Deep Dive Into FSA Behavior Finds Knowledge Gaps That May Reduce Effectiveness

Deep dive into FSA behavior finds knowledge gaps that may reduce  effectiveness | BenefitsPRO

Source: BenefitsPRO, by Alan Goforth

Flexible spending accounts can be a useful way for workers to stretch health-care spending dollars further than they otherwise could. However, little is known about how workers use — or don’t use — FSAs.

In response, the Employee Benefit Research Institute established the FSA Database to shine a light on this under-researched employee benefit. Analysis of this database revealed several things:

Contributions. In 2020, workers contributed an average of $1,265 to their FSAs. Only 7.7 percent of accountholders had the benefit of also receiving an employer contribution. Among those who did, the average employer contribution was $299.

Only 3.6 percent of workers contributed the statutory maximum, which was $2,750 for 2020. Inertia may be a powerful force in setting contribution amounts, because 10.5 percent of workers contributed the statutory maximum for 2019 ($2,700).

Distributions. The vast majority of accountholders took a distribution in 2020. Fully 89 percent did, similar to the share of accountholders taking a distribution in 2019. Of those who took a distribution, the average amount withdrawn was $1,287, nearly identical to the average of $1,279 observed in 2019.

That distributions are closely tied to contributions is not surprising. There is a strong incentive for FSA accountholders to spend the entirety of their balances. Unlike with health savings accounts, there is a limit to how much accountholders can roll over each year — if they can at all — and so accountholders generally cannot withdraw significantly more than they contribute.

Limited-purpose FSAs. Workers enrolled in an HSA are ineligible to contribute to regular health-care FSAs, but they can enroll in limited-purpose FSAs to save specifically for vision and dental expenses. Because these accounts specifically are intended for defraying dental and vision expenses, accountholders tend to use them differently than standard health- care FSAs.

Notably, the average contribution was significantly smaller than the average contribution to a standard health-care FSA — $859, compared with $1,259. This may reflect the more limited scope of qualified medical expenditures that are eligible for reimbursement compared with a regular health-care FSA.

Three different FSA types. “Use-it-or-lose-it” FSAs are self-explanatory; accountholders forfeit any money remaining at the end of the plan year to their employer. FSAs with a rollover feature, on the other hand, allow the accountholder to roll over funds to the next year, up to a statutorily defined amount.

“Grace-period” FSAs allow workers to take distributions up to two and a half months after the end of the plan year. All three types of FSAs had similar average contribution and distributions. Only about $150 separated the average contribution of a “use-it-or-lose-it” FSA and the average contribution of a rollover FSA.

Similarly, the three FSA types saw similar average distributions; about $120 separated the smallest average distribution, seen in “use-it-or-lose-it” FSAs, from the largest average distribution, seen in FSAs with a grace period.

Age and FSA attributes. FSA contributions and distributions both increase with age. Older accountholders are more likely to incur health-care expenditures than their younger counterparts and, because of higher salaries on average, may be better positioned to divert more discretionary dollars to FSAs as well.

Younger accountholders contributed relatively little to their FSAs in 2020, contributing an average of $499. Generally, as age increased, so did average contribution, with one notable exception: The 45 to 54 age group contributed the most, diverting on average of $1,430 to their FSA. The oldest workers in EBRI’s FSA Database contributed the second-highest amount, chipping in an average of $1,427.

“Developing a better understanding of accountholder behavior is critical in fostering optimal usage of FSAs and ultimately can improve workers’ financial well-being,” the report concluded.

“While it is encouraging that older workers stretched their health-care dollars further with higher average contributions and more frequent distributions, younger workers had relatively small contributions, and little more than half took a distribution from their FSA. This is perhaps indicative of a knowledge gap and may hinder a worker’s financial wellbeing.”

DOJ Fights Mergers

by Dr. Merrill Matthews

Many health policy experts warned that the Affordable Care Act would lead to massive consolidation in the health care industry, including hospitals, physicians’ practices, and especially health insurers. Now the Justice Department is pushing back by opposing the mergers of four large health insurers—Aetna with Humana and Anthem with Cigna. The real question is whether the insurers will continue to sell in the exchanges if they aren’t allowed to merge?

The Obama administration says that the mergers would reduce competition. Attorney General Loretta Lynch explained, “If allowed to proceed, these mergers would fundamentally reshape the health insurance industry.” That’s rich, since nothing has reshaped the health insurance industry more than Obamacare—and by design.

But government antitrust litigation is almost always about politics rather than economics. And that’s why free market advocates tend to be skeptical of most government antitrust efforts; companies, not the government, are in the best position to judge whether a merger would be beneficial.

And politics is certainly at work in this instance. President Obama promised the country that his health care legislation would increase competition and lower health insurance premiums. Now that just the opposite is happening, his administration is trying to limit the fallout and appear to be fighting for the consumer. But blocking the mergers will likely hurt consumers and competition.

Health insures are fleeing the Obamacare exchanges because of financial losses. A recent McKinsey & Co. survey found that health insurers selling in the individual market—where individuals buy their own coverage, usually through Obamacare exchanges—lost $2.7 billion in 2014. Those loses only compounded in 2015. The Hill reports that Humana “is pulling out of Obamacare plans in all but a handful of states after a year of nearly $1 billion in losses.”

Aetna said it lost about $140 million on the individual market in 2015. The Texas Blues Cross parent company, which controls Blues plans in five states, lost a reported $2 billion—$720 million just in Texas.

Oscar, a start-up health insurer that was supposed to bring new thinking to the individual health insurance market lost $105 million on Obamacare exchanges in 2015—and that was in just two states, New York and New Jersey.

UnitedHealthcare, the largest health insurer, reported last January that it lost $720 million in 2015 selling individual health insurance on the Obamacare exchanges. And about $1 billion when 2014 and 2015 were combined. And 16 of the 23 nonprofit Obamacare co-ops—which were the left’s consolation price for not getting their “public option”—have gone under, with more collapses on the way.

The left has long wanted to “take the profits out of health care,” and Obamacare seems to be doing exactly that. Obama officials dismiss the health insurer losses, claiming that many of the insurers are still profitable. But that’s because health insurers often have several lines of business, some of which may be profitable even as they lose hundreds of millions of dollars selling in Obamacare exchanges. No responsible board of directors will let such losses continue indefinitely. Larry Levitt of the Kaiser Family Foundation has been quoted as saying, “Something has to give. Either insurers will drop out or insurers will raise premiums.” And that’s exactly what we’re seeing. Nationwide, there was a 12% decline in plans in 2016 as compared to 2015, and that includes a 40% decline in PPO plans. There will be even more exits in 2017. Prior to Obamacare there were 18 insurers offering individual coverage in Kansas. Today there are three. The Obama administration initially praised health insurance competition in Maricopa County, Arizona. This year there were eight plans available on the Obamacare exchange; next year there will only be four—unless Aetna drops out, too. And insurers that choose to remain are increasing premiums. Texas Blue Cross has requested an increase of up to 60% for its 2017 premiums, and Arizona Blue Cross requested a 65% increase.

We know Humana, without the merger, is pulling out. Aetna claimed for months it would remain in the Obamacare exchanges, but is now saying it may scale back. And Anthem announced recently that it will only expand into other exchanges if it’s Cigna merger goes through. In other words, the Obama administration’s efforts to keep four insurers from becoming two may mean that only one or none will continue selling on the Obamacare exchanges.

Expect to see even fewer insurers participating and higher premiums as financial losses increase, especially if the Obama administration continues its efforts to stop money-losing insurers from merging. Policyholders will likely be receiving the notice that their premiums are rising or policy is being canceled in September or October—just before the election.

Merrill Mathews is a resident scholar with he Institute for Policy Innovation at ipi.org.

Employees Aren’t Taking Steps to Reduce Eyestrain

Employees are spending more time on electronic devices than they did five years ago – increasing their risk for digital eyestrain and other vision issues, according to a survey conducted by Wakefield Research for Transitions Optical. Forty-four percent of employees are spending more time during their work day using electronic devices  including smart phones, tablets, computers, and laptops. Fifty-four percent are extending their digital day by increasing use at home.

Extended use of electronic devices can lead to numerous vision problems including eyestrain, fatigue, and headaches. In fact, one-third say that light reflected from a computer screen and personal devices bothers their eyes at work. Taking breaks to rest the eyes can help alleviate problems. But 80% of employees spend at least part of their break time using devices.

Jonathan Ormsby, strategic account manager, Transitions Optical said, “We live in a digital world, so it makes sense that many employees are depending heavily on their devices throughout the day; that likely won’t change. The unfortunate consequence is that this increased and extended use is likely hurting their eyes and productivity.”

Very few employees take steps to reduce visual disturbances. Only one-third adjust the settings on their computer screens or personal devices; 16% adjust light in their work space; and one-third wear eyeglasses with advanced lens technology to improve their vision.

Ormsby added that employers have a tremendous opportunity to educate employees about the risks of extended digital use and to reinforce the importance of using their vision benefit to get regular eye exams and get eye wear that reduces glare and provides more comfortable vision.

Eighty percent of employees want more protection for their eyes. Seventy percent want more protection outdoors from the sun or ultraviolet light , and 50% want more protection indoors from harsh artificial light or glare from personal devices.

Less than 40% of employees say their plans cover anti-reflective coating fully or offer discounts while only one-third say their plans cover photochromic lenses. Twenty-seven percent of employees who have  visual disturbances at work, including eyestrain, have not told anyone about the issue. Indoor workers are three times less likely to discuss eye health concerns with eyecare professionals than are outdoor workers. Transitions Optical offers employee and employer focused tools and education free of charge at HealthySightWorkingforYou.org.

New Law Aims to Reduce Insurance Company Insolvencies

Governor Brown signed Assembly Bill 553 into law. It establishes new oversight tools that are designed to reduce the number of insurance company insolvencies. It aligns state law with standards developed by the National Association of Insurance Commissioners (NAIC). New disclosures and filings will help the Commissioner determine the financial and corporate capacity of companies to conduct business in California, and identify troubled companies quickly enough to avoid insolvencies. It clarifies the role of state insurance departments as group-wide supervisors over multi-national insurance groups, as part of the Insurance Holding Company System Regulator Act. The bill takes effect immediately.

The ACA May Reduce ER Visits (Slightly) but Doesn’t Affect Hospitalizations

Two patient groups created by the Affordable Care Act (ACA) had slightly fewer emergency department visits than before health care reform – Medicare patients enrolled in federally designated patient-centered medical homes and people under 26 who can remain on their parents’ health insurance. However, there was no change in the rate of the most expensive types of emergency visits: those that lead to hospitalization, according to a report by the American College of Emergency Physicians.

One study examined the rate of emergency department visits and hospitalizations for Medicare patients treated by patient-centered medical homes. (Primary care practices can receive special designation as patient-centered medical homes (PCMHs) from the National Committee for Quality Assurance.) From 2008 to 2010, outpatient emergency department visits grew slower for Medicare patients being treated by PCMH practices than by non-PCMH practices. The rate of growth per 100 PCMH beneficiaries was 13 visits fewer for 2009 and 12 visits fewer for 2010. There was no effect on rates of inpatient hospitalization.

The concept of medical homes has been around since the 1960s. Lead study author Jesse Pines, MD, MBA, FACEP said, “Our study shows that these models can have a positive effect on patients as far as limiting outpatient emergency department use, but they don’t seem to keep patients from being hospitalized, which is many times more expensive than ER visits.”

In a related study, the emergency department visit rate declined by 1.6 per 1,000 people among young adults (age 19 to 25) covered by their parents’ private insurance plans. The decrease was concentrated among women, weekday visits, non-emergency conditions, and conditions that could be treated outside the emergency department.

Lead study author Yaa Akosa Antwi, PhD said, “Reductions in ER use among young people were quite specific to less severe conditions that could be handled in a primary care setting, which is not unexpected. Overall, the reductions in ER use were modest, which suggests that even when the ACA is fully implemented, population-level changes in emergency department use may also be modest.”

Wellness Programs Can Reduce Workers’ Comp Claims

Effective corporate wellness initiatives have shown to be successful in not only reducing the duration of lost-time workers’ compensation claims, but also in reducing a company’s workers’ compensation claims, according to a report by Lockton. The report, authored by Lockton’s Michal Gnatek, is titled “Wellness Programs: The Positive Affect on Workers’ Compensation Claims.” Gnatek says that promoting healthy behavior can inhibit unsafe or inattentive workplace behavior. “Risk managers and claims professionals should be adding employee wellness to the available arsenal of weapons to combat increasing claims,” he said. Lockton recommends that risk managers become well acquainted with their companies’ wellness program and find the data on comorbid factors captured by their insurer or third party administrator. Collaborating with internal safety, health, human resource, and environment professionals will help risk managers discover how to integrate employee wellness with workplace safety, he said. For more information, visit http://www.lockton.com.

Will Medicare Cuts Reduce the Quality of Hospital Care?

The Affordable Care Act (ACA) permanently slows the growth of Medicare payment rates for inpatient hospital care, raising concerns that hospitals will raise prices for private payers in order to offset lower Medicare revenue. But if history holds true, nonprofit hospitals will reduce operating expenses instead, according to a study by the Center for Studying Health System Change (HSC).

The claim that the ACA will drive large numbers of hospitals to insolvency appears to only hold true with for-profit hospitals. For-profit hospitals, which tend to have lower operating costs, will see profits decline.

But not-for-profit hospitals will adjust their operating expenses to match lower revenues. Hospitals will offset about 90% of lost revenues by through savings on personnel and non-personnel costs. Hospitals will also delay or forgo capital improvements. According to researchers, “Newhouse (1970) describes the hospital industry as aspiring to a Cadillac level of quality. Our results suggest that hospitals, if forced to, will instead turn out Buicks.” If hospitals can maintain or improve their quality of care, the result will be improved efficiency. For more information, visit www.hschange.org/CONTENT/1385/.

How to Reduce Presenteeism

A white paper from The Standard explains how employers can address presenteeism, which is defined as the decline in workplace productivity due to a medical condition. In this recovering economy, employers and their workers are doing more with less, which stretches employees to their limits. The white paper outlines five solutions:

• Work with a disability carrier that provides on-site assistance.
• Make sure that the disability carrier you choose offers quick and effective ergonomic interventions with equipment to improve workers’ productivity.
• Improve employer pharmacy programs to reduce the effects of medical conditions that can contribute to lost productivity.
• Integrate the company’s health management programs.
• Provide health management programs such as wellness initiatives, employee assistance plans, and disease management.

To download the white paper, visit www.workplacepossibilities.com.

CMS Policy to Withhold Hospital Payments Did Not Reduce Infection Rates

A recent study by the New England Journal of Medicine finds no evidence that the 2008 CMS policy to reduce payments for central catheter–associated bloodstream infections and catheter-associated urinary tract infections had no measurable effect on infection rates in U.S. hospital. In October 2008, the Centers for Medicare and Medicaid Services (CMS) discontinued additional payments for certain hospital-acquired conditions that were deemed preventable. A total of 398 hospitals or health systems contributed 14,817 to 28,339 hospital unit–months, depending on the type of infection.

A study in the American Journal of Infection Control finds that the policy has led front-line hospital staff to enhance their focus on infection prevention and change their practices. But one-third of respondents said their hospitals needed to shift resources away from non-targeted infections in order to focus on targeted infections. Infection preventionists also expressed concern that hospitals focused more on improving physician documentation and coding practices to avoid negative financial penalties, rather than enhancing infection prevention efforts to improve patient outcomes. Finally, a quarter of respondents reported that their hospitals performed unnecessary diagnostic testing, upon admission, to avoid potential financial penalties. For more information, visit www.apic.org.

Last Updated 06/29/2022

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