Consumer Driven Health Care

Despite managed care’s cost-control goals, health care costs have continued to rise sharply, prompting employers to adopt consumer-driven health care plans (CDHPs). CDHPs pair a pretax payment account with a high-deductible health plan, shifting more costs to employees to encourage comparison shopping for care. High-deductible plans require greater out-of-pocket spending before coverage begins, unlike managed care plans where insurers paid most costs. CDHPs function as three-tier systems: a pretax account, employee payments until the deductible is met, and insurance coverage for remaining eligible costs. Flexible spending accounts (FSAs) let employees pay certain uncovered medical expenses with pretax dollars but have a “use it or lose it” rule, creating risk of forfeited funds. Employers face some risk with FSAs because they must make the full elected benefit available from day one, even if employees haven’t contributed the full amount. Health reimbursement accounts (HRAs) are funded only by employers and allow unused balances to roll over, unlike FSAs. Health savings accounts (HSAs), established in 2004, are portable, have inflation-adjusted contribution limits, allow broad provider and service choice, and permit tax-free rollovers of unused funds. Unlike HSAs, neither FSAs nor HRAs legally vest unused balances to employees when they leave employment.