Consumer Driven Health Care (CDHC) is a new avenue for employers to provide benefits by contributing set dollar amount, and then requiring the employee to choose from a range of coverage options. The idea is to put the employee back in direct control of health plan choice, while at the same time transferring accountability for wise use of health benefits back to the consumer.
Two of the most popular types of Consumer Driven Health Care plans are Health Savings Accounts (HSA) and Health Reimbursement Arrangements (HRA). Both health plans provide employers with important new benefit options that help raise consumer awareness of the real costs of health care, while empowering consumers with greater decision-making control over their health care spending.
- Health Reimbursement Arrangements
- As most commonly constructed, Health Reimbursement Arrangements are linked with health insurance plans with higher deductibles, which can reduce the overall cost of the plans. Employers then reimburse employees to a lower deductible amount, but only when claims occur. Statistics show that in most cases, the amount reimbursed by the employer is much less than the cost savings. This is often seen as a step towards self-insuring for employers who offer a fully insured health plan. Reimbursements of qualified claims are tax-deductible for the employer.
- Health Savings Accounts
- Growing in popularity, Health Savings Accounts are a tax-advantaged savings vehicle available to individuals enrolled in a Qualified High Deductible Health Plan (HDHP). The funds contributed to the account, by the employees, employer or both, are not subject to federal income tax at the time of deposit and accumulate year after year if not spent. Funds may be used to pay for qualified medical expenses at any time without federal tax liability. Health Savings Accounts are owned by the individual, which differentiates them from the company-owned Health Reimbursement Arrangements.
Advantage Benefits Group will assist your organization in designing the most effective Consumer Driven Health Care plan that will enable your employees to be wise health care consumers.