businesses do not believe they have many choices or much control over health benefits, and as their policy renewal date approaches, anxiety levels rise. They wonder, “Will my premium increase this year by 15% to 20% or more? Or will the roll of the dice land in my favor this year, resulting in a manageable premium increase?”
Either way, you feel that you have little or no control. If you end up with a large, unmanageable premium increase, you’ll likely go into crisis mode as the deadline for renewing your insurance approaches. Is there time to consider a change? Can you reduce benefits in order to reduce premium increases? Can you shift more of the cost to your employees without causing a revolution? Or, will you have to lay off some of your employees? This is NOT a situation that you want to be in.
How Can HSAs Help?
A high-deductible health plan (HDHP) combined with a Health Savings Account (HSA) is your PATH® to becoming Carrier Agnostic. For example, consider an HDHP with a $2,000 deductible for single coverage and $4,000 for family coverage. This could drop your premiums for health insurance by between 30% and 40%. In addition, we typically recommend using a portion of your company savings to fund a tax-deductible HSA for each of your employees.
Industry data from the last 5 years indicates that in a typical year, only 15% to 20% of an employee’s healthcare costs exceed the high-deductible level. Therefore, 80% to 85% of your employees – those without serious injury or illness in that year – do not use their health insurance except for preventive care, usually at no cost. And, the 15% to 20% of employees who will need their health insurance the upcoming year are often not the same people who used it last year. Over time, your employees begin building balances in their HSAs, and that is the critical point.
How Do You Know When You’ve Become Carrier Agnostic?
It may take a few years, which is why we recommend a multi-year plan for purchasing health insurance. If most of your employees are in an HDHP and the average balances in their HSA accounts are increasing, the balance of power will have shifted in your favor. If your health insurer, Company X, raises your HDHP premiums too much or is providing poor service, you can easily switch to Company Y with little or no disruption to your employees. This is because most of your employees don’t use their health insurance anyhow (like their car or homeowner’s insurance). As HSA balances increase, you can increase deductible levels and/or modify company contributions to the HSA. You are in control of your future costs, not the insurance company.
If the current system of health insurance purchasing is not working for your company, then stop making health benefits decisions based upon old habits. Read a case study on the benefits of HSAs for one employer, and consider whether that approach might work for you. If you want to learn more about becoming Carrier Agnostic, contact us through the RMP site or give us a call at 610-975-4415.