Consumer-Directed Benefits Put the Affordable in Affordable Care, By Thomas Beal
As the Patient Protection and Affordable Care Act continues to roll out, more employers
are choosing consumer-directed benefits plans. Still, many employers and employees are
struggling with the question of which plan offers the best value for their company or their
family – a consumer-directed benefits plan or a traditional health care plan.
There are no across-the-board rules for making one of the most important decisions a
business and its employees must make. People need to look carefully at their own use of health
care before choosing one plan over another.
Consumer-Directed Plans Benefit Employer and Employee
Consumer-directed benefits help companies deal with the increasing price of health care by controlling
costs. Additionally, in response to the Affordable Care Act, companies are easing the transition to this
new model bysubsidizing the premiums and contributing to health savings accounts or health reimbursement
accounts, the popular companion plans that often accompany the Consumer Directed Benefit Plans.
Employees should contact the company’s broker for a conversation regarding their
current and future healthcare needs. They should ask the important questions and rely on the
broker for advice and direction.
The pros and cons of each plan offered should be discussed and evaluated carefully based on
the specific needs of the individual and his or her family. For example, if someone has an ongoing
high-maintenance need (such as asthma or diabetes), he or she could be better off with a normal
co-pay plan. High Deductible Health Plans or HSAs or HRAs may not be a sound choice because
the employer is not going to put enough money into it.
This is a very individual decision. Of course, any conversations with an employer’s
healthcare broker remains confidential.
Consumer-Directed Benefits Plans can mean savings in multiple areas for the company
and the workers. Here are three examples.
1. Insurance savings
According to the Towers Watson survey, (conducted by the leading global professional
risk services actuarial company) companies with fifty percent or more of its workers using HSAs
and other consumer-directed benefits report total claim costs per employee of more than $1,000 lower
than companies without these types of health plans.
2. Tax savings
This one is a no-brainer. HSAs, HRAs and other tax-advantaged accounts are just that:
tax-advantaged. Employees keep more of their money; employers keep more of their money. It’s
3. Health savings
Healthier workers mean less health dollars spent by the company and the savings here
are two- fold. Many companies are using positive employee actions and incentives to help get
their workforce healthier. For the employee, that could mean additional incentive dollars into an
HSA or for other incentives, such as exercise equipment or gift cards. But the real health savings
is … health.
IRS Limits, Minimums and Maximums
The Internal Revenue Service has announced the 2014 contribution limits, deductible
minimums and out-of-pocket maximums for health savings accounts (HSAs) and high-deductible
health plans (HDHPs).
- An HDHP must have a deductible of at least $1,250 for individual coverage and at least
$2,500 for family coverage (including a minimum $2,500 embedded individual deductible
under family coverage) to qualify an individual to contribute to an HSA. These minimum
deductibles are unchanged from 2013.
- Out-of-pocket maximums for an HSA-qualifying HDHP in 2014 are $6,350 for individual
coverage and $12,700 for family coverage. These are increased from $6,250 for individual
coverage and $12,500 for family coverage in 2013.
- Contribution limits for HSAs will be $3,300 for individual coverage and $6,550 for
family coverage in 2014. These are increased from 2013’s limits of $3,250 for individual
coverage and $6,450 for family coverage. The annual “catch-up” contribution amount for
individuals age 55 or older will remain $1,000.
The benchmark Towers Watson is using for which companies are outperforming others is
the affordability for employers and employees. The report shows that those companies working
toward increased use of Consumer Directed Benefit Plans are set up for long-term success and
are the best performers. These companies are learning how to make the Patient Protection and
Affordable Care Act not only affordable for their employees but also for themselves.