All firms, including Classics Architects, have desires to make profits even in worst economic performance. As such, they take up strategies to reduce the cost of operation. At Classics Architects company, the health care costs continue to surge at a rate higher than inflation resulting from the economic downturn. Nigel Duncan, the Director of Human Resource thinks that one way of reducing costs is by implementing the consumer-driven health care that lowers insurance cost. The strategy involves a combination of high deductible health insurance in combination with a tax advantage account and reduces costs for employers. However, it is important to note the advantages and disadvantages of the consumer-driven health-care plan to determine whether the strategy is feasible or not.
Advantages
The consumer-driven health care (CDHP) plan’s original premise is that employers shift the costs to employees (Abdus, Selden, " Keenan, 2016). Naturally, the employees will tend to make more educated decisions about their healthcare. as such, the employees will think about the costs they will incur when visiting a doctor’s office or the emergency room before getting to the hospital. from the case study, employees at Classics Architect made decisions to reserved in emergency rooms even when there was no need. therefore, the consumer driven healthcare plan shifts responsibility to employees and thus decreases the ultimate cost of care. Additionally, the consumer-driven health care plan will encourage employees at the company to make changes to their lifestyle and thus reduce health care consumption.
The health savings account (HAS) will give employees an opportunity to set aside amounts of money that will be used pay out of pocket healthcare expenses. The out of pocket payment will replace the expenses that were covered in full or subject to small co-payment (Abdus, Selden, " Keenan, 2016). Importantly, the savings roll over from year to year and hence can satisfy the deductible amount that makes both employers and employees share the costs.
CDHP makes it possible for employers to save money for their employees, a strategy that is more appropriate for individuals that are generally healthy. Individual employees are therefore in a position to pocket the money they save from lack of hospitalization. Even as employees seek medical attention, they will request doctors for a more generic version of treatments. The plan greatly influences discernment of employees over their healthcare choices. Therefore, Classics Architecture will be able to attain its ultimate goal of reducing spending on health insurance.
Disadvantages
Despite the measure having advantages, they are shortcomings that would need correction for the strategy to be effective. First, the CDHP does not take care of the chronically ill. Employees at Classics Architecture with chronic conditions will not be attracted to the strategy as it works to their disadvantage. Additionally, it may be challenging to convince the employees to take up the consumer driven health care plan as it may not seem attractive. According to Sharpe (2016), the plan shifts cost to the employees and thus favors the wealthy workers at the expense of low-income earners.
Should Classic Architecture select a flexible spending account (FSA) or a health savings account (HSA)
Both the FSA and HAS to make employees to sock away pretax money for future medical costs. The healthcare plans reduce the income tax liability for employees. However, the two healthcare plans offer different benefits for employees. They are like savings accounts and thus individuals can only obtain health care services they can afford. Importantly, every employee has different needs that they would want the healthcare insurance to cover (Stover et al., 2016). Classics architecture, therefore, needs to consider the needs of the employees before settling for the health plan to implement.
Usually, all employees with FSA are legible for HAS except if they are enrolled to HSA. Importantly, employees that pay for low dollars for FSA only get a few covers that they are legible. For instance, they do not get cover for out of pocket vision and dental expenses. Employees with high deductible insurance plans are eligible for HSA with different amounts required for families and for individuals.
Employee income is another factor that Nigel need to consider; FSA is relatively cheaper compared to HSA. Evidently, different employees at Classics Architect earn different amounts of income. Account ownership of the two health plans also differ. Usually, the FSA stays with employers and thus, workers may not change the accounts when changing jobs. However, HSA healthcare plans allow employees to maintain their accounts in different jobs and even in their retirement.
All money not used in HSA is normally rolled over to the following year. Unfortunately, FSA does not allow rollover benefits unless employers at Classics Architects decides to. The pre-tax payroll with FSA does not make money to grow, but funds in HSA can be invested in stocks and bonds to allow growth (Stover et al., 2016). Therefore, Classics Architecture should implement both FSA and HSA and allow its employees to choose their most preferred health care plan.
References
Abdus, S., Selden, T. M., " Keenan, P. (2016). The financial burdens of high-deductible plans. Health Affairs, 35(12), 2297-2301.
Sharpe, D. L. (2016). Consumer financial issues in health care. In Handbook of consumer finance research (pp. 267-280). Springer, Cham.
Stover, D., Adams, E., Klug, K., Kubala, K., " Baer, D. (2016). U.S. Patent Application No. 14/925,417.
