In contrast to traditional health benefit plans, consumer-directed health plans were developed to empower and encourage covered persons to evaluate their health care options with an eye on the cost and an incentive to spend dollars wisely. At Shenandoah Valley Group (SVG), we have designed consumer-directed plans to encourage covered persons, the consumers of health care, to make informed choices.
Consumer-directed health plan options from SVG can include Health Savings Accounts (HSA), Health Reimbursement Arrangements (HRA), and traditional Flexible Spending Accounts (FSA).
Comparing Consumer-Directed Options
HSAs are employee-owned accounts that can be funded by both the employee and employer. The employee can put funds in an HSA pretax or on a tax-deductible basis. Once an employer contributes funds to an HSA, those dollars belong to the employee and follow the employee upon termination of employment. Individuals who set up HSAs must be enrolled only in a qualified high-deductible health plan.
HRAs can be funded only by an employer; employees cannot contribute to an HRA. The employer simply funds HRA-eligible expenses as they are submitted to and approved by a third party administrator. While HRAs are usually set up with health plans that have high deductibles and out-of-pocket limits, the rigid requirements that govern the companion health plan for HSAs do not apply to HRAs.
FSAs have been around much longer than HSAs or HRAs and are still a very viable part of a consumer-directed plan design. FSAs are easy for employees to understand, and funding is flexible since both employees and the employer can contribute. FSAs can be used with any traditional health plan.