Out-of-pocket medical expenses are on the rise, along with consumer stress levels. According to a Consumer Affairs article, “the average out-of-pocket spending for an individual consumer [in 2016] was $1,400”. These costs are compounded when employees lack understanding of the options available to manage out-of-pocket costs and how to optimize them. Help employees control or even reduce out-of-pocket medical expenses with these three proven strategies.
Opportunity #1: Leverage pre-tax health accounts
Pre-tax Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) allow employees to set aside funds to pay for out-of-pocket medical expenses. As deductibles increase and out-of-pocket medical expenses rise, these are natural additions to your benefits package.
How HSAs Can Help
There are two basic parts to the HSA—the health insurance and the savings account used to pay out-of-pocket expenses of health insurance. HSAs are a unique pre-tax benefit for many reasons. First, they offer a triple tax benefit. Employees save when they contribute funds, as funds grow, and when funds are used for qualified medical expenses. Second, funds automatically roll from year-to-year and are not lost if employment changes. While there are many more advantages, just these two make them a winning strategy. Employees save for both current and future out-of-pocket medical expenses.
How Medical FSAs Can Help
A Medical FSA also allows employees to save pre-tax funds to pay for eligible out-of-pocket medical expenses. It provides several key advantages that make them an attractive alternative. For example, an FSA can be used with any insurance offering. HSAs require employees to enroll in a qualified high deductible health plan. Additionally, an FSA provides employees with access to their full annual election on the first day of the plan year. This allows employees to easily pay for large out-of-pocket medical expenses incurred early in the plan year. As an employer, you can maximize your FSA offering, by allowing up to $500 of unused FSA funds to roll from year-to-year.
BONUS STRATEGY: Add a Limited FSA
A Limited FSA is typically designed to pay for eligible dental and vision expenses. It may also be designed to cover out-of-pocket medical expenses once a minimum deductible has been met. A Limited FSA can be offered alongside an HSA. It allows employees to use their HSA for medical expenses, while also setting aside additional funds for dental and vision expenses. A Limited FSA can also aid in ensuring employees remain eligible as they transition from a Medical FSA to an HSA.
Opportunity #2: Implement a Voluntary Benefits Program
Voluntary benefits are just that, voluntary—which means they sometimes take a back seat to the medical insurance benefits for employees. With voluntary benefits, employees determine the benefits that have the most value for them, such as: life insurance, disability coverage, accident coverage and specified disease or illness coverage. The benefits are paid by employees through payroll deductions. These benefits typically pay a specified amount per day or per event. These can be used to aid in out-of-pocket medical expenses and can also prevent wage loss in times of illness or injury. Since these benefits are not considered medical insurance, employees can receive them while also remaining HSA eligible making them an attractive supplemental option.
While these benefits are viewed as a key strategy for managing out-of-pocket expenses, awareness of these benefits is an issue. According to a Securian survey, less than half of respondents (44%) are aware that many employers now provide supplemental group insurance options to help employees pay for out-of-pocket expenses and other costs associated with an accidental injury, hospital stay or critical illness.
Make sure when you are implementing a voluntary benefits program, you consider your communication and rollout strategy.
Opportunity #3: Provide resources
There are hundreds, if not thousands, of resources designed to help employees save money on their out-of-pocket medical expenses. The main roadblock is knowledge. Employees often are overwhelmed with information during open enrollment and may not realize the options that are available to them. There are often 3 types of resources to consider or make your employees aware of:
- Price transparency tools —Enable employees to understand the difference in cost for the same services or items from different providers.
- Direct savings —Employees can save money by purchasing eligible items at online or specialty providers.
- Remote medical care—Telemedicine services and nurse hotlines are a great resource for convenient, lower-cost medical care.
Benefit Resource provides a Healthcare Resource Center which highlights several options which help employees save on their out-of-pocket medical expenses, along with educating them on ways to be a better consumer and reduce their overall costs.
Bringing it all together
Although out-of-pocket medical expenses are on the rise, employees can use a smart combination of pre-tax health accounts, voluntary benefits and cost-saving resources to manage their out-of-pocket medical expenses. To learn how you can implement these strategies, please request a proposal or contact us.