According to a recent study by CIGNA, individuals enrolled in consumer-driven health plans (CDHP) can lower their costs. Their study advises that members compared to those customers in traditional PPO and HMO plans, those in a CDHP:
- Lowered their health risks: CDHP customers lowered their risk of developing or worsening a chronic condition. According to the study, when employers fully transitioned to offering only a CDHP option, individuals improved their health risk profile by 10 percent in the first year compared to customers in a traditional plan option.
- Reduced total medical costs: CDHP medical cost trend was 16 percent lower than traditional plans during the first year. Over five years, cumulative cost savings averaged $9,700 per employee enrolled in a CDHP compared to employees who remained in a traditional health plan. Cost reductions were achieved without employers shifting out-of-pocket health expenses to their employees.
- Received higher levels of care: CDHP customers had consistent or higher use of over 400 evidenced-based medical best practices (than their counterparts in traditional plans. CDHP customers also sought preventive care, such as annual office visits and mammograms, more frequently than customers enrolled in a traditional plan.
- Were more engaged in health improvement: Through proper plan design plan and the use of incentives, CDHP customers were more likely to have completed a health risk assessment and participated in their health coaching program than those enrolled in a traditional plan.
- Were more savvy consumers of health care: CDHP customers enrolled in their pharmacy management program were more likely to choose generic medications and had 14 percent lower pharmacy costs compared to those in a traditional plan. In addition, CDHP customers used the emergency room at a 13 percent lower rate than individuals enrolled in HMO and PPO plans.
- More likely to compare cost and quality: CDHP customers were twice as likely to use myCigna.com online cost and quality information to help them select a doctor or to review potential medical costs than customers enrolled in traditional plans.
“Each year the evidence increasingly shows that properly designed consumer-driven health plans can lower health risks, reduce medical costs and drive engagement,” said Cigna Chief Medical Officer, Dr. Alan Muney.
Please contact Gary Whiddon at Health Plans Online for more information on Consumer Directed Health Plans. He can be reached at (888) 474-6627 or firstname.lastname@example.org.
- Health Savings Accounts (HSAs) .
- Medical Savings Accounts (MSAs)
- Flexible Spending Arrangements (FSAs) .
- Health Reimbursement Arrangements (HRAs)
The Patient Protection and Affordable Care Act requires employers to report the aggregate cost of employer-sponsored health coverage on the W-2 forms for their employees. The IRS issued notice 2012-9, which includes some of the information below:
Exemption for small employers. Employers filing fewer than 250 Forms W-2 for the preceding calendar year are not required to report the aggregate cost of coverage.
Stand-alone dental and vision plan reporting. The Notice clarifies that the standard for determining whether the cost of coverage under a dental plan or vision plan is included in the aggregate cost is the same standard for determining whether such coverage is an excepted benefit under HIPAA. Thus, certain stand-alone dental and vision plans may be exempt from the reporting requirement.
Excess reimbursement for highly compensated individuals. The reporting requirement does not apply to the cost of coverage includible in income under Section 105(h) of the Internal Revenue Code, or payments or reimbursements of health insurance premiums for a 2% shareholder-employee of an S corporation that is required to include the premium payments in gross income.
Coverage under employee assistance program or similar program. An employer that does not charge a premium for an EAP, wellness program or on-site medical clinic to COBRA-qualifying beneficiaries is not required to include the cost of such coverage in the aggregate reportable cost. For arrangements that are not subject to any federal continuation coverage requirements (such as church plans), the employer is not required to include the cost of such coverage on the Form W-2.
Optional reporting of exempted benefits. Employers may, for convenience, include in the aggregate reportable cost the cost of coverage that is not required to be included (e.g., cost of coverage under a Health Reimbursement Account, provided that certain conditions are satisfied.
Reporting non-applicable employer-sponsored coverage. Employers may use any reasonable method to determine the relative allocation of cost for benefit programs that make available both applicable employer-sponsored coverage (e.g., group health plans) and other coverage (e.g., long‐term disability programs).
Employee election changes after year-end. The aggregate reportable cost for a calendar year reported on a Form W-2 may be based on the information available to the employer as of December 31 of the calendar year, without regard to any election or notification made or provided in a subsequent calendar year that has a retroactive effect on a previous year’s coverage.
Payroll periods crossing two taxable years. The Notice provides employers with various options for reporting the aggregate reportable cost for a payroll period that spans two taxable years.
Hospital indemnity/specified disease insurance. Employers are required to include the cost of coverage in the aggregate reportable cost on Form W-2 if the employer makes any contribution to the cost of coverage that is excluded from the employee’s income, or if the employee purchases a policy on a pre-tax basis under a cafeteria plan. However, if the employer provides the opportunity for employees to purchase an independent, non-coordinated fixed indemnity policy and the employee pays the full amount of the premium with after-tax dollars, the cost of coverage provided under that policy is not required to be reported on Form W-2.
Third-party sick pay. The aggregate reportable cost is not required to be reported on a Form W-2 furnished by a third-party sick pay provider. However, a Form W-2 furnished by the employer to an employee must include the aggregate reportable cost, regardless of whether that Form W-2 includes sick pay, or whether a third-party sick pay provider isfurnishing a separate Form W-2 to report sick pay.
Health care reform legislation imposed a new, $2,500 limit on annual contributions to health care flexible spending accounts (FSAs). This limit applies to all FSA plans in taxable years beginning after Dec. 31, 2012 — even plans grandfathered under other provisions of health care reform.
Plans that currently allow a health care FSA election of more than $2,500, must amend plan documents before Jan. 1, 2013, and change employee communications.
To simplify administration of this change, sponsors of non-calendar year plans may want to adopt the new limit as of the first day of the plan year rather than waiting until Jan. 1, 2013. For example, if the current plan year begins May 1 and ends April 30, the plan sponsor may:
- Communicate the change to employees.
- Amend their plan documents to implement the new $2,500 maximum election.
- Initiate the changes to the contribution effective May 1, 2012, rather than wait until the mid-plan year in Jan. 1, 2013
A Trio of Federal Agencies charged with interpreting the Mental Health Parity laws have determined that a plan cannot require pre-authorization of mental health treatments if the same requirement is not imposed on other non-mental health related procedures.
A plan may not, as a routine matter, approve significantly shorter stays for inpatient mental health and substance abuse treatment than it does for inpatient medical or surgical care, even if extensions of those stays are subject to review.
Plan sponsors should be aware of these interpretations of the rules not only in regard to plan design, but with regard to their own (and their vendor’s) administrative practices.