This is the seventh in a series in which Penn State Employee Benefits staff explain key concepts, terms and processes to help faculty and staff better understand and use their health benefits.
When it was first introduced for the 2014 plan year, the PPO Savings Plan was greeted by the Penn State community with a variety of reactions, ranging from inquisitiveness to skepticism to passivity. The enrollment in this program has remained relatively low since its inception, with about 2,000 employees selecting it. In order to better understand why employees chose one health plan over another, the Survey Research Center recently sent a survey to all benefits-enrolled employees.
As a Qualified High-Deductible Health Plan (QHDHP), the PPO Savings Plan is structured differently than the PPO Blue Plan, requiring plan members to assume more first-dollar risk for medical expenses, but also having lower payroll deductions associated with it. On the other hand, the PPO Blue Plan has lower deductibles and out-of-pocket maximum amounts, but requires greater up-front costs from the consumer in the form of higher payroll contributions which offset the lower point-of-service expenses.
The nature of HDHPs can make it difficult for consumers understand how they impact health care spending, so sometimes it is easier to explain these plans in everyday consumer-driven terms. Basically, the PPO Savings Plan operates like a high-deductible car insurance plan: the consumer is charged a lower annual premium in exchange for being required to pay a greater proportion of the costs to repair a vehicle following an accident. For many, the choice of a higher-deductible versus a lower-deductible plan hinges on a variety of factors including driving style and history of accident avoidance, the dollar amount to be paid for the premium in each category, the individual’s comfort level with the prospect of being required to pay more money out-of-pocket in the event of an accident, and the costs to repair the type of vehicle that person drives.
Election of the PPO Savings Plan over the PPO Blue Plan should be made in a similar vein: Employees should take into account not only their payroll deduction for each plan, but also their utilization of medical services and prescription drugs, their general health status and ability to influence it, and their comfort level with the possibility of paying higher out of pocket expenses in the event they experience large medical claims in a given year.
One can offset the potential higher out-of-pocket expenses in the PPO Savings Plan by putting aside pre-tax dollars into a Health Savings Account (HSA) which may be used during the plan year or rolled over in to later plan years. When one enrolls in the PPO Savings Plan, an HSA is automatically opened on the employee’s behalf.
For many employees it makes sense to be in the PPO Savings Plan over the course of a number of plan years. For example, an employee who makes $60,000 per year and who was previously enrolled in the PPO Blue Family plan with an annual Flexible Spending Account (FSA) contribution of $1,200 may, under the PPO Savings Plan, deposit into their HSA the difference in payroll deduction between the PPO Blue and the PPO Savings plans (approximately $2,400 per year in this example), continue to add the same amount to their HSA as they contributed previously to their FSA ($1,200 per year) and take advantage of the Penn State contribution of $800. This would mean that during the plan year, they would make contributions totaling $4,400 to their HSA, which is enough to satisfy the deductible for a family for the plan year ($2,600) and pay 10 percent co-insurance on $18,000 worth of qualified medical expenses.
Once the deductible has been satisfied, and if the family’s qualified medical expenses are less than $18,000 during that plan year, the employee would be able to roll over any unused portion of the funds, and use those monies for medical expenses in future years. In addition, all of the individual’s expenses would count toward satisfying the deductible and co-insurance out-of-pocket maximum, unlike the PPO Blue Plan where the employee would still be responsible for office visit co-pays and prescription drug costs that do not count toward the deductible or co-insurance out-of-pocket maximums.
One of the best ways to determine if the PPO Savings Plan is right for the employee is to conduct an analysis of annual expenditures for their current plan and compare it to what they would have spent had they been enrolled in the other plan during the same time period. To do this, an individual will need to add up all expenses incurred in each plan, including payroll deductions for premium, and fees for deductibles and co-insurance, and for the PPO Blue Plan, payments made for office visit co-pays and prescription drugs. When calculating the costs for the PPO Savings Plan, Penn State’s contribution to the HSA should also be taken into consideration. A future “Understanding Your Benefits” article will provide an overview on how to determine one’s medical expenses and claims history by using the Highmark website.
Because of changes made to the IRS regulations governing QHDHPs, the 2016 coinsurance out-of-pocket maximum for the PPO Savings Plan will be lowered to $4,200 for a Family plan and $2,100 for an Individual plan. When the deductible and the coinsurance out-of-pocket maximum are combined, the total maximum out-of-pocket cost-sharing for the plan year will be $6,800 for a Family and $3,400 for an individual.
It is thought that many employees have not elected the PPO Savings Plan because it is simply easier to stay in the plan that they have always had. But by doing so, Penn Staters may be missing out on the opportunity to spend less on their health care. For more information about Benefits Open Enrollment and to view interactive health plan decision-making tools, please visit the Employee Benefits Open Enrollment microsite at http://openenrollment.psu.edu/# .