If trying to understand your obligations under the federal Affordable Care Act (ACA) has you scratching your head, you’re in good company. A survey of 259 small businesses with fewer than 50 employees conducted in February by e-Health Inc. found that confusion over the law is rampant.
Results showed, for example, that a majority of respondents (56%) incorrectly believe that the ACA requires them to provide health benefits for employees in 2014, or that they’ll be taxed if they don’t offer health benefits next year. Actually, only employers with 50 or more full-time equivalent employees (FTEs) must provide coverage or face penalties. (More on that later.)
The e-Health survey also found that most small employers anticipate they’ll need help understanding and securing health insurance in 2014, when many of the new rules kick in. More than two-thirds (70%) expect their choices to be complex enough to necessitate outside assistance.
“Navigating the federal healthcare reform landscape can be a really daunting task,” says Phil Vogel, senior vice president of CBIA Service Corporation. “To seek help either from CBIA or your insurance agent will be very important.”
Joe Brennan, CBIA senior vice president of public policy, agrees, citing feedback he’s gotten from businesspeople.
“My recent experience traveling the state and speaking to CBIA members and business groups confirms that the level of uncertainty, the level of concern over fast-approaching compliance dates, and the amount of education that needs to occur between now and 2014 is substantial,” he says. “That’s understandable given the incredible complexity of the ACA. A lot of small-business folks are going to be looking for help.”
Which is where CBIA comes in.
“We know you are nervous about how you are going to continue providing benefits to keep your employees healthy and compete for top talent,” says John Rathgeber, CBIA president and CEO. “And we recognize that there are going to be disruptions in the marketplace as we move toward 2014, when many new federal healthcare regulations will take effect. But we’re going to be here to guide you through the phase-in of regulatory changes and help you make the right choices for you and your employees.”
The overarching purpose of the ACA is to extend health insurance coverage to uninsured Americans.* It does that mainly by offering subsidies and expanding Medicaid, as well as through several consumer protections and mandates, including:
- Guaranteeing coverage regardless of preexisting medical conditions (guaranteed issue)
- Guaranteeing that group and individual health plans are renewable (guaranteed renewability)
- Allowing young people to be covered under their parents’ health plan up to age 26
- Ending lifetime limits on coverage for most benefits for all new health insurance plans
- Phasing out annual limits on the dollar amount policies will pay
- Mandating that most individuals obtain coverage or pay a penalty at tax time
- Requiring that each state have a public health insurance marketplace, or exchange, where health plans can be purchased by individuals and small groups
Connecticut’s exchange. Each state can choose how its exchange will operate. States can create and run their own exchange—as Connecticut is preparing to do—or have one supported by the federal government.
Connecticut’s exchange will be open to individuals and businesses with 50 or fewer FTEs to purchase health plans from commercial insurers, with open enrollment slated to start in October.
A 14-member board runs Connecticut’s exchange and is charged with implementing it as guided by the ACA, a task that includes adopting the state’s Essential Health Benefits package (EHB)—the set of benefits that insurers must offer both inside and outside of the exchange in the individual and small-group markets as of Jan. 1, 2014.
“Connecticut’s health insurance exchange has already adopted its EHB package,” says CBIA assistant counsel Jennifer Herz, “and it can’t be changed until 2016.”
Health benefit mandates. In addition to meeting federal essential benefits requirements (the ten categories of benefits certain plans must offer under the ACA***), Connecticut’s EHB package contains all of the state’s existing health benefit mandates—state laws requiring that insurance companies cover specific medical procedures or services.
“Federal dollars will cover the cost of the premium subsidy for individuals receiving subsidized health coverage through the state exchange,” says Herz, “but under the ACA, any new mandates passed during the current legislative session cannot be included in the EHB package. That means the cost of new mandates would come out of the state budget, an added expense the state clearly cannot afford. So it’s important that lawmakers reject any new mandates proposed this year.”
The ACA has introduced changes that will significantly affect employers and the health benefits offered to employees. The new law will bring with it tax incentives (for individuals and certain small businesses), many compliance deadlines, employer reporting and notice requirements, and potential significant financial consequences for some Connecticut employers in the form of higher insurance premiums, new fees and taxes, and noncompliance penalties.
Just how federal healthcare reform affects a business will depend on many factors, including:
- Whether a company currently offers health insurance to its employees
- Whether a company that does offer coverage is self-insured or fully insured
- The number of people a company employs—specifically, the number of FTEs, a combination of full-time and part-time workers
Although major provisions of the ACA will not kick in until Jan. 1, 2014, aspects of the law are already in effect, including its requirement that employers provide covered employees with a summary of benefits and coverage for open enrollment periods beginning on or after Sept. 23, 2012. In addition, the effect of some of the law’s tax provisions and fees (which don’t kick in until 2014) is already being felt in the form of higher insurance premiums.
Will You Face a Play-or-Pay Penalty?
As the e-Health survey suggests, the ACA’s employer shared responsibility provisions—also known as the employer mandate or “play-or pay” rules—have caused considerable confusion and anxiety among business owners, particularly with regard to who is required to offer coverage or face a financial penalty.
So, will your company face a penalty?
If you have fewer than 50 FTEs, you are exempt from the employer mandate and its associated penalties.
In fact, if you have fewer than 25 FTEs, you are not only exempt from penalties, but you may be eligible for a small-business healthcare tax credit, designed to encourage small employers with lower-income workers to offer health insurance coverage for the first time or maintain coverage they already have.
However, if you have 50 or more FTEs, you may be subject to penalties if you fail to offer at least 95% of your full-time eligible employees*** coverage that meets minimum value and is affordable. What does that mean?
First, to meet minimum value, a health plan’s actuarial value (AV) must be at least 60%. AV is calculated as the percentage of total average costs for covered benefits that a plan will pay. For example, if a plan has an AV of 60%, an average consumer in a standard population could expect to be responsible for 40% of the costs of all benefits covered under the plan.
Second, a health plan offered by employers is considered affordable if the employee’s required contribution toward the cost of coverage is less than 9.5% of his or her household income. Recognizing the difficulty for employers in determining an employee’s household income, the law provides several ways for employers to calculate it (“safe harbors”), including basing it on whether the employee’s contribution exceeds 9.5% of his or her wages as reported on tax Form W-2 for the calendar year.
Count Your FTEs
- Start by counting your full-time employees and part-time employees. Each group should be counted separately, then added together.
- Full-time employees are those working, on average, 30 or more hours per week. (Seasonal employees who work fewer than 120 days during the year should be excluded from a count of full-time employees.
- Part-time employees are those working fewer than 30 hours per week. Count them by adding the total hours worked by part-time employees on a monthly basis, then dividing that total by 120 to get the number of FTEs represented by the part-time group.
- Add the number of your part-time FTEs to the number of your full-time employees to get your total FTE count.
What Are the Penalties?
Play-or-pay penalties are meted out this way:
- If an employer with 50 or more FTEs fails to offer coverage that meets minimum value to an eligible full-time employee, and that employee obtains coverage through the state exchange and receives a subsidy for the purchase of that coverage, the employer is subject to a penalty equal to $2,000 times the total of all full-time eligible employees after the first 30 are subtracted.
- If an employer with 50 or more FTEs offers coverage that is unaffordable, and an employee for whom it is unaffordable obtains coverage through the state exchange and receives a subsidy for the purchase of that coverage, the employer is subject to a penalty equal to the lesser of $3,000 per subsidized employee or $2,000 times the total of all full-time employees after the first 30 are subtracted.
A potential surprise for Connecticut employers, says Vogel, is that for some who are accustomed to being treated as under-50 companies by state insurance rules may now be considered 50-or-over firms by the new federal rules when it comes to play-or-pay.
“For example, a company with 40 full-time employees and 150 part-timers would be considered an under-50 account rated in Connecticut,” he says, “but it may be treated as a 50-or-over account under the federal rules that determine if the company could be penalized for not offering coverage that’s affordable and meets minimum value.”
Of course, employers with 50 or more FTEs can steer clear of a play-or-pay penalty by offering their full-time eligible employees a health benefit plan that meets a minimum of 60% actuarial value and requires an employee contribution that is less than 9.5% of household income. But other cost impacts of the ACA may be unavoidable.
Many of the law’s reforms, such as guaranteed issue, guaranteed renewability, and the extension of family medical coverage to young people under age 26 either already have driven up the cost of health insurance or will in the future.
Other significant cost drivers include the following:
New modified community rating rules. Connecticut is one of several states that require insurers to use modified community rating when determining rates for small groups. Under modified community rating, insurers can adjust their rates up or down based on certain demographic factors, such as gender, age, geographic area, family composition, SIC, and group size.
As of Jan. 1, 2014, the ACA changes the rules governing the pricing, or rating, of health insurance. New modified community rating rules under the ACA include eliminating gender, SIC, and group size as factors that can be used to adjust premiums. The law also changes the way age, geographic location, and family composition are used or defined.
In Connecticut, insurance carriers have been permitted to adjust their rates according to the age of those covered by a ratio of 5:1, meaning the rates charged to older people can’t be more than five times higher than those charged to younger people. The ACA, however, compresses that ratio to 3:1, a move that could have dramatic cost consequences for insured individuals and small groups.
“Although under the new rating rules, older individuals may see their rates come down slightly,” says Vogel, “younger people—and employers in the small-group market with relatively young, healthy workforces—could see significant increases.”
Under the new rating rules, geographic areas will be standardized across all carriers to eight defined rating areas that align with Connecticut’s counties.
In addition, one of the biggest changes for the small-group market involves how family composition is used as a rating factor. The rules in this area will become more complex, because the rate for a family (primary insured plus spouse and/or dependents) will be determined by adding up the premium charged for each individual family member, which will be based on each of their ages, not just on the age of the insured employee. (Currently, in the small-group market, the age factor applies to only the enrolled employee.)
Plans sold to employers with more than 50 employees do not have to meet the requirements imposed by the new rating rules unless a state decides to recognize employers with 51–100 employees as part of its small-group market, allowing such employers to purchase coverage through state exchanges.
Connecticut has chosen to define its small-group market as employers with 50 or fewer employees. In 2016, the small-group market in all states will automatically expand to employers with up to 100 employees, and those employers will be allowed to purchase health plans through the state exchanges. In 2017, states can allow employers in the large-group market to purchase plans through the exchanges as well.
Essential health benefits. Benefit and new plan design requirements imposed by the ACA’s essential health benefits provisions will also likely result in higher premiums for individuals and most groups. Plans sold in the large-group market, however, are not subject to those provisions unless they are sold through the state exchanges, which can’t happen until 2017.
Taxes and fees. New taxes and fees imposed by the ACA on insurance carriers beginning in 2014 are already affecting the price of health coverage.
“We are already seeing the impact of new taxes and fees in the small-group market,” says Ken Comeau, vice president of sales and products/services at CBIA. “Insurance carriers have already begun passing some of these costs through in the quarterly rates they are filing.”
Self-Insured Businesses and Health Insurers
The cost of healthcare reform will also hit self-insured companies and insurance carriers in the form of new taxes and fees. In some cases, those taxes and fees will translate into higher health insurance premiums as costs are passed through to consumers.
About half of Connecticut’s privately insured employee population receives insurance through large employer self-insured plans, where the employer assumes the financial risk, paying employees’ claims out of its own funds. The other half receives insurance from fully insured plans regulated by the state, where the employer pays part of the premium charged by the insurance carrier issuing the plan.
Self-insured companies tend to be larger firms, while the state regulated market is dominated by small businesses, since they typically lack the means to self-insure.
“Overall, large companies expect they will see between a 5% and 10% increase in the cost of providing health coverage for their employees,” says Johnna Torsone, executive vice president and chief human resources officer at Pitney Bowes in Stamford, a self-insured company.
She adds that some of the increase will come from normal increases in the cost of healthcare but that some of it also is “built into the Affordable Care Act.”
Here are some of those built-in cost drivers:
- PCORI tax. The ACA imposes an annual tax of $2 per covered individual (employees plus dependents) to be paid by employers (for self-insured plans) and insurers (for fully insured plans) in order to fund the Patient-Centered Outcomes Research Institute (PCORI) set up by the ACA to advance clinical effectiveness research. After 2013, the PCORI tax rate will be indexed to inflation.
- Transition Reinsurance Program fee. This tax, assessed from 2014 to 2016 and paid by employers (for self-insured plans) and insurers (for fully insured plans), is intended to reimburse insurers in the individual market for claims paid to high-cost individuals—for example, those with preexisting conditions—in order to stabilize their premiums. The cost to self-insured companies and carriers will be significant, says Torsone. “You have an estimated fee of $63 per covered individual effective in 2014,” she says. “That’s a big-ticket item for many companies, depending on how many employees they have.”
- Health benefits excise tax. Beginning in 2018, the ACA imposes a 40% nondeductible tax on high-cost, or “Cadillac,” health plans—those with annual premiums exceeding $10,200 for individuals and $27,500 for families. The tax will be paid by insurers (in the case of fully insured plans) and employers (in the case of self-insured plans) and applies only to the cost of benefits beyond the thresholds. The thresholds will be indexed to the Consumer Price Index (CPI) between now and 2018, but because annual increases in healthcare costs typically outpace increases in the CPI by a wide margin, many large employers’ health plans that are not subject to this tax now will become Cadillac plans by 2018.
- Annual fee on health insurers. The ACA levies a tax on issuers of fully-insured health plans beginning in 2014. The tax aims to collect a predetermined dollar amount divided among insurers according to a formula based on net premiums. In 2014, the tax collected will total $8 billion, rising to $11.3 billion in 2015–16, $13.9 billion in 2017, and $14.3 billion in 2018. From there, the figure will be indexed to growth in net premiums. “Insurers are probably looking at an extra 2%–3% in taxes,” says John O’Connell, president of C.M. Smith Agency Inc. in Glastonbury, “What we’re hearing from a lot of the carriers is that premiums will increase by about the same amount. And this is all in addition to healthcare cost inflation, or medical trend, which has tended to run at about three times the rate of inflation.”
Will Employers Drop Coverage?
Against the backdrop of skyrocketing healthcare costs and the new cost drivers built into the ACA, some pundits have speculated that many employers with 50 or more FTEs will simply drop healthcare coverage for their employees in favor of paying the ACA’s play-or-pay penalty once the state health insurance exchanges come online in 2014.
CBIA’s John Rathgeber, however, doesn’t see that happening on a wide scale for several reasons.
“Most companies will continue to offer benefit plans as opposed to driving their employees to purchase individual policies directly from insurers or through the state exchange,” he argues. “You want to be able to attract and retain the kind of people you need to run a successful business. In a state like ours, where the competition for a quality workforce is stiff, there is an expectation in the marketplace that employers are going to offer health benefits. And there are also tax advantages of doing that.”
Recent studies support Rathgeber’s argument.
According to the e-Health survey, two-thirds of small-business owners say they would not stop offering their employees health insurance, and only 6% say they would definitely stop offering health benefits. Nearly half of employers responding (44%) say that they provide health coverage out of a sense of moral obligation, while 31% say they do so to attract talented workers. More than two thirds (70%) believe that their employees might look for work elsewhere if they stopped providing health insurance.
In 2012, a study conducted by Truven Health Analytics (formerly the healthcare business of Thompson Reuters), used claims and wage data from 33 large companies with 933,000 employees to examine the direct benefit and tax cost of eliminating group health coverage under four different scenarios, including those in which employers subsidized employees for part of the lost benefits and one where employers did not. The investigation found that eliminating benefits provides no short- or long-term advantage for employers.
That’s not to say that employers won’t be making changes to adjust to the post-ACA healthcare environment. Until the landscape becomes clearer, however, many larger companies may be watching closely and waiting before making any bold moves.
“I think for most of us there are still too many uncertainties,” says Torsone. “Some of the regulations are still being finalized, there is uncertainty about the tax implications of doing one thing or another and about the operational readiness of the exchanges—there are just too many uncertainties to understand the full impact.
“I think what has to happen is that employers have to analyze their workforce, what their talent requirements are, where healthcare plays into their value proposition—their ability to attract and retain employees—and then determine what options they’ll have from a regulatory and tax perspective. In the short term, I think you’re going to see a lot of companies continue down the road of offering high-deductible, consumer-directed plans, but I think it’s a very small percentage that are even thinking about switching over to the exchanges in the near future.”
Wellness and Value-Based Benefits
Another reason most employers are unlikely to drop health coverage, says Rathgeber, is that they have a strong interest in making sure that the health plans their employees elect promote wellness and healthy lifestyles.
“Some self-insured companies have put together very sophisticated value-based benefit designs linked to wellness and preventative care,” he says.****
“They benefit from that in higher employee productivity and the ability to drive down costs because they incent employees to obtain the kind of preventative services and adopt the kind of behaviors that help them avoid serious, costly chronic diseases, such as those related to obesity and smoking.”
Such diseases account for the lion’s share of healthcare spending, says O’Connell.
“Employers have really grasped the fundamental point that the majority of healthcare costs they incur—probably close to 70%—are driven by modifiable lifestyle behavior,” he says. “So progressive employers who have been at this for years, like a Pitney Bowes, have really got it down to a science. It’s called population health management, where you determine what the biggest health risks are, create programs around those identified risks, and then measure their success over time.”
‘A Real Revolution in Healthcare’
The ACA “certainly unleashed a strategic review of opportunities for better-performing healthcare delivery systems to create a new business model,” says O’Connell, although major changes on the delivery side, including hospital mergers, were already taking place in response to dramatically rising healthcare costs.
He points out that doctors are aligning with hospitals, and hospitals are buying up doctor practices in a move toward more integrated healthcare delivery systems, or accountable care organizations, in which a spectrum of providers—from primary care doctors to acute care doctors, lab specialists to rehab providers—are linked in a single network.
“They might be linked by common ownership or through a common electronic health record platform,” says O’Connell. “So there is more of a continuum of care, as opposed to this sort of fragmented cottage industry model that we’ve always had.”
All of these changes stem from common goals, which the ACA does not sufficiently address, says Rathgeber. He believes that although the law will increase the number of people with health insurance, it doesn’t do nearly enough to bend the healthcare cost curve and focus on evidence-based medicine, which will improve the quality of healthcare and reduce costs by eliminating unnecessary treatments and procedures. That, he says, will come about through developments in the private sector.
“Despite the intense regulatory environment the ACA has created, the real gains are going to come out of market-based changes that started before the law was passed in 2010,” he says. “You see this tremendous realignment within the provider, payer, and employer communities aimed at making sure the money spent on healthcare actually improves people’s health status. I think out of all this comes a real revolution in healthcare.”
Prepare Now for 2014
One challenge to being ready for the full-scale rollout of the ACA is that even the federal government isn’t ready.
“Part of the problem is that a lot of the regulations under the ACA explaining how the law is to be implemented have not been released,” says CBIA’s Phil Vogel. “So there are still a lot of unanswered questions, but there are definitely some things employers can do now to be prepared.”
In addition to getting an accurate count of your FTEs to determine if you could face a play-or-pay penalty, you should begin planning ahead when it comes to your budget, says CBIA’s Ken Comeau. He notes that employers’ benefit plans in the small-group market will change to comply with the ACA, but that it’s not yet clear what shape plan designs will take. In such an uncertain environment, what can small employers control?
“You can control what your contribution toward premium will look like,” says Comeau. “Think about what you want to allocate for that line item in your budget so that when you have a better understanding of plan design and the cost associated with it, you’ll already have some work done on budget. And then you can work with your agent or other advisor to see what makes the most sense in terms of contribution strategy.”
‘That’s Our DNA’
With years of experience guiding Connecticut’s small businesses through regulatory minefields, CBIA understands the challenges that the ACA poses for employers.
“For decades, CBIA has been a trusted source of unbiased information on employers’ human resources obligations and changing trends in human resources management,” says Rathgeber.
“We do it through our free consulting on compliance issues and best practices. That’s our DNA, and it gives us the experience to help our members through this very stressful time as we go through the implementation of the Affordable Care Act.”
If you have questions about how federal healthcare reform impacts your business, call 860.244.1900 to talk to one of our experts.
You can also take advantage of several new resources to make health benefit planning as worry-free as possible:
- Our healthcare reform resource center provides the most relevant ACA-related information in a simple, user-friendly format. “There is a wealth of information out there,” says Comeau, “but wading through it all to get to what’s most important is the difficult part. Our new website focuses on the things that are most important to businesses and presents the information in a way that is easy to access and makes sense.”
- CBIA Health Connections employee web portal. This fall, we’ll be rolling out a new online tool designed to make it easy for employees to choose the health insurance plans that fit their needs. The portal will also be a resource for insurance agents to assist employers through an efficient online enrollment experience, incorporating contribution strategy and decision support tools developed from CBIA’s years of experience operating a private insurance exchange. “Once an employer and their agent have established a contribution strategy and benchmarked a target plan with buy-up and buy-down options for employees to consider, the employer can use the web portal to present the plan to employees in an electronic environment or a face-to-face meeting, as they’ve traditionally done,” says Comeau.
- New CBIA Health Connections benefit plans. The vast majority of health plans available in the small-group market need to be modified to comply with the narrow definitions established by the ACA, says Comeau. “Some of the biggest changes are going to be driven by new rules about maximum deductibles and out-of-pocket costs. Right now, we’re working with our carriers to develop new CBIA Health Connections plans that meet the requirements of the law and allow for the easiest possible transition for our members.”
Exchanges? CBIA Wrote the Book
“CBIA is a leader when it comes to employee health plans and other benefits,” says Rathgeber. “We created a private-sector health insurance exchange—CBIA Health Connections—over 20 years ago that not only helps employers control their costs but offers employees a choice of benefit structures and plans to meet their needs.”
He adds that the new state health insurance exchanges required by the ACA represent an attempt by the government to create what CBIA pioneered a long time ago.
“But the difference is our experience and that our sole focus is on the customer—our members—and what they need, as opposed to the government’s idea of what health insurance coverage should be.”
Kim Pita, managing principal of The Pita Group, a marketing and branding agency in Rocky Hill, values the human connection that CBIA Health Connections gives her and her employees.
“The state is planning to implement its exchange as an online marketplace,” says Pita. “Healthcare is already so confusing that to just have an online resource is a frightening concept to me. So we will continue to get that one-on-one attention, both through the brokers that represent CBIA Health Connections and CBIA staff members, who are so knowledgeable. We are constantly calling them and saying, ‘OK, what do we do in this situation involving maternity leave, or what do we do in that situation’—I don’t believe you’re going to get that kind of support with the state exchange.
“CBIA has been doing this forever. They know how it works. They have the administrative pieces put together. To me, CBIA is the winner. With the state exchange, there are going to be a lot of lessons learned.”
Another feature that distinguishes CBIA’s private-sector exchange from what the state exchange will offer is CBIA’s free benefit-administration services.
“We get very high marks from our members, not only because we help them secure that initial employee health benefit but also because we take care of a lot on the administrative end, including administering health reimbursement accounts and COBRA,” says Rathgeber.
Eileen Hasson, president of IT consulting firm The Computer Company in Cromwell, is one of those members.
“Overall, CBIA Health Connections has been the best for a small-business group in terms of their offerings of health insurance pricing and options,” says Hasson. “We use your vision program and your COBRA administration service, which is huge, because we don’t have time to deal with that kind of thing. Small businesses often don’t have HR departments to guide them, so CBIA helps fill that role. The fact that CBIA can offer COBRA administration has been very helpful.”
For years, affordability, choice, free administrative services, free HR consulting, and unmatched personal customer service have given CBIA members an advantage over other small businesses when it comes to providing their employees with quality health benefits—something that’s not about to change in 2014, when Connecticut’s health insurance exchange is operational, says Comeau.
“We’re going to have a private-sector solution that offers greater choice, flexibility, and services that employers need and want.”
* This article does not reflect the total complexity of the Affordable Care Act and its associated regulations; additional exceptions and conditions may apply. Many questions are still unanswered, including the definitions of certain terms that appear in this article. Federal regulation and guidance will be needed to clarify provisions and terminology in the ACA and direct its implementation.
** The ten categories are: 1. Ambulatory patient services 2. Emergency services 3. Hospitalization 4.Maternity and newborn care 5. Mental health and substance use disorder services including behavioral health treatment 6. Prescription drugs 7. Rehabilitation and habilitation services and devices 8. Laboratory services 9. Preventive and wellness services and chronic disease management 10. Pediatric services including oral and vision care
*** It’s important to note that FTEs and full-time eligible employees are not the same thing. The full-time equivalent count determines if an employer may be subject to a penalty, while full-time eligible employees are those who must be offered coverage and are used in a penalty calculation.
**** Value-based benefit designs rely on the notion that out-of-pocket healthcare costs such as copays and deductibles should be determined by the value of a service (e.g., medication or treatment) to the patient’s health, not by how much it costs. So, for example, in a value-based health plan offered by an employer, a preventative screening for a life-threatening health condition such as heart disease might be provided at little or no cost, while a service that is considered overused or of lower health value (such as an MRI) may require a bigger out-of-pocket contribution by the employee. Savings from such a plan are generated over time as employees take advantage of the plan’s incentive structure to prevent or manage serious, chronic medical conditions and adopt healthier lifestyles, thereby avoiding future, higher-cost interventions, such as emergency room care, hospital stays, or surgery.