Frequently Asked Questions Health Reimbursement Account (HRA)

October 26, 2006

                  1.     Explain the rationale for the Health Reimbursement Account. 

Ø     The Health Reimbursement Account has been proposed as a strategy to help the County control the escalating cost of health care benefits over the long run, without degrading the quality and scope of coverage now enjoyed by our employees.  The major change is a high deductible health plan conjunction with a County funded Health Reimbursement Account (HRA). Employees can use funds in the HRA to cover the majority of deductible and other out of pocket expenses.  Employees can save the HRA funds for future expenses during or after their employment with the County.

Ø     Simply put, the HRA plan is designed to create incentives for employees to take a more active role in managing their own utilization of health care. This is achieved by making it possible for employees to keep some of the savings resulting from lower utilization to cover future health related costs.

Ø     The idea is that consumers will be more selective about how they purchase healthcare if it feels like it is coming out of their own pocket.  They will make decisions to reduce costs where they feel they have discretion such as generic versus brand name drugs.

2.     What can HRA funds be used for? 

Ø     Money that is not used from the HRA account can now be saved by the employee to roll over for health related expenses in future years, even into retirement.  All HRA funds are limited to use for medical expenses that are approved by the IRS Code.  These are the same limits currently placed on your Flexible Spending Account (FSA) unreimbursed medical expense funds.

Ø     Examples include medically necessary procedures, whether or not they are covered under the ODS health plan, such as Orthodontia, lasic eye surgery, and other expenses that exceed the coverage of the health plan. 

      3.     What’s the actual out of pocket people will experience in the new plan compared to the current PRIME HIGH?

Ø     That will vary by individual and family member configurations.  The best thing to do is to use the comparison calculator and plug in your personal situation.  Many individuals will see a savings while some will pay an increased amount of out of pocket during a catastrophic year. 

Ø     The biggest difference is in the premium.  The HRA premium is 19% lower that the PRIME HIGH plan is now and in the future it is projected to increase at half the rate of PRIME HIGH plan.  This will result in long term savings for both the County and the employees. 

      4.     Is this just a shell game lowering the premium but increasing costs on the other end?

Ø     It may seem that way now, but the real concept is to give the consumer more choice and discretion about their health care benefit.  People who are able to keep their expenses down will be able to see a personal benefit through money in the HRA.  They will also avoid paying anything out of pocket if they keep costs below the HRA limit.

Ø     People who don’t have the discretion to control their own health care costs will probably pay more out of pocket for their medical expenses but they will see a reduction in premium costs.  They can still put money in their FSA to help reduce the out of pocket expenses and help budget for any anticipated expenses. 

      5.    Where’s our assurance that the HRA will always be there?  If we change companies does the HRA remain?

Ø     The HRA does not follow the insurance company.  No matter which carrier we use we can offer the HRA arrangement.  It is administered through Benefit Help Solutions just like the FSA.

Ø     The IRS governs the HRA arrangements.  The IRS gives us a choice to set up the HRA so that it follows the employee even after termination.  We have selected that choice as opposed to the option to have unused funds returned to the County after termination.

Ø     We are committed to making this new plan successful.  If other opportunities to reduce costs and maintain benefit levels become available the Employee Benefit Committee will evaluate those opportunities and introduce them if appropriate.  

      6.  Are the costs for prescriptions going up as well?

Ø     Yes, the prescription drug industry is one of the primary reasons for the increased cost for health insurance over the years.

Ø     Anything we can do as an organization and as individuals to reduce our prescription drug usage and habits will ultimately affect the cost of health care.  This is why we are pushing so hard for employees and family members to use generic drugs where possible. 

Ø     Under the HRA the prescription plan requires up-front payment of the discounted prescriptions.  Therefore, the higher the cost of prescriptions drugs, the more the employee must spend either out of pocket or out of their HRA account. 

     7.    Aren’t there health plans available that offer better benefits for less money?

Ø     That is what we are trying to do with the HIP plan.  The benefit may not be better for all people but it is definitely better for many due to the ability to control the HRA funds and carry them into retirement.  Other than the high deductible, the plan itself is designed to encourage access to preventive care which is not subject to the deductible.  Alternative care is also available on this plan and is not subject to the deductible. This truly is a better benefit for many people and it is less expensive. 

      8.     Are you just shifting the additional cost to the employee rather than the County?

Ø     The County is shifting some of the additional costs to the employee and trying to reduce costs for both the County and the employee through innovative approaches to plan designs. 

      9.    Can the employee access all of the annual HRA funds at the beginning of the year?

Ø     We have elected to incorporate a Benefits Card option that will allow employees easy access to their FSA account and the entire annual contribution to the HRA at the beginning of the year.  The card would also reduce the need to pay for prescription drugs and services up front and then seek reimbursement. (See the handout on “How to use the Benefits Card”) 

     10.     How can you view this plan as non-discriminatory to people with chronic health concerns?

Ø     The entire insurance industry is based on charging more to consumers who fully utilize the product.  Group plans minimize the impact on individuals by spreading the risk.  However, group plans are still accountable for high utilization of healthcare by being charged higher premiums.  What this plan does is reward those who do not use the product.

Ø     We have made efforts to minimize the affect on the chronically ill but to make no distinction between those who use the product and those who don’t defeats the purpose of the plan which is to control costs through consumer choice and responsibility. 

      11.     After I retire, am I limited to use the HRA funds for the County Health Plans? 

Ø     Use of your HRA fund is only limited by the IRS, not by insurance carrier. 

Ø     You may use HRA funds to pay premiums after retirement to any individual health plan or even Medigap policies. 

      12.     Are the Commissioners going to view our “nest egg” later down the road and refuse salary upgrades? 

Ø     We hope that some employees will earn a “nest egg” in this account.  That means the plan is working.  Some employees will use their funds every year just like some employees use sick leave as they earn it.  There is no connection to the HRA balance and salary tables.

Ø     We designed the plan so that the amount an individual can carry over in their HRA is not limited. 

      13.  What is the new drug plan? 

Ø     The HRA drug plan is not a copay plan. You pay 100% of the discounted charge until you meet your combined health and rx deductible. Once the deductible is met ODS pays 80% of the cost.  If you meet your annual out of pocket maximum for the calendar year, your cost for rx will be $0 until the beginning of the next calendar year when the deductible starts over again.  All authorized Rx expenses are credited toward the deductible.

      14.  How do I ensure that my prescription drug purchases get applied to my deductible?

Ø     You will need to show your ODS card at the Pharmacy to get the ODS discount. Then after you pay the cost of the drug, you will send your receipt to ODS to have it applied to your deductible or to get reimbursed the 80% if your deductible is met.

Ø     You should only use your Benefits Card at the pharmacy if you know that you have not met your deductible.  If you use the Benefits Card and then a portion of your cost is reimbursed to you by ODS, you will need to put that money back into your HRA at Benefit Help Solutions. 

      15.  Were other insurance carriers considered? 

Ø     Yes, we evaluated and took our benefits out to bid to several other carriers. This competitive bidding process helped us negotiate such great rates with ODS. By staying with our current carrier we are able to minimize the amount of disruption to the employees. 

     16.  Do all new employees have to go to the HRA plan?  Can current employees switch plans if they don’t like the HRA?

Ø     All new employees will not have to enroll in the HRA plan, they may still choose to enroll in the PRIME HIGH, however their premium share will be greater since the PRIME HIGH plan premiums exceed the County benefit cap.

Ø     All employees will continue to have the option to switch plans during open enrollment each year.  Open enrollment will be in November for a January through December plan year.  

     17.  Is the County going to reduce the contribution to the HRA each year when premiums increase?

Ø     The County is making as much of a commitment to this plan and the HRA as is possible by putting the HRA contribution into the cost of the benefit package.  This means that as the plan premiums increase, the HRA contribution will remain stable, however, the employee share of premium could increase if the total premium and HRA cost exceeds the cap.   

     18. Why the push to do this now?  This type of plan is still new, aren’t there going to be bugs to be worked out?

Ø     Yes, we do predict that there will be some bugs to be worked out.  Especially with the HRA and Benefits Card.  We will work diligently with ODS, Benefit Help Solutions and our employees and families to smooth the transition as much as possible.

Ø     These plans have been in place for 3 years in other locations and they are successful at achieving both plan expense reductions and employee out of pocket reduction. 

      19.  Are our costs greater because we have an older employee population?  If the healthy people leave the PRIME HIGH option will our costs for those plans increase? 

Ø     The County’s premiums are established based on the historical expenses we have incurred over the past two years.  Our rates are based on the use of health care and not age.

Ø     Yes, we are concerned about some “adverse selection” issues by adding the HRA arrangement.  That is the situation that occurs when healthy people choose one plan and chronically ill people choose another causing the costs of the chronic plan to soar beyond affordability.  We have made every effort to make the HRA arrangement attractive to all employees and we believe that we will achieve this by keeping the premiums low and the HRA contributions high on the HRA plan.  Many people will base their decision on economic factors as well as health factors. 

      20. Is dental part of this HRA plan?  

Ø     No, Dental is still offered through ODS and Willamette Dental and we have proposed no changes to those plans.

Ø     If an employee has low health expenses and high dental expenses, they may use the excess HRA dollars on their Dental out of pocket costs.  Using the HRA funds for dental expenses will not, however, reduce the deductible amount on the health plan so be careful to insure that the funds really are not needed for health care expenses. 

     21. How are expenses reimbursed?  HRA or FSA first?

Ø     Expenses will be reimbursed from your FSA account first, if you have one, then, when the FSA allotment is expended, reimbursements will come from the HRA.  This ensures that your “use or lose” money is used first.

Ø     All expenses that are eligible for FSA reimbursement are also eligible for the HRA reimbursement so you will see no difference in how you use the benefits. 

     22. Will the HRA be taxable to the employee?

Ø     No, it is tax exempt when used for eligible tax deductible expenses as defined by the IRS. 

     23. How will the HRA plan work with people who are also covered by another health plan?

Ø     The HRA plan will work just like the traditional plans and will coordinate benefits with your other coverage.  As the employee, the HRA will be the first payor.  ODS will process the claim and apply the claim to your deductible, then ODS will send the claim to your second insurance and they will pay according to that plan benefit. For family members who use the County plan as their secondary payer, their primary insurer will process the claim first then send it to ODS to process through the HRA plan.

Ø     Do not use the Benefits Card if your claim will be covered by the secondary insurance. 

     24. Do single and two-party receive the same savings?

  Ø     The employee premium amount may vary by enrollment as a single or with dependents. This is due to the increased amount into the HRA to more equally cover the family deductible.  The amount of deductible for two enrollees is double the deductible of a single enrollee.

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