Asked late in the summer of 2004 about their plans for the upcoming year, 14 percent of large employers said they were likely to offer a consumer-directed health plan in 2005, while 26 percent of the 3,020 employers surveyed said they were likely to offer such a plan by 2006, according to the 2004 National Survey of Employer-Sponsored Health Plans, conducted by Mercer Human Resource Consulting.
Legislation passed in December 2003 as part of the Medicare Prescription Drug, Improvement and Modernization Act, which allows for the creation of health savings accounts, could help speed the process.
"Considering how new the model is--and how fundamentally different it is from traditional health plans--I'd say employers are adopting consumer-directed health plans surprisingly fast," says Blaine Bos, a consultant in Mercer's Minneapolis office and one of the study's authors.
"While the largest employers are already getting on board the consumer-directed health plan bandwagon, we're actually seeing more interest among smaller employers as a result of the health savings account rule," he says.
"These plans will allow smaller employers to convert their catastrophic plans into high-deductible health plans, and provide employees with an opportunity to use tax-sheltered accounts for health care expenses."
Consumer-directed plans offer high-deductible conventional insurance plans--usually based on a PPO network--along with an additional spending account funded either by the employer, the employee or both.
Employees covered by a high-deductible plan are eligible to establish a health savings account. Money contributed to the health savings account belongs to the employee, and is portable if they move to another employer.
Funds unspent from the account can be rolled over from year to year and gains interest tax-free, similar to an IRA. The employer and employee contribute to the health savings account tax-free. Any funds distributed from the account are not taxed as long as they are used to pay for medical expenses. Banks or investment companies must administer the health savings account.
February 1, 2005
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