Consumer Directed Health Plans

Consumer Directed Health Plans

Most of you have heard about "consumer directed health plans". The Bush administration has been a strong supporter of this concept as a way to get a handle on soaring healthcare costs. The recent inaugeration of Mr. Bush signals that consumer directed health plans will increasingly make up a larger percentage of group medical plans over the next several years. In the past, consumer directed plan designs have taken on many forms: Medical Savings Accounts (MSAs), Flexible Spending Accounts (FSAs), Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs).

Many experts consider HRAs and HSAs to be the first generation of viable consumer directed health care products. HRAs are typically paired with a high-deductible health plan and are employer-funded Section 105 defined contribution plans. HSAs are the latest version of consumer directed health care plans. The core components of HSAs include a high deductible insurance product and a cash spending account. HSAs combine the pre-tax treatment of a FSA, the portability and roll-over characteristics of a 401(k), and the tax-free distributions of a Roth IRA.

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