Prepare for the effects of Health Spending Accounts on your practice

Issue: March 2008

ByAlly Stoeger, OD

Ally Stoeger, OD
Ally Stoeger

It was not so long ago that most optometry patients paid by cash or check. However, the combination of managed care, therapeutic eye care, billing/coding parity and vision plans caused a shift that resulted in most optometric practices seeing fewer and fewer private pay patients.

Although doctors may not be satisfied with managed care reimbursement schedules, they do benefit from the fact that patient financial responsibility is often limited to small co-pays. But this is about to change. Welcome to the era of the Consumer Driven Health Plan (CDHP).

CDHPs are changing the medical benefits landscape. Some say that CDHPs are growing at a faster rate than HMOs did when they were first introduced. CDHPs include Flexible Spending Accounts (FSAs) as well as Health Reimbursement Arrangements (HRAs). However, it is the newest addition, the Health Spending Account (HSA) that is the most likely to affect optometric practices.

Optometry practices are already familiar with FSA accounts. In fact, the “use it or lose it” provision of these accounts became a reason why some doctors no longer went on vacation in the month of December. FSAs can now roll over until March 15, so the rush to use an FSA may occur in February/March rather than December. Working with patients who have FSA money to spend can be a great pleasure. Working with patients who have HSAs is likely to be more complicated.

HSA covers qualified expenses

An HSA is a tax-sheltered trust account that a beneficiary owns for the purpose of paying qualified medical expenses. HSA contributions are voluntary and tax-deductible. Interest accumulates tax-free and the patient can make tax-free withdrawals for qualified medical expenses. At the end of the year, unused funds, as well as the interest they earn, are carried over from year to year. The beneficiary maintains ownership of their HSA account even if they leave their job or retire.

In order to be eligible for an HSA account, a beneficiary must have a High Deductible Health Plan (HDHP). The HDHP/HSA combination can save a beneficiary money because of lower monthly medical insurance premiums and tax savings for medical expenses.

HDHPs should control medical costs

Government and business leaders believe HDHPs will help control medical costs. If the beneficiary’s deductible ranges from $1,100 to $5,600 for an individual plan and $2,200 to $11,200 for a family plan, consumers will be more likely to comparison shop for fees and question utilization of medical services.

HDHP/HSA savings have obvious appeal for young and healthy beneficiaries. However, less healthy individuals who are still under Medicare age can also benefit from the tax savings and rollover benefits.

Some financial experts consider HSAs to be medical Individual Retirement Accounts (IRAs) because they are a method of sheltering tax deferred income. The patient can use the HSA account toward their deductible as well as for either uncovered or out-of-network health care services or products.

Noncovered items that can be paid with an HSA account include screening tests such as retinal photography or Optomap Retinal Exam (Optos Inc., Marlborough, Mass.), contact lens fitting fees, vision therapy, contact lenses, eye wear, solutions, supplements and other prescription and non-prescription products. As always, practices that are successful at educating and recommending will benefit most from patients who are in a position to purchase higher levels of care.

Patients who anticipate large medical expenses, such as LASIK, may be able to fund both HSAs and FSAs.

HDHP/HSA vs. traditional plan

Optometry patients with HDHPs/HSAs will exhibit different consumer behavior than those with traditional managed care medical insurance plans. Under a traditional plan, a patient who requires a threshold visual field test might pay a $10 deductible, with the doctor billing the patient’s insurance carrier for the rest of the negotiated fee. With the patient responsible for such a low payment, there is no financial reason why he or she would resist scheduling the visual field test.

However, the patient who has an HDHP/HSA and has not met his or her deductible is more likely to question the need for a visual field test. The patient may ask to delay the test because he or she has not met the deductible this year, but perhaps will next year. If the patient has not met the deductible and has already depleted the HSA, the doctor can expect even more resistance.

Conversely, a patient who has already met the high deductible may want to schedule the visual field test in December instead of January. More than ever before, doctors and patients may want to take timing into consideration so patients can maximize their benefits.

Deductibles, doctor networks

Deductibles are higher in HDHP/HSA programs for out-of-network doctors and they are calculated separately than deductibles for in-network doctors. The result is a powerful disincentive to see an out-of-network doctor. This will be mitigated for some patients by use of the tax-free HSA account to pay for the out-of-network doctor. Nevertheless, optometrists may find that it will become even more important to be an in-network provider.

HDHP/HSA patients may find carve-out vision plans especially appealing because they will not be subjected to high medical plan deductibles. Under a traditional medical plan, a patient with a chronic medical eye condition is usually covered for a comprehensive annual eye exam. With HDHP/HSA, a patient with a chronic medical eye condition will have to pay for the eye examination unless he or she has met the deductible.

Some of these patients will not mind using their tax-free HSA account and contributing toward their deductible. Others may decide that they would rather save their HSA money and visit the vision plan doctor first. If the vision plan recommends further testing, that would be accomplished through the HDHP/HSA.

Filing claims

Few completely private pay practices are probably left these days, but they are positioned well to benefit from patients with HDHP/HSAs. Their staff will not have to file claims, they will be able to collect their full fee instead of an insurance negotiated fee and their patients already are accustomed to paying for everything out of pocket. Now these patients can spend more happily because they will be spending from a tax-free HSA account.

Medicare patients cannot participate in HDHP/HSA. However, if an individual started an HSA before he or she became Medicare eligible, he or she can continue to spend or save this money tax-free. For example, a Medicare patient with funds in an HSA account would find it easier to afford better quality eye wear.

The claims process for HSAs is more complex because in-network practices have to file claims, determine if the patient has not met the deductible, collect from the HSA if the patient has met the deductible or collect from the patient if the deductible has not been met and the HSA is depleted. An in-network doctor only receives the insurance negotiated fee, even if the patient is paying from HSA or private funds. HDHP/HSA patients will ask more fee questions and are more likely to scrutinize their explanation of benefits statements. Staff will need to spend more time explaining fees to these patients.

Well-run practices recognize how important it is for patients to understand fees and insurance benefits prior to receiving their eye care.

For more information:

Ally Stoeger, OD, practices at Virginia Eyecare Center, a Vision Source-affiliated private practice in Burke, Va. Dr. Stoeger can be reached at 9314-A Old Keene Mill Road, Burke, VA 22015; (703) 569-3131; e-mail: ally.stoeger@verizon.net; Web site: www.virginiaeyecare.com.