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Tuesday, July 13, 2010

Health insurance 101: The rise of consumer-directed health care plans

Third in a series of blog posts featuring frequently asked questions about health insurance.

As we discussed in last week’s post, employers are passing more of the costs of health coverage to employees. In response, insurers are offering health plans that help individuals better absorb expenses and use their health care dollars more wisely.

What is meant by consumer-directed health care?

Blue Cross Blue Cross Blue Shield of Michigan introduced CDH plans in 2005 amid a growing number of employers that were dropping health care benefits altogether or requiring their employees to contribute more toward their premiums. Today, we market them under the umbrella term Healthy Blue Choices™.

CDH plans are credited with exposing employees to the true costs of their health care. Broadly speaking, they typically employ three different funding mechanisms. Each is designed to help you pay for eligible medical expenses, including deductibles and copayments, that otherwise are not covered under a health plan:

  • An employer, subscriber or both contribute money into a non-taxable health savings account (HSA) used to pay for a health plan or other qualifying medical expenses.
  • Employers may elect to set up health reimbursement arrangements (HRA), in which they set aside money to reimburse employees for qualified medical expenses.
  • Employers can also offer a flexible spending account (FSA), a tax-favored program that allows subscribers to pay for eligible out-of-pocket health and dependent-care expenses using pre-tax dollars.

Consumer-directed health plans are touted as member-centered health plans that give you options and control over your health care. You get a choice of health care plans and tax-free funding options that have the added bonus of reducing your income-tax liability.

Next week:Newer Michigan Blues plans reward individual wellness.

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