Welcome to High Deductible Health Insurance…Ready or Not!

Our company recently joined the ranks of employers switching from traditional health insurance plans to high-deductible, HSA compatible plans. We switched from our HMO plan for two reasons: First, the fourth or fifth consecutive year of double-digit premium increases was driving our benefits expenses beyond the palatable. The new model allows us to reduce our premiums. We plowed the savings back into assisting employees with their health care expenses (more about that later).

Second, the high deductible plan encourages us to be more informed consumers of  medical services. In the past, we paid a co-payment for every office visit or prescription, regardless of the real cost of the product or service. Because we’ll be paying 100% of the first $2,500 per person for “sick office visits” and prescriptions, we’re bound to pay more attention to the cost of these things. I know I’ll be more likely to see if there’s a generic alternative to a brand-name drug for example.

Even though I’m in the insurance business, my experience with health insurance is strictly from the consumer side. And, I’m quick to admit that I don’t quickly grasp the concepts of embedded deductibles, co-pays and maximum out-of-pocket expenses. It gives me more sympathy for our clients trying to understand insurance terms that we carelessly toss around every day.

Going from a plan with a $500 deductible to one 5 or more times higher was  a bit scary for me. It took a while to get my head around. As one of the decision-makers, I was also concerned that the plan would work well for our employees. Fortunately, our agent was very patient in explaining the plan repeatedly, and in answering our (ok, mostly my) questions.

How does one absorb such an increase in deductible? Plan participants establish Health Savings Accounts (HSAs), into which they can deposit pre-tax dollars for medical expenses. We decided to deposit $750 in each participant’s account at the beginning of the year, to front-end load their expense account. To further encourage employees to fund their own accounts, we agreed to match the first $750 that they deposited via payroll deduction. So, if they contribute $750, they’ll have a total of $2,250 in their HSA. That goes a long way towards the $2,500 deductible.

My HSA debit card arrived in today’s mail. The plan starts on January 1. I’ll post more occasionally during the year to explain how the plan’s working, and how I’m adjusting to having a high-deductible plan.