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Employers and Health Insurance
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Employers and Health Insurance
Characteristics of Consumer Directed Health Plans (CDHPs)
Both employers and consumers are showing increased interest in consumer directed health plans (CDHPs).
- CDHPs are health plan offerings that combine a high-deductible health plan (HDHP) with a health reimbursement arrangement or savings option.
- CDHPs are currently offered with two tax-advantaged arrangements/ savings options. These are used to pay enrollees’ healthcare expenses until funds are exhausted. These arrangements include:
- Health reimbursement accounts (HRAs) – employer owned account designed to reimburse enrollees for qualified medical expenses that occur prior to meeting the deductible. HRA contributions are made only by the employer. HRAs are administered by the employer or an insurance carrier. Since an HRA is not employee-owned, funds cannot be retained upon changing jobs.
- Health savings accounts (HSAs) – similar to HRAs but are an employee owned account. Since an HSA is owned by the employee, employees, too, can make contributions to the account. Furthermore, HSAs can accrue balances without limit and are fully portable.
- CDHPs are structured to reward prudent healthcare purchasers.
- Annual deductibles can be paid with funds from the HRA/HSA or out-of-pocket.
- To support CDHP enrollees, health plans are developing more sophisticated decision support tools to engage consumers and aid them in making better healthcare purchasing decisions.
