Consumer Driven Health Plans

In response to rising premiums employers are wise to consider Consumer Driven Health Plans (CDHP’s) to bend their plan’s cost curve downward.  CDHP’s shift some medical care costs to the employee or enrolled dependent instead of the insurance plan.  Over time CDHP’s encourage a more educated health care consumer resulting in lower annual premium increases.

MDG performs a comprehensive analysis of each client’s benefit plan funding strategy.  Various factors are considered including: claims utilization, medical loss ratio,  employer’s benefit budget, employee’s benefit plan expectations, competitive benchmarking data, and applicable market underwriting guidelines.

The Consumer Driven Health Plan strategies include:

  • Bridge Plans
  • First Dollar Indemnity Plans
  • Flexible Spending Accounts (FSA)
  • Health Reimbursement Arrangements (HRA)
  • Health Savings Accounts (HSA)
  • High Deductible Health Plans (HDHP)
  • Section 125 Accounts

Consumer Driven Concepts – 2018

IRS Code: FSA
106 & 125
HRA
105, 106, 125 & 213
HSA
223
What is it? Flexible Spending Accounts may be offered with any type of health plan Health Reimbursement Arrangements may be offered with any type of health plan. Most commonly offered with a High Deductible medical plan Health Savings Accounts are tax-advantaged savings accounts that the account holder can use to pay out of pocket medical expenses. They are available only in conjunction with a High Deductible Health Plan (HDHP). HDHPs are defined as having $1,350 Individual and $2,700 Family Deductible and annual Out of Pocket expenses of $6,650 Individual and $13,300 Family
FAQs on HSAs
Who owns it? Employer owned – not portable Employer owns and typically not allowed to rollover to another employer Employee owned and completely portable
Who funds the account? Typically the employee, however the employer is allowed to contribute. Employee contributions are tax-free, while employer contributions are exludable for income and FICA tax purposes. The employer funds the account. Contributions are excludable for income and FICA tax purposes Employer and/or Employee. Employee contributions are tax-deductible up to $3,450 for Individual and $6,900 for Family coverage.  Employer contributions are exludable for income and FICA tax purposes
Is there a “use it or lose it” rule?
Yes, but employer can elect $500 carryover per year
No, the employer determines whether to allow a carryover No, the individual owns the account regardless of whether the contributions are made by the individual or the employer
What are considered eligible expenses? Qualified medical, dental and vision expenses as defined under Section 213 of the IRS Code and selected over-the-counter drugs FSA Worksheet Qualified medical, dental and vision expenses as defined under Section 213 of the IRS Code as well as Qualified Long Term Care services, and COBRA premiums if allowed in Plan Documents (determined by employer) Qualified medical, dental and vision expenses as defined under Section 213 of the IRS Code as well as Qualified Long Term Care services, and premiums. Ineligible expenses are subject to gross income tax and 20% penalty HSA Worksheet