Last Updated: November 16, 2009
Time was nary when a person had a consumer-driven health plan (CDHP). Today, you would still be in the minority if you had a CDHP. In 2009, for instance, 4 percent of the adult population with private health insurance was enrolled in a health reimbursement arrangement (HRA) or had a high-deductible plan with a health savings account (HSA), according to a new survey released recently by the nonpartisan Employee Benefit Research Institute (EBRI). An additional 4.9 percent were eligible for an HSA but did not have such an account. And overall, 8.9 percent of adults with private insurance were either in a CDHP or were in a high-deductible plan that was eligible for an HSA, but had not opened an account.
If you are among those who have a CDHP, or if you among those who might consider enrolling in such a plan, you would be wise to pay heed to the changes occurring with that employee benefit. "Workers with employee-only coverage have seen their annual employer contributions decrease, while those with family coverage have seen their annual employer contributions increase, such that nearly three-quarters of workers with family coverage receive a contribution of $1,000 or more," according to EBRI's report, which was published in the November 2009 EBRI Notes. "Both the amount of money that individuals have accumulated in their accounts and the amounts rolled over from year-to-year have grown: Those reporting a rollover of $1,500 or more increased from 13 percent in 2006 to 31 percent in 2009."
If you are among those with access to or already participating in a CDHP, FPA past board member Elizabeth Jetton, CFP®, a partner with RTD Financial Advisors, offers the following advice: "It makes sense for any employee who has a strong expectation of out-of-pocket health care costs to participate in the HRA and/or HSA, as available. That's because it permits using pre-tax dollars in the case of the HRA and tax-free dollars in the case of the HSA, to cover health care expenses that otherwise would have to be paid with after-tax dollars."
Jetton said the higher the taxable income, the higher the cost savings to the employee. In addition, she said it's important to understand the differences between HRA and HSA plans, especially regarding the ability to roll over the year-end balance accumulated in the account, over to the next year.
Of note, HSAs were created by the Medicare bill signed by then President Bush on December 8, 2003 and are designed to help individuals save for future qualified medical and retiree health expenses on a tax-free basis. Learn more about HSAs.
According to the Treasury Department: "You can have both types of accounts (an HSA and a HRA), but only under certain circumstances. General HRAs will probably make you ineligible for an HSA. If your employer offers a 'limited purpose' (limited to dental, vision or preventive care) or 'post-deductible' (pay for medical expenses after the plan deductible is met) HRA, then you can still be eligible for an HSA. If your employer contributes to an HRA that can only be used when you retire, you can still be eligible for an HSA."
"Health-care expenses and employee health-care benefit planning is a critical part of financial planning," said Jetton. Find a financial planner who can help you make sense of your health care expenses and employee health-care benefit planning.