CONSUMER-DRIVEN HEALTH CARE

The term “consumer-driven health care” is used to describe different vehicles for providing health care or funding health care costs. These vehicles encourage individuals to become actively involved in making decisions regarding their health care. The proponents of such vehicles believe that giving the individuals more control– empowering them to assume a more active role and giving them a financial stake in lowering their health care costs – will foster an increase in consumer educational and market competition. Wouldn’t this ultimately result in greater health care quality and availability at a lower cost? One component commonly found in “consumer-driven health care” is a personal account through which an employee can pay for or be reimbursed for certain medical expenses of the employee.

One of the most popular mechanisms today is Health Reimbursement Arrangements (HRAs).

A Health Reimbursement Arrangement (HRA) is an employer owned, self-funded arrangement used to reimburse employees for eligible medical related expenses on a non-taxable basis.  HRAs can be designed in a variety of ways.  Plan design allows for flexibility while still providing employer tax advantages. 

The most common use of an HRA is coupling the HRA with high-deductible health coverage.    The premium cost for high deductible health insurance coverage is generally much less than the premium cost for traditional group health coverage.  The employer can use that savings to assist their employees in paying for the employee’s increased out of pocket expense.

HRAS……IN SUMMARY

A plan document must be adopted by the employer (typically by a board of directors’ resolution or by other formal action by an authorized officer) or owner.  The design features of the HRA must be incorporated into the plan document and communicated to the employees.