Consumer-Directed Medical Expense Plans Chapter 13 by hcj


									Consumer-Directed Medical
Expense Plans
Chapter 13
Types of Plans
n   Archer Medical Savings Accounts (ceased to
    exist in 2003; pilot program allowing 750,000
    accounts but fewer than 100,000 have been

n   Health Reimbursement Arrangements

n   Health Savings Accounts
Concept of consumer-directed
medical expense plans
n   Response to rising costs and service quality
n   Giving consumers better information to
    make decisions and giving them greater
    control over how they spend their health-
    care dollars.
A. Archer Medical Savings
n   Savings account from which unreimbursed
    medical expenses can be paid. Accounts
    sponsored by financial institution.
n   Available to employees and self-employed
n   Limits on deductible: minimum of $1700 ($3450)
    but not exceeding $2,600 ($5150) for individual
n   Contributions: must be made by either employee
    or employer but NOT both
n   Unused balances are carried over from year
    to year.
n   Distributions are used to pay medical
n   Withdrawals can NOT be used to pay for
    long-term insurance, COBRA continuation
    coverage, or health coverage while
    receiving unemployment compensation
B. Health Reimbursement
n   Used with high deductible medical expense
n   No limit on deductible
n   Can be established by any size employer
    but can NOT be established by self-
n   Contributions must be made by employer
n   Reimbursements are made only for medical
    expenses for employee, spouse and other
n   Account balances are carried over
n   Access to HRA ceases with termination of
    employment unless employee opts for
    COBRA benefits
C. Health Savings Accounts
n   Part of the Medical Prescription Drug,
    Improvement, and Modernization Act
n   Designed to succeed Archer MSA
n   HSAs must be funded and held by a trustee
n   Employees, self-employed, individuals
    whether employed or not
n   High deductible medical plan is required
    minimum $1,000 ($2,000) up to $5,000 ($10,000)
    for individual (family) coverage.
n   Contributions can be made either by employee or
    employer or both.
n   Amount set aside each year is $2700 for an
    individual or $5450 for a family or the amount of
    the deductible of health insurance plan whichever
    is lower.
n   Employee contributions are tax deductible even if
    the employee does not itemize
n   Distributions are used to pay for qualified
    medical expenses, pay for long-term care
    premiums, COBRA continuation coverage,
    health insurance while receiving
    unemployment benefits
n   Advantages            n   Disadvantages
n   More choices to       n   More responsibility
    employees             n   Additional risk
n   Employees become      n   Reduce employers’
    more cost conscious       health care costs
n   Better educated

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