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FREQUENTLY ASKED QUESTIONS
 
 




Q: What is an HSA?
A: HSA is an acronym for Health Savings Account.   HSA's were introduced in 2003 as an alternative means to finance healthcare.  An HSA is a tax-exempt, fully portable, interest bearing savings account where funds accumulate to pay for qualified medical expenses.  They were created to empower consumers in taking control of their own healthcare costs and lower premiums.  HSAs provide employers with a  financial incentive to choose a high deductible health plan (HDHP) which have significantly lower premiums then traditional-type health plans.  The IRS determines the guidelines for a qualified HDHP.
 
Q: What is an HRA?
A: HRA is an acronym for Health Reimbursement Arrangment.  HRAs provide a customizable way for employers to set up a fund to reimburse deductibles and/or co-insurance based on utilization.  With the opportunity to determine how and when their health care dollars are used, HRA members have an incentive to become informed, value-seeking health care consumers.
Q: What are the Primary differences between HRAs and HSAs? 
A: An HRA offers a myriad of employer-controlled plan design possibilities.  If the employer funds an HRA and an employee terminates, the employer retains ownership of the funds.  The employer determines the maximum amount of reimbursements; who pays expenses first-employee or employer; whether funds will roll to the next year; whether to place a cap on amount that can accumulate over time and the cap amount.   HRA Funds are always employer funded only.
 
An HSA qualified plan is determined by the IRS and is always a high deductible health plan (HDHP).  If the employer funds an HSA and an employee terminates, the employee takes the funds with them.  The employer pre-determines how much they will contribute to all employees' HSA and must do so by April 15th of that tax year.  The employer determines the amount they will contribute as well as the contribution frequency.  Contributions may be made by employer or employee or both.  All unused contributions will roll over year to year.  Contributions may be made to an HSA until age 65 at which time the employee may use the funds for anything they choose, subject only to regular income tax. 
Q: What is a PPO vs. a Traditional-Type health plan?
A: PPO is an acronym for Preferred Provider Organization.  A PPO negotiates arrangements with doctors, hospitals and other providers who accept lower fees from the insurer for their services.  If you are on a PPO plan and you go to a non-network participating provider, you must pay the difference between what the provider charges and what the plan pays.  You may self refer to any provider you want within the PPO network, but you must have prior approval for major diagnostic testing, outpatient procedures and hospitalizations.
 
A Tradtional-type health plan is more flexible then a PPO and allows you to see any doctor you want regardless of network affiliation.  This is a reimbursement-type plan and you may be required to pay charges up front.  As there is no network discount, your out-of-pocket expenses could be significantly higher on this type of plan.  Reimbursment is based on what is reasonable for a demographic area.
Q: Why is health insurance so expensive? 
A: Health insurance premiums have increased dramatically over the last few decades and are now thought to be excessively high. 
 
One of the primary reasons for this excessive cost is due to the rising cost of health care itself which may be attributed to current overuse of medical resources by patients. Overuse is the response of consumers who do not have to pay the cost of the medical services they use.  One of the causes of those excess costs are incentives for individuals to have their employers purchase their medical care in the form of private health insurance with low deductibles and co-pays.  These types of plans have created blinders to the actual cost of the services but is evident in annual premium increases.
 
Another reason for skyrocketing health insurance costs is increased useage of prescription drugs.  We are living longer and living better thanks to new medicines.  With these new medicines come new higher pricetags-often many times higher then the older drugs. 
 
During the last two decades, drug companies gained greater patent protection on brand-name drugs allowing them to sell their patented drugs exclusively over a longer period of time, often at increasingly higher prices.
 
Additionally, television and print ads promoting specific drugs has had a major impact on consumer demand.  According to the National Institute for Health Care Management, direct-to-consumer advertising rose 35% between 1999 and 2000.  The drug companies have driven consumer requests for higher cost specific drugs.  The consequence: higher premiums.