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Overview of HSAs
Health savings accounts (HSAs) are a great way to save money and efficiently pay for medical expenses. HSAs are tax-advantaged savings accounts that accompany high deductible health plans (HDHPs).
HSAs were created in 2003 to provide individuals with HDHPs with a tax-preferred way to save for medical expenses. There are certain advantages to putting money into these accounts, including investment earnings and favorable tax treatment. The rationale behind the HSA/HDHP combination is that people will have a clearer idea of their medical costs and more control over their spending, enabling them to reduce their medical costs.
HSA money can be used tax-free when paying for qualified medical expenses, helping you pay your HDHP’s larger deductible. At the end of the year, you keep any unspent money in your HSA. This rolled-over money can grow taxdeferred and, if used to pay for qualified medical expenses, will remain tax-free. Your HSA and the money in it belong to you—not your employer or insurance company.
Why Have an HSA?
HSA/HDHPs take a different approach to health coverage than other plans with lower deductibles. Having an HSA provides you with many benefits, including flexibility and easy saving, helping you plan and pay for medical expenses.
Here are eight advantages an HSA provides:
- Security—Your HSA can provide a savings buffer for unexpected or high medical bills.
- Affordability—In most cases, you can lower your monthly health insurance premiums when you switch to health insurance coverage with a higher deductible, and these HDHPs can be paired with an HSA.
- Flexibility—You can use your HSA to pay for current medical expenses, including your deductible and expenses that your insurance may not cover, or you can save your funds for future medical expenses.
- Savings—You can save the money in your HSA for future medical expenses, all while your account grows through tax-deferred investment earnings.
- Tax savings—An HSA provides you with triple tax savings: tax deductions when you contribute to your account, tax-free earnings through investment and tax-free withdrawals for qualified medical expenses.
- Control—You make the decisions regarding how much money you will put into the account, when to make contributions to the account, whether to save the account for future expenses or pay current medical expenses, which expenses to pay for from the account and how to invest the money in the account.
- Portability—Accounts are completely portable, meaning you can keep your HSA even if you change jobs, change your medical coverage, become unemployed or move to another state.
- Ownership—Funds remain in the account from year to year, just like an individual retirement account, or IRA. There are no “use it or lose it” rules for HSAs, making it a great way to save money for future medical expenses.
Conclusion
To help determine if an HSA is right for you and how much you might save in taxes, contact your benefits team.
What Is Step Therapy?
Prescription drugs can be expensive, so health insurers often use cost-control strategies to manage drug spending. One common approach is step therapy, also known as a “fail-first” policy. In this process, your health plan requires you to try a similar-acting, lower-cost drug before it approves coverage for the medication your doctor prescribed.
This article explains what step therapy is, how it affects your care and what you can do if your medication requires it.
Overview of Step Therapy
Step therapy is a type of prior authorization in which an insurance company has you try less expensive prescription options before “stepping up” to costlier drugs. Basically, the health plan won’t cover the more expensive drug until the lower-cost medication has failed to treat the condition.
Step therapy is used to curb drug spending and to encourage the use of lower‑cost medicines. Many types of medications may fall under step therapy, including treatments for mental health conditions and chronic illnesses such as arthritis, diabetes and migraines.
This cost control method is also used by insurance companies for other treatments. In some situations, a physician may recommend a specific medical procedure or treatment, but the insurance company requires the patient to try other, less expensive options first before they will pay for the prescribed procedure.
Carriers frequently require similar fail-first or prior authorization protocols for various medical services and diagnostic imaging to manage high-cost treatments.
How Does Step Therapy Work?
Your health plan uses a formulary to organize prescription drug coverage. A formulary is a list of medications the plan covers and how much you pay for each one. Drugs are grouped into tiers, such as generic, preferred brand and specialty drugs. Lower‑tier drugs usually cost less, while higher‑tier drugs cost more. If a medication is on the formulary, it means the plan covers it—but there may still be rules about when and how it’s covered.
As such, one of those rules may be step therapy, which means you will need to try a lower‑cost or preferred medication first before it covers another option. These medications are often proven treatments that work well for many people. If the first medication works for you, you can stay on it. If it doesn’t work, causes side effects or isn’t appropriate for your condition, your doctor can document that and move you to the next option. Drugs that require step therapy are often marked with an “ST” code, and the formulary lists which medications must be tried first.
If step therapy isn’t right for your situation, there are options. Your doctor can request an exception if you’ve already tried the required medication, if it’s unlikely to work for you or if it could cause harm. If approved, the plan may skip one or more steps and cover the medication your doctor originally prescribed. Step therapy is meant to manage costs, but it’s designed to allow flexibility when a different treatment is medically necessary.
What If a Medication Requires Step Therapy?
First, it’s important to confirm any step-therapy requirements on your plan’s formulary and understand the preferred medications you must try before the requested drug will be covered. If your prescribed medication has a steptherapy requirement, consider these six actions:
- Try the first step.
- Document your experience.
- Report results promptly and discuss them with your primary care provider.
- Request a step-therapy exception, if needed.
- File an appeal.
- Talk to your doctor about other covered medications that don’t require step therapy.
Conclusion
Step therapy can help reduce your healthcare costs, but it may also prevent you from accessing medications your doctor prescribed. To ensure you get appropriate care, review your health plan’s formulary and explore all available options with your healthcare provider.
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