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Health Accounts and Account-Based Plans

Why Employers Care

Health plans created consumer-directed health plans (CDHPs) in response to the constant rise in health care costs, particularly consumers' increasing out-of-pocket costs. Under traditional health care plans (HMOs, PPOs and POS); employees pay relatively low copayments and other cost sharing and generally higher premiums. Under CDHPs, premium payments are lower but cost sharing is higher thus promoting people to have more of their own "skin in the game" to choose medical care in a cost-efficient way.

Congress added Health Savings Accounts (HSAs) for use with HDHPs in 2004, which offer multiple tax advantages, including tax-free employer and employee contributions, investment earnings, disbursements for eligible medical expenses and full portability. A few other pre-tax health arrangements/accounts also exist including: Health Reimbursement Arrangements (HRAs) funded solely by employers and Flexible Spending Accounts (FSAs) which allow employees to voluntarily save for their out-of-pocket health expenses.

Recently, the IRS issued guidance permitting plan sponsors to modify the “use-or-lose” rule for health FSAs to allow a $500 carryover of unused health FSA funds into the following plan year, provided the health FSA does not also have a 2½ month grace period for incurring and submitting claims the following plan year.

A current, complicated set of varying regulations accompanies each of the accounts commonly associated with CDHPs. The confusion for individuals and employers inhibits the growth of account-based CDHPs. The Business Group believes the government, through legislation and regulation, should create a uniform set of simple rules that enable the creation of a single, portable health account that both employers and employees can fund and use for health care expenses.

For more details on the specific health accounts, please visit the following pages:

      Flexible Spending Accounts (FSAs)
      Health Reimbursement Arrangements (HRAs)
      Health Savings Accounts (HSAs)

What Can Employers Do?

As members of the National Business Group on Health, employers can voice their concerns while shaping and influencing public policy on health account regulations and legislation to the Business Group's public policy team and by responding to public policy opportunities to comment on proposed regulations, contact Congress and/or the Administration, testify, or participate in related activities.

Relevant Tools and Resources Include:

Page last updated: August 14, 2014

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