Consumer-driven health plan can make good financial sense

Ounce of prevention
All UAB plans, including Viva Choice, cover preventive care at 100% with no deductible for physicals, immunizations, routine screenings and preventive generic prescriptions.A benefit option that enables employees to pay lower monthly health care premiums in exchange for higher out-of-pocket expenses for covered services continues to grow in favor among eligible employees.

Viva Choice — UAB’s consumer-driven health plan (CDHP) — is an alternative to traditional Viva and Blue Cross health care plans offered to eligible employees of UAB, UAB Hospital and UAB Hospital Management LLC during the annual open enrollment for benefits Oct. 21-Nov. 7. More than 2,100 employees selected the CDHP in 2022, its sixth year, which represents 15% of benefit-eligible employees who enrolled in a UAB plan.

“Viva Choice is attractive because consumer-driven health plans give UAB employees more control in planning for and managing health care costs, and it enables them to save for future expenses through the health savings account,” said UAB Executive Director for Benefits and Wellness Mike Boyd.

“For employees who are healthy or have fairly predictable costs, Viva Choice can make good financial sense,” Boyd said. “Viva Choice offers the lowest premiums and the lowest out-of-pocket maximum among our plans, and the university’s contribution to the health savings account covers almost half the annual deductible.”

What is a CDHP?

A consumer-driven health plan provides the same coverage as the traditional health care plans. The difference is how — and how much — you may pay for it. 

A CDHP, in this instance Viva Choice, is paired with an HSA — a health savings account — that enables you to set aside pre-tax payroll or after-tax dollars to pay for qualified, out-of-pocket medical expenses.

In exchange for lower monthly premiums, people with CDHPs pay higher out-of-pocket expenses until they reach an annual deductible. For Viva Choice, the annual deductible in 2023 is $1,500 for single coverage and $3,000 aggregate for a family. The IRS substantively increased the allowed HSA contributions by $200 for single coverage and $450 for family coverage in 2023. (See below)

All qualified medical expenses — doctor visits, medical tests and prescriptions — count toward the deductible. Once the deductible is met, Viva Choice begins paying 90 percent of claims up to the overall out-of-pocket maximum ($3,500 for single coverage and $7,000 aggregate for a family).  Once the out-of-pocket maximum is reached, the plan pays 100 percent of claims for the remainder of the calendar year. These out-of-pocket expenses can be paid through pre-tax funds you invest in an HSA account.

How does an HSA work?

For years UAB employees have been able to opt for flexible spending accounts (FSA) to help pay for medical expenses. In 2023, you will be able to set aside as much as $2,850 per year with an FSA, but any FSA funds you do not spend by the year’s end are forfeited.

HSAs are employee-owned accounts that can be used for qualified medical expenses now or saved for long-term expenses. If you enroll in Viva Choice, you will be enrolled automatically in an HSA, and you will be ineligible to contribute to a health care FSA. (You will continue to be eligible for the dependent care FSA plan.)

Like an FSA, your HSAs funds can be accessed using a debit card provided for the account or by submitting a reimbursement claim form. But, it differs from an FSA in several important ways:

• You can set aside more to cover expenses. For an HSA, the amount of pre-tax dollars you can set aside for 2023 is $3,850 for single coverage and $7,750 for families. Employees ages 55 and older may contribute an extra $1,000 as a catch-up contribution.
• You can save for the future. All the money you invest is yours — always — even if you don't spend it all this year. Balances carry over year to year — and earn interest, and the funds are available to spend on any qualified medical expense that arises.
• You can take it with you. Even if you retire or go to another employer, the funds in your HSA account belong to you. They can be used or saved to pay for long-term retirement expenses, including Medicare premiums or nursing home care.
• UAB contributes to your HSA. UAB will fund the first $600 for single coverage and $1,200 for non-single coverage for employees enrolling during annual open enrollment; that is yours to use whether you invest additional funds or not.
• You can decide to invest more at any time. FSA contributions can only be made through payroll deduction, and the amount is set during open enrollment. With HSAs, employees can contribute up to IRS limit either with pre-tax dollars through payroll deduction or with after-tax dollars at any time during the year. 

How does this fit together?

Let’s say you have single coverage, and you go hiking and slip and break your leg. An ambulance picks you up and carries you to the doctor, who X-rays and sets your leg and gives you a prescription for medication and rehab. Let’s say the cost of all this is about $5,000.

With VIVA Choice, you pay all expenses up to the annual deductible — $1,500 — and your insurance kicks in for 90 percent of the $3,500 in remaining expenses — or $3,150. Leaving you to pay a total of $1,850, which you can pay out of your own pocket or from funds available in your HSA account.
More detailed information about VIVA Choice and health savings accounts is available for you in the Open Enrollment toolkit in the UAB for Me portal at uab.edu/hrintouch.