There’s More Than One Way to Skin a Cat
By Bill Rusteberg
Under the Affordable Care Act (ACA) once a plan member meets their out-of-pocket annual maximum the phenomenon of moral hazard is fueled. When other people’s money are funding health care expenses there is no incentive to address cost and needs.
For example a plan member taking a prescription drug costing $50,000 per year may hit their maximum-out-of-pocket on their first prescription. At that point there is no incentive to seek a less expensive medication if one is available. And there is no motivation to address costs and needs for all other care either since the maximum-out-of-pocket limitation applies to all covered health care needs in the aggregate.
One solution towards modifying the effects of moral hazard is to silo certain plan benefits into a Health Reimbursement Arrangement (HRA). The Affordable Care Act (ACA) required maximum out-of-pocket (OOP) limits for health plans do not apply to Health Reimbursement Arrangements (HRAs).
Plan reimbursement for high-cost prescription medication can be funded through a HRA thus removing the maximum-out-pocket benefit feature. The incentive to seek lower cost alternatives is preserved to the benefit of both plan and plan member.
