Consumer-Directed Health Plans
Consumer-Directed Health Plans (CDHP) are designed to help consumers become more aware of their health care benefit options and the cost of procedures in order to help curtail the ever-increasing costs of health care. The premise of consumer direction is that health care would be more efficient if consumers had fiscal incentives to choose more cost-effective care along with access to effective education and decision support tools.
The CDHP consists of a health fund or account (HSA or HRA); a high deductible health plan (HDHP) and web-based information tools to help members make more informed health care decisions.
The High Deductible Health Plan (HDHP)
A High Deductible Health Plan (HDHP) with a Health Savings Account (HSA) or a Health Reimbursement Arrangement (HRA) provides traditional medical coverage and a tax free vehicle to help build savings for future medical expenses. The HDHP with an HSA or an HRA provides greater flexibility and discretion over how to use health care funds.
The Health Savings Account (HSA)
An HSA is a tax-advantaged health savings account for individuals covered under high deductible health plans. Contributions to the HSA can be made by the employer, the employee or both. Contributions are deductible if made by the employee and are excludable from income and wages if made by an employer. Earnings grow tax-free and distributions for qualified medical expenses are tax-free. Unused funds can be carried over from year-to-year, are portable, and can be used into retirement.
The Health Reimbursement Arrangement (HRA)
The HRA, also known as a Defined Contribution Plan or a Personal Care Account, allows an employer to fund an account to repay the employee for unreimbursed medical expenses. Unlike a Flexible Spending Account, the HRA permits unused funds to be carried forward to the next year.
High Deductible Health Plans coupled with an HSA or HRA is a viable option for a company due to the favorable IRS opinions on tax treatment for these plans.
A High Deductible Health Plan together with an HSA or HRA will permit your employees to play a greater role in determining how their health care dollars are spent. There are several types of plans available. Let our expert professionals assist you in determining if an HRA is the right choice for your company.
Cambridge also has a long history of working with multi-location companies and can determine the most cost-effective method of delivering and administering medical benefits at multiple sites.
