Thursday, September 8, 2011

Welcoming Change: Education and Hand-Holding

Recently, I helped my daughter decide on a health insurance option. Before we met, she had read through the 3 options her company offered. She was pretty sure she wanted a conventional, moderate deductible plan. She understood the elements of it. As I looked over the options I noticed one that included a Health Savings Account (HSA). I asked her what she thought of that one. "Dad, that has a really high deductible!" she objected. "I could be paying out a lot of money if I have an accident."

"Okay, but did you know that very few people have more than $500 in medical claims? Get a piece of paper and let's figure this out," I replied.

After we went through the savings in premiums, and the company's contribution to her HSA, she realized that even if she had an accident she would end up spending far less. Even with an accident, she'd spend only about the amount she would have spent just for the premiums on the plan she almost selected. She would have spent more with the other plan after her deductible (moderate as it was) and the co-pays.

When I've done this education in a company setting, and we've laid out 10 different health scenarios, we can usually show that 9 out of 10 people should select the option with the HSA. In fact, I know several companies that do this have high election rates for those plans (80-90%). There's still the factor of overcoming the perception of risk with a higher deductible. Nobody hopes to have an accident or a sudden acute condition and they're aware that such events occur. They don't want to be caught unprotected should the rare but unfortunate event happen.

Besides providing some education, a little hand-holding might be necessary: one more explanation that even if the worst case happens, the financial damage is still limited because the catastrophic occurrence is covered. It might even be worthwhile to explain that 3% incur less than $500 in claims, and only 1% have more than $1,000 in any given year.

In fact, my daughter's company plans on that. Her HSA deductible is below the legal limit. The company is probably self-funded and "bought" down the deductible by covering any claims above her lowered limit. Statistically, they'll probably only have to pay $10/person to provide the $1,000 extra "peace of mind" for their employees to convince them to choose the HSA option. They're spending more on the contribution, but far less than if they contributed a full 50% of the higher deductible. Instead of putting $500 in each person's HSA, they take the risk that their output is only $10 per. Savings on benefits means more profits meaning higher stock value and job security...and so on.

Smart move on the company's part. Smart move on my daughter's part. I hope most of the company's employees also see the wisdom in the plan. With a little education and hand-holding, we'll all be smart.

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