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Consumer-Directed Medical Expense Plans Chapter 13.

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Presentation on theme: "Consumer-Directed Medical Expense Plans Chapter 13."— Presentation transcript:

1 Consumer-Directed Medical Expense Plans Chapter 13

2 Types of Plans Archer Medical Savings Accounts (ceased to exist in 2003; pilot program allowing 750,000 accounts but fewer than 100,000 have been established) Health Reimbursement Arrangements Health Savings Accounts

3 Concept of consumer-directed medical expense plans Response to rising costs and service quality shortcomings: Giving consumers better information to make decisions and giving them greater control over how they spend their health- care dollars.

4 A. Archer Medical Savings Accounts Savings account from which unreimbursed medical expenses can be paid. Accounts sponsored by financial institution. Available to employees and self-employed Limits on deductible: minimum of $1700 ($3450) but not exceeding $2,600 ($5150) for individual (family)coverage. Contributions: must be made by either employee or employer but NOT both

5 Unused balances are carried over from year to year. Distributions are used to pay medical expenses Withdrawals can NOT be used to pay for long-term insurance, COBRA continuation coverage, or health coverage while receiving unemployment compensation

6 B. Health Reimbursement Arrangements Used with high deductible medical expense plan No limit on deductible Can be established by any size employer but can NOT be established by self- employed Contributions must be made by employer ONLY.

7 Reimbursements are made only for medical expenses for employee, spouse and other dependents. Account balances are carried over Access to HRA ceases with termination of employment unless employee opts for COBRA benefits

8 C. Health Savings Accounts Part of the Medical Prescription Drug, Improvement, and Modernization Act 2004. Designed to succeed Archer MSA HSAs must be funded and held by a trustee Employees, self-employed, individuals whether employed or not

9 High deductible medical plan is required minimum $1,000 ($2,000) up to $5,000 ($10,000) for individual (family) coverage. Contributions can be made either by employee or employer or both. 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. Employee contributions are tax deductible even if the employee does not itemize

10 Distributions are used to pay for qualified medical expenses, pay for long-term care premiums, COBRA continuation coverage, health insurance while receiving unemployment benefits

11 Advantages More choices to employees Employees become more cost conscious Better educated consumers Disadvantages More responsibility Additional risk Reduce employers’ health care costs

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