Finding Buried Treasure At Defined Care Web Summit; Evolution Health Seminar Leader Illustrates How 10% Increase In Employee Rx Costs Can be Offset by Slight Increase in FSA Contribution.

Business Editors and Health/Medical Writers

Among the more than 900 benefit professionals attending the Defined Care Web Summit last month, those who saw the presentation by Chris Byrd of Evolution Health LLC discovered a hidden gem in many of today's benefit plans ... one that can help employers shift costs without inflicting a lot of pain as it eases the transition to defined-contribution/consumer-driven models. It's the health care flexible spending account (FSA) and, according to Byrd, senior vice president of strategy and development, all it needs to realize its full potential is a little help from a little piece of plastic known as the stored-value card.

Employees who participate in an FSA with a stored-value card, like the one Evolution Health offers (the Benny Card), simply present it to any provider that accepts MasterCard. The amount of the unreimbursed expense is automatically deducted from the FSA. No claims to file; no checks to cut.

"When employees see that they no longer have to file claims and wait to be reimbursed," Byrd explained, "the FSA suddenly acquires new luster. The convenience encourages more employees to participate. And since cards enable employees to better manage their accounts, they often feel more comfortable increasing the amount they contribute to the FSA. Both of these factors can add up to substantial FICA tax savings for the employer. Take the hypothetical example of an employer with 14,000 employees, 15% of whom currently participate in the FSA and contribute an average of about $1,000 (the national average). As a result of raising the participation rate and increasing the annual election by 20%, each results in FICA tax savings of nearly $70,000 to the employer."

"But the potential savings an employer can reap with an FSA card go even further," he continued. "Let's say you're an employer with 50,000 employees and spend about $4,500 on health care per employee. Your prescription drug costs are about 15 percent of those costs, or $675 per employee per year. You need to have employees take on a slightly greater share of those costs. By increasing copays or coinsurance a mere 10 percent, you could realize approximately $3.4 million in annual savings! Meanwhile, if your employees set aside an additional $190 in FSA contributions, their FICA savings could wipe out the 10 percent increase."

The stored value card can also pave the way to consumer driven health plans that use employer-funded personal care accounts. "Because the Benny Card has the ability to create separate `purses' with different funding sources or expense categories," Byrd explained, "they can be set up for FSAs, PCAs, prescription drug carve-outs, transportation reimbursement accounts, and so on. Employees can use the card as the `bridge' between first dollar coverage, deductibles and coinsurance, until 100 percent coverage kicks in. And they can keep track of everything on their account by going to the card's website."

The Benny Card was officially launched by Evolution Benefits, a division of Evolution Health, on January 1st of this year when its first major contract took effect with Northeast Utilities, a Fortune 500 utility company based in Central Connecticut. More information is available at the Evolution Benefits website: www.EvolutionBenefits.com.

About Evolution Health

Evolution Health was founded in 2000 with a commitment to supporting the movement toward greater consumer choice in and responsibility for health care benefits. Its initial product, the stored-value Benny Card offered by the Evolution Benefits division, applies the latest in payment technologies to flexible spending accounts, creating a bridge between today's benefit structures and the self-directed benefits movement. The company was created in part by the team that built Value Health, the nation's largest specialty managed care company covering over 70 million people in the early and mid- 1990s. Led by Value Health Founder and CEO, Robert E. Patricelli, Evolution Health has built a management team of seasoned professionals from the health insurance, managed care, third party administrator and information technology industries. In addition to Purchase, N.Y.-based MasterCard International, Evolution Health's partners in the Benny Card include WildCard Systems (Sunrise, Fla.), BANKFIRST (Sioux Falls, S.D.) and leading pharmacy benefit managers, such as Advance PCS, Merck-Medco and Express Scripts.