Group Health Insurance Archives - EVCO: HR Software

Formulary

Consumers simply want to fill their prescription needs. However, it’s first important to understand the insurance company “formularies” so you know how your prescription plan works. Did you ever wonder why your drug might fall under the $10/$30/or $50 copay? In short, the more common and inexpensive a drug, the less it will cost. These drugs are in categories Tier 1 or Tier 2 formulary; also known as generic. The more rare, specific, or new drugs are usually Tier 3 or “brand”. In the worst case scenario the drug will be excluded from insurance coverage as Tier 4 or non-formulary. A health insurance provider will financially incentivize members to seek lower cost drugs, typically generic, by charging a lower copay.

Most Affected

The common strategy of offering Silver and Bronze plans is cost effective from a premium standpoint, but exposes employees to high Rx costs. Health Saving Account (HSA) plans are a terrific strategy from a tax standpoint, but are one of the worst financial decisions if a brand name drug is regularly needed. Lastly, anytime policies change to a new health insurance provider, it exposes employees to potential Rx costs increases because every insurance carrier has a different “formulary”.

Best Solutions

There is no reason to limit employees to a certain plan(s) that the company contributes towards; instead, allow employees to “buy-up” by paying the additional cost for stronger plans. Employees selecting a Bronze or any HSA plan should be aware of the financial burden if they require a Brand name Rx. Both these solutions of “buy-up” plans and employee education can and should be managed through an automated online platform so there is no added Administrative work. When you require a health insurance provider change at the company level, a proactive broker is crucial. They can help educate employees by assisting with the “pre-authorization” Rx process. This process requires the prescribing doctor to complete a short form documenting need for Specific Brand Rx to reduced it to a lower cost tier.

Creative Ideas

There are many discount Rx programs now available online. Perhaps one of the best currently available is GoodRx. This site allows consumers to fill prescriptions while avoiding the insurance companies altogether. Financial discounts through discount prescription programs can often be greater than going through a health insurance provider.

What is an HSA?

A Health Savings Account (HSA) is a special savings account that you can only use for your medical needs. It’s tax-advantaged and deposits made are free from federal income tax. The employee, employer or both can make contributions into this account. In order to qualify to open an HSA, you must be enrolled in a qualifying High Deductible Health Plan (HDHP).

HDHP coverage options are available through most medical carriers and are an alternate option to a more standard medical plan. HDHP’s are typically characterized by having much higher deductibles than standard plans and must have a deductible over $1,350 to qualify. For these plans the member traditionally pays the full amount of health services while working towards the deductible prior to any financial splits from the insurance carrier.

Money in an HSA rolls over from year to year and can be used for medical needs as they occur, or saved for future years. Many HSA providers also allow for you to invest your money contributed to the HSA for a larger growth potential.

Advantages of an HSA

There are a lot of advantages to having an HSA compatible plan. To start these HDHP options are generally much less expensive in premium than a more traditional plan option. A general initial premium savings can be between 15 – 25% for moving to an HDHP. Beyond the initial premium savings, the main advantage of an HSA plan is the ability to set aside funds on a tax-advantaged basis for your future healthcare needs.

With this you have more control over your healthcare and the associated costs. Essentially you pay for the services you actually use instead of paying advance for services you might use. The other large advantage of the HSA account is the ability to rollover contributed funds from year to year without limitation. The lower premiums and ability to grow a tax-advantaged funds from year to year are especially advantageous to the younger generation as well as those who do not have multiple ongoing medical concerns.

Disadvantages of an HSA

Though HSA’s can be incredibly advantageous, they may not be desirable to everyone. Services and prescription medications are often full cost until spending reaches the deductible. Given that these HSA plans are compatible only with HDHP’s the deductible can be very expensive to hit. Those with continual ongoing medical needs may find these plans less advantageous than a plan with less expensive copays. Also generally healthy people can have an unexpected unhealthy year, which can be a drain on HSA funds.

Are HSA’s Gaining Popularity?

HSA’s gained popularity from around 2005 – 2012. Insurance carriers had set very low initial premiums for HDHP’s and very low out of pocket maximum expenses. After 2012 a substantial increase in both premium of HDHP’s and higher out of pocket maximums made them less attractive. The use of these plans has increased since HSA contribution limits raised to $3,500 per individual or $7,000 per family. The catch-up contribution (those 55 and older) also has risen to $1,000. The ability to fund the HSA’s more with tax-advantaged funds have increased interest in these plans. Also the out of pocket maximums and premiums have leveled off more for HDHP’s making them all the more stable.

Although these plans aren’t for everyone, HSA compatible plans are on the rise and may be advantageous for you. To learn more about how HSA’s can be administered and offered please visit EVCO Insurance to connect with an expert broker.

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