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Scott Miller Appsguild - Software craftsmanship, project management, and the biz of software
This isn't tech-worthy, but maybe you can get some benefit out of my experience.

November is benefits enrollment time again at most corporate jobs. This is when you choose which health plan you want for the next year, and they let you know how much the premiums went up this year. :)

Most companies are now offering Health Reimbursement Accounts (HRA's) or Health Savings Accounts (HSA's). I have had HRA's in the past, so this is my experience.

An HRA is a "consumer driven" health care plan, which is supposed to involve you in your healthcare spending. An HRA has three components -

  • Your company pays a yearly amount, which can be like $500-1000. All of your medical bills are usually paid 90-100% out of this amount. If you don't use it, it rolls over to the next year.
  • A high deductible catastrophic insurance plan that kicks in at anywhere between $1000 for a single person or $4000 for a family, depending on the plan. This is like an out-of-pocket maximum. After this the insurance usually pays 100%.
  • The third component is the bridge amount between the amount your company pays and the amount where the catastrophic insurance kicks in. This is what you pay completely 100% out of your pocket.

Now this isn't too bad if you are young and you never go to the doctor. Many single coworkers in their 20's that I know never reach the company paid amount and they roll over every year.

So what's the big draw? HRA's have premiums that are much less than the PPO and HMO plans that most companies offer employees. And HRA's keep costs down because people use less healthcare when they reach their limit and have to pay the bridge amount 100% out of pocket. Also the logic is that if you involve the employee/patient as a consumer and they see how much is actually being spent on services, then there is the logic that the employee/patient will make better choices or leverage their doctors for better services or care.

So does it work? HRA's have been shown to keep costs down.

What is my personal experience? At a previous employer I had Definity HRA. I had a family plan. The base $1600 was paid by my employer. The catastrophic limit was $4000. I had to pay the bridge of $2400. Now you would think that it would be difficult to reach the $1600. Not so. The dirty little secret of HRA's is that you are on your own price-wise with doctors. They charge you full price for everything. You finally see how much BC/BS and those PPO's bargain for price controls and write-offs on your bills! Apparently the HRA's don't do the same thing. Prescriptions count toward the $1600. And prescriptions were two or three times what they were on the PPO or HMO for the base price (not the co-pay, the price that is listed on your statement). That $1600 was eaten up fast and the $2400 bridge was alot of money to come up with in big chunks every time we went to the doctor or pharmacy. This can be offset somewhat with a Flex account, but then you are paying alot up front.

Now I wouldn't have a problem with HRA's if the prices were fair, but its obvious that doctors offices, hospitals, and pharmacies are hitting the HRA consumers with the money that they are losing on people with no insurance, Medicare patients, and those with aggressive PPO's that limit the amount that they will pay for services.

So why go into this topic? Because many companies are offering HRA's/HSA's and then jacking up the PPO premiums to force you to go on the HRA plans. And Bush talked about moving more to HRA's/HSA's in the last two State of the Union addresses. I envision 20 years from now that we will "own" and fund our health care benefits much like we now "own" our 401K plans.

Posted on Friday, October 26, 2007 11:14 PM | Back to top

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