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Consumer-Driven Health Accounts A recent study performed by the Kaiser Family Foundation discovered that the cost of health insurance for American companies rose by more than ten percent between 2003 and 2004. Considering such high increases, it's no surprise that businesses across the country are trying to find ways to cut healthcare costs. To that end, consumer-driven health accounts have become a popular solution, lowering costs and empowering employees. What Are Consumer-Driven Health Accounts? Typically, consumer driven health accounts are plans that are built with a high deductible. In connection with a Health Savings Account (HSA), these plans include an annual limit that can be used for typical out of pocket expenses. Additionally, HSAs can be carried over from one year to the next, meaning that the money is not lost. HRAs, or Health Reimbursement Arrangements, may or may not be connected to a high or low deductible health plan and can be carried over at the employer's discretion. Flexible spending accounts (FSA) are another option in the world of consumer-driven health accounts. These plans do not need to be used in conjunction with a high deductible healthcare plan. Instead, the money put into the account can be used for certain medical expenses on a pre-tax basis. This simply means that whatever money is placed in the account is not taxed, thus saving the individual 25% to 45% on taxes from their paychecks. And, as a result of a recent IRS ruling, any left over money in the account can be carried over to the following year and used to pay qualified expenses incurred during the first 2½ months of the next plan year. Obviously many employers prefer these types of plans because of the lowered cost to them. Nevertheless, these plans also allow employees to be more closely involved in the decision-making process regarding their health, including control over the cost of their healthcare. Additionally, since unused money in some of these plans carries over to the following year, participants can build a nest egg for future health expenses, making these types of plans very attractive to prospective employees. |
Additional Topics Consumer-Directed Health Plans Dependent Care Flexible Spending Accounts Flexible Health Spending Accounts Flexible Medical Expense Accounts Health Care Flexible Spending Accounts Health Reimbursement Arrangements IRS Section 125 Cafeteria Plans Medical Expenses and Income Tax Plan for Medical that Health Insurance Doesn't Cover Save 25% to 40% on Health Expenses Save on Co-Pays and Over-the-Counter Medications Save on LASIK and Orthodontic Costs Section 125 Plan Administration |
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