Consumer-Driven Health Plans
You've heard the buzz. You've seen the hype. Consumer-driven health plans may lower costs, change behavior, and save money. The goal is to give consumers "skin in the game" when it comes to allocation of their healthcare dollars. Sounds good but complicated. It might be do-able for a national employer, but could seem out of reach for the small and mid-sized business. Not true. As technology has simplified most other facets of our daily lives, technology has simplified the management of employee benefits.
Below we discuss the three most common forms of consumer-driven plan formats These are fast becoming the critical component to any employer seeking control of current and future benefit costs. Let Resource Group design a plan which makes the most sense for your company.
Health Savings Accounts
What is a Health Savings Account (HSA)?
A Health Savings Account (HSA) is a tax-advantaged account participants can use to pay for qualified health expenses they incur while covered under a high deductible medical plan. HSA dollars, contributed by the employer, employee or a qualified family member, accumulate over time with interest or investment earnings, are tax-free, are portable after employment and can be used to pay for qualified health expenses tax-free, or for non-health expenses on a taxable basis.
Who is eligible to participate in a Health Savings Account?
An eligible individual:
Health Reimbursement Arrangement
What is a Health Reimbursement Arrangement (HRA)?
Health Reimbursement Arrangements (HRAs) are IRS approved tax-favored accounts that are 100% employer-funded and set up for the purpose of reimbursing employees for qualified medical expenses. HRAs are used in combination with a High Deductible Health Plan - the employer chooses a health plan with a high deductible, thereby slashing premiums and creating real savings, and then sets up an HRA to help cover the deductible costs. The idea is that the HRA contributions will be funded using the savings gained from the lower premium cost, and will thus enable the employer to fund the HRA, which will then be used to reimburse employees for covered medical expenses.
How does an HRA work?
The following link will take you to a short and very informative video that clearly explains the mechanisms of an HRA: https://www.healthconnectsystems.com/hcs/HRAERVideo.aspx
What are the advantages of a Health Reimbursement Arrangement?
Flexible Spending Accounts
What is a Flexible Spending Account (FSA)?
Flexible Spending Accounts are employee-funded accounts, set up by the employer, which allows the employee to contribute a portion of their earnings to pay for qualified expenses. These accounts are allowed under section 125 of the Internal Revenue Code and are also called "125 plans" or "cafeteria plans." The employee contributes funds to the FSA through a salary reduction agreement and is able to use the funds for medical bills or dependent care, depending on the type of FSA. The money deducted from the employee's salary and put into the FSA is not subject to payroll taxes, resulting in substantial payroll tax savings.
Types of Flexible Spending Accounts
There are two common types of FSAs - a medical expense FSA and a dependent care FSA.
Important Note - The information on this site is general in nature. Any description of coverage is necessarily simplified. Whether a particular loss is covered depends on the specific facts and the provisions, exclusions and limits of the actual policy. Nothing on this site alters the terms or conditions of any policies. You should read the policy for a complete description of coverage. Coverage options, limits, discounts and deductibles are subject to availability and to individuals meeting underwriting criteria. Not all features available in all areas.