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Group Health Insurance – Creative ways to keep premiums low

What are consumer-directed health plans?

Group Health Insurance, Orange County, CA - June 26, 2012 - Consumer-directed health plans are high-deductible PPOs that offer the same network as traditional PPOs, but usually at a lower cost. In addition, they have tax savings, deferral and rollover features similar to a 401(k) or IRA. 

The plans have two key features:

  • Your regular health plan ID card
  • A debit card associated with your health bank account

On a traditional PPO or HMO, you present your ID card at the doctor’s office and pay your co-pay ($10, $20 etc…). With a consumer-directed card you would still present your ID, but you would not have a co-pay. You will pay for the visit (at a reduced, negotiated rate) using your medical bank account debit card. The funds will be withdrawn from your account just as if you were using your regular bank account.

Consumer-directed health plans may offer substantial savings over traditional PPOs and HMOs. This savings can then be deposited into an account reserved for your medical expenses. You may receive a federal tax deduction on the amount you deposit, up to IRS limits. In addition, the money in the account grows tax-deferred, much like your 401(k). Withdrawals for medical expenses may be tax free, and monies that are unused in a given year “rollover” year on year.  These type of plans not only put the consumer in charge of their health-care dollars, they can offer a savings vehicle for future medical expenses. 

Consumer-directed health plans have become ever more popular because of their ability to save consumers money. New research published by Health Affairs shows that if consumer-directed health plans increased as a share of employer-sponsored plans from 12.4 percent to 50 percent, it could save $57.1 billion annually in national health expenditures. The report states, “The study uses two types of consumer-directed plans to comprise the increased market share: Half health reimbursement arrangements (HRAs) and half health savings accounts (HSAs). The study shows that if the ever-popular HSAs were to take up the entire 50 percent of market share, savings could reach $73.6 billion, or 9.1 percent of employee health care spending.” 

With the disastrous effects that rising health insurance prices are having on employers big and small, now may be the best time to see if these consumer-directed health plans would be a prudent choice for you and your business.

All the best,

Greg LevinCFP®

CA Insurance Lic# 0F08519

 LPL Financial Tracking #1-078008
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Comment   |  7 years, 9 months ago from Cowan Heights, CA