Consumer Driven Care Learning Center

The Consumer Driven Care Learning Center and newsletter, brought to you by MCOL, have been developed to provide a resource for health care professionals interested in Consumer Driven Care and related programs.

 

Consumer Driven Care is the learning resource for professionals interested in Consumer Driven Care and related programs. Here's what you can do while visiting Consumerdrivencare.com:

  • Browse our dictionary, with a searchable Glossary of common and obscure Consumer Driven Care terminology
  • Reference our Fact Sheet, filled with key data and information
  • Consult our library of Videos on selected Consumer Driven Care topics
  • Review Lists compiled of relevant Consumer Driven Care data and more, from healthsprocket
  • Check out  links to important web Resources for professionals
  • Sign up to receive the complimentary Consumer Driven Care e-Newsletter
  • Find out more About Consumer Driven Care from MCOL

Consumer Driven Care Newsletter

Consumer Driven Care provides a complimentary email newsletter providing regular updates on Consumer Driven Care and related program news, issues, trends, events and announcements. To see the current newsletter, click here.

Term Definition
Account Administrator The organization responsible for the administration of an applicable spending or savings account. Such organizations could include a health plan, third party administrator, or financial institution.
Account Integration The processes in place in a consumer driven health plan that attempt to make the consumer and other interfaces between the applicable spending or savings account, and the high deductible health plan, as seamless as possible.
Benefits Cycle The concept that in the consumer choice environment, future marketplace competition between health plans will not cause major fluctuations in premium increases that have historically occurred over periods of time (see Premium Cycle) and instead will cause periods of increased or decreased cost sharing and benefit coverage based upon economic conditions.
Concierge Care Physician or other provider services that typically involve an upscale packaging of services to a patient population in a non-managed care environment.
Consumer Choice Health Care See Consumerism
Consumer Driven Health Plan Involves a combination of an tax advantaged and funded spending or savings account with a high deductible insurance policy
Consumerism The delivery of health care services, information or benefits that is rendered in a more consumer-oriented fashion, with the focus on engaging and empowering consumers more in clinical decision making, in the financing of the care, and in enhancing consumer knowledge about their health care.
Convenient Care See Retail Clinics
Customized Health Plans A Customized Health Plan offers a variable plan of benefits, and or participating provider networks, which a consumer may select from within the plan, during an open enrollment period, so that the plan premium price is determined by the variable options selected by the consumer.
Debit Card A health care debit card involves issuance of card to participants in a qualified health care spending or savings account (such as HRAs, MSAs or FSAs) that can be presented to providers to transfer funds from the applicable account to the provider for payment of health care services rendered to the participant. In order for such accounts to properly qualify for tax advantaged treatment, the administration of the debit card payments must meet various IRS provisions.
Decision Tools Decision support provided by plans, administrators or third parties, typically web-enabled, that assist consumers in providing information under different options and scenarios for such functions as provider selection, provider pricing, clinical treatment options, out of pocket expense calculation, benefit option selection and various other items.
Defined Contribution Health Plan A health plan funding arrangement whereby an employee is given a specified dollar amount each period from an employer or union to purchase health plan coverage or health care services from various available option
Design Your Own Plan A Customized Health Plan offers a variable plan of benefits, and or participating provider networks, which a consumer may select from within the plan, during an open enrollment period, so that the plan premium price is determined by the variable options selected by the consumer.
Flexible Spending Account A plan which provides employees a choice between taxable cash and non-taxable benefits for un-reimbursed health care expenses or dependent care expenses that can not roll over from year to year
FSA A plan which provides employees a choice between taxable cash and non-taxable benefits for un-reimbursed health care expenses or dependent care expenses that can not roll over from year to year , and has qualified under Section 125 of the IRS code.

Pages

Consumer Driven Health Plans

Consumer Driven Health Plans combine a tax advantaged and funded spending or savings account with a high deductible insurance policy. Typically these account-based plans involve either a Health Savings Account (HSA) or a Health Reimbursement Account (HRA). The companion insurance policies for HSAs must meet the regulatory definition of a High Deductible Health Plan (HDHP).

Other Aspects of Consumerism

Consumer Driven Care, in addition to the narrower context of Consumer Driven Health Plans, is referred to by some stakeholders somewhat inter-changeably with the broader aspects of health care consumerism. Health care consumerism encompasses a wide range of components involving the engagement and empowerment of consumers in the delivery of health care services and benefits.

Other types of health benefit design, in addition to consumer driven health plans, that might fall under the umbrella of consumerism could include:

  • Defined Contribution Health Plans
  • Customized Health Plans
  • Value Based Benefit Design
  • General deployment of increased consumer cost sharing requirements

Other trends, strategies and business models that can be considered aspects of consumerism could include:

  • Wellness participation incentives
  • mHealth applications, web based tools and portals
  • Health Care Social Media
  • Retail Clinics
  • Medical Tourism
  • Direct to Consumer Advertising
  • Health Insurance Exchanges

Tax Advantaged Health Savings and Spending Accounts:

Flexible Spending Accounts (FSAs):  pre tax accounts where unspent balances may not be rolled over, other than for a 2.5 month grace period after each plan year. Often offered as separate component of cafeteria plans. Created in 1978. FSA tax provisions were modified under the Affordable Care Act whereby employees may not choose an annual election in excess of a limit determined by the IRS, which was set at $2,500 for the first plan year beginning after December 31, 2012.

Health Reimbursement Arrangements (HRAs): employer funded pre-tax accounts where unspent balances may roll over from year to year. No employee portability. Typically offered in combination with high deductible plans. Created in 2002.

Health Savings Accounts (HSAs): pre tax savings accounts funded by employers or employees/individuals that must be offered in combination with qualified High Deductible Health Plans. Provides for employee portability and investment of account funds. . Effective in 2004.

Medical Savings Accounts (MSAs): pre tax savings accounts with many various qualifying provisions. Created in 1996.  No new accounts may be opened as an MSA since 2007.

The following table summarizes comparative provisions of the major types of accounts:

FSA

HSA

HRA

  • May be used by any employer and employees
  • May be funded by employer or employee
  • Balances may not rollover from year to year (use it or lose it) other than for 2.5 month grace period
  • One time qualified transfer to HSA was allowed until 2012

 

  • May be used by any taxpayer, must be opened before age 65
  • Require companion high deductible insurance policy
  • May be funded by employer or employee
  • Balances may rollover from year to year
  • May be used by any employer
  • May only be funded by employer
  • Balances may rollover from year to year
  • More flexibility in plan design than HSA
  • One time qualified transfer to HSA was allowed until 2012

 

Consumer Driven Health Plan Design and Structure

plandesign.gif

For Health Savings Accounts, the Insurance Plan must be an IRS defined High Deductible Health Plan, with a minimum Annual Deductible and maximum Annual Account Contribution amounts set annually by the IRS. HSAs may be arranged by individuals or by Employer or other qualified groups.

Health Reimbursement Accounts may only be arranged by Employers or other qualified groups, and may be offered without a companions health plan. Most HRAs are offered with a companion plan, that can be an IRS defined High Deductible Health Plan, but can also fall outside the IRS High Deductible Health Plan specifications.

The Difference between the Funded HRA or HSA, and the Deductible amount is the Gap that Employee must pay out of pocket, unless the employee also has a funded Flexible Spending Account (FSA) to pay for the difference.

The Insurance Plan's Preventive Care Benefit it typically not subject to the Deductible amount (the preventive benefit has first dollar coverage)

Annual HSA and HDHP Minimums and Maximums

For 2016, the deductible for self-only coverage must have been at least $1,300 (with an annual out-of-pocket limit not exceeding $6,550); the deductible for family coverage must have been at least $2,600 (with an annual out-of-pocket limit not exceeding $13,100). The annual HSA contribution limit in 2016 for individuals with self-only coverage was $3,350; for family coverage, it was $6,750.

For 2017, the deductible for self-only coverage must be at least $1,300 (with an annual out-of-pocket limit not exceeding $6,550); the deductible for family coverage must be at least $2,600 (with an annual out-of-pocket limit not exceeding $13,100). The annual HSA contribution limit in 2017 for individuals with self-only coverage is $3,400; for family coverage, it is $6,750.

(Revenue Procedure 2016-30)

Key Consumer Driven Care Regulations

Key Regulations impacting consumer driven care include:

  • IRS Code Section 125 as part of the Revenue Act of 1978 regulates Flexible Spending Accounts (FSAs). IRS Notice 2005-42 allows for a grace period extending 2.5 months after the close of a plan year for FSA claims to be filed.
  • IRS Notice 2002-45 created Health Reimbursement Arrangements (HRAs) and IRS Revenue Ruling 2002-41 modified applicable IRS Code sections to allow pre tax treatment of qualified HRAs with balance rollovers
  • IRS Revenue Ruling 2003-43 stipulates that provider payments through applicable debit and credit card transactions may be made on a pre tax basis; and IRS Revenue Ruling 2003-102 stipulates that over the counter prescriptions are eligible for pre tax treatment as expenditures, from qualified FSAs and HRAs
  • The Health Insurance Portability and Accountability Act of 1996 (HIPAA) included provisions creating Medical Savings Accounts (MSAs) as a pilot program with extensions issued by the IRS. After 2007, new accounts may not be created, but existing accounts can continue, or may choose to rollover into HSAs.
  • The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 established IRS Code Section 223 for Health Savings Accounts.
  • The Tax Relief and Health Care Act of 2006 modified various HSA provisions, and extended MSA enrollment through 2007.
  • The Patient Protection and Affordable Care Act amended Section 125 such that FSAs may not allow employees to choose an annual election in excess of a limit determined by the Internal Revenue Service. The annual limit will be $2,500 for the first plan year beginning after December 31, 2012.
  • Subsequent Guidance has provided HSA, HRA and FSA clarifications and provisions include, but are not limited to the following:
    • Revenue Ruling 2003-43 (Debit and Credit Card transactions)
    • Revenue Ruling 2003-102 (OTC drugs)
    • Notice 2004-2 (general overview)
    • Notice 2004-23 (safe harbor definition of “preventive care”)
    • Rev. Ruling 2004-38 (other permissible coverage)
    • Rev. Ruling 2004-45 (permissible FSA/HRA coverage)
    • Notice 2004-50 (88 FAQs covering variety of issues)
    • Notice 2005-8 (HSA Contributions by Partnerships and S corporations)
    • Revenue Procedure 2005-25 (Contributions of Spouses to HSA Accounts)
    • Notice 2005-86 (HSA Eligibility During A Cafeteria Plan Grace Period)
    • Notice 2006-69 (Debit Cards -also applicable to HRAs and FSAs)
    • DOL FAB 2006-02 (ERISA applicability)
    • Notice 2008-59 (Guidance on Health Savings Accounts)
    • IRS Bulletin 2008-20 (Employer Comparable Contributions to Health Savings Accounts Under Section 4980G)
    • Annual Revenue Procedures setting annual HDHP minimum deductibles and HSA maximums contributions

Consumer Driven Care Data

  • The number of enrollees with HSA/HDHPs rose to nearly 19.7 million in January 2015, up from 17.4 million in January 2014, 15.5 million in January 2013, and 13.5 million in January 2012; plans participating in both 2014 and 2015 saw a 22 percent increase in enrollment. (1)
  • The total number of HSA accounts rose to 18.2 million in 2016, holding over $34.7 billion, a year over year increase of 22% for HSA assets and 25% for accounts for the period of 6/30/2015 to 6/30/2016. During 2015, health plans were the leading driver of new account growth, comprising 37% of new accounts. (2)
  • HSA investment assets reached an estimated $3.2 billion in June 2016, up 23% year over year. The average investment account holder has a $15,092 average total balance (deposit and investment account). (2)
  • Nine percent of covered workers are enrolled in HDHP/HRAs in 2016, and 14% 19% of covered workers are enrolled in HSA-qualified HDHPs. (3)
  • In 2016, 28% of firms offering health benefits offer an HDHP/HRA or an HSA-qualified HDHP, this has steadily risen from 23% in 2011, and 15% in 2010. Among firms offering health benefits, 5% offer an HDHP/HRA and 24% offer an HSA-qualified HDHP. (3)
  • Virtually all firms with 1,000 or more workers offer an HDHP/HRA-HSA, compared to 44% of firms with 3 to 199 workers, and 53% of firms with 200-999 workers. (3)
  • In 2016 29% of covered workers overall were enrolled in a HDHP/HRA-HSA. This enrollment has increased 8% between 2014 and 2016.
  • The average general annual deductible for single coverage is $1,478 for HDHP/HRAs and $2,196 for HSA-qualified HDHPs. The average aggregate deductibles for workers with family coverage are $4,321 for HDHP/HRAs and $4,364 for HSA-qualified HDHPs (3)
  • 65% of employees with employer sponsored HSA/HDHPs received contributions to the accounts from their employers. Among those accounts receiving employer contributions, the average contribution was $1,176 for single coverage and $4,719 for family coverage (3)

(1) 2015 Health Savings Account Census Report, America’s Health Insurance Plans, Center for Policy and Research, November 11, 2015

(2) 2016 Midyear Devenir HSA Research Report, Devenir Press Release, August 16, 2016

(3) 2016 Employer Health Benefits Survey, The Kaiser Family Foundation and Health Research & Educational Trust, September 14, 2016


AHIP Center for Policy and Research
Health Savings Accounts and Account-Based Health Plans

Bureau of Labor Statistics
Consumer-Driven Health Care: What Is It, and What Does It Mean for Employees and Employers?

Deloitte Center for Health Solutions
Health Care Consumerism

Employee Benefit Research Institute
Consumer-Driven Health Benefits Project

HSA Center
Sponsored by UnitedHealthcare

National Center for Policy Analysis
Consumer-Directed Health Care

National Conference of State Legislatures
State Legislation and Actions on Health Savings Accounts (HSAs)and Consumer-Directed Health Plans

The Institute for HealthCare Consumerism
The Institute for HealthCare Consumerism Website

U.S. Department of the Treasury
Raesource Center: Health Savings Accounts

University of Minnesota, Carlson School of Managment
Consumer Driven Health Plan Research