Most of you have heard of “consumer directed health plans.” The Bush administration has been a strong supporter of this concept as a way to get a handle on rising health costs. The recent inaugeration Mr Bush that the signals of health plans consumer directed increasingly constitute a larger percentage of group medical plans in the coming years. In the past, consumer directed plan designs have taken many forms: Medical Savings Accounts (MSAs), flexible spending accounts (FSAs), Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs).
Many experts consider HRAs, HSAs to be the first generation of viable health care consumer directed products. HRAs are often paired with a high deductible health plan and employers are funded by the Section 105 defined contribution plans. HSAs are the latest version of health care consumer directed plans. The basic components of HSAs include an insurance product high-deductible expenses and a cash account. HSAs combine the treatment of a pre-tax FSA, the portability and the introduction of more of the characteristics of a 401 (k) plan, and tax-free distributions from a Roth IRA.