Consumer-Directed Health Care

Health Savings Accounts
The new personal Health Savings Accounts (HSAs), help pay unreimbursed medical expenses effective January 1, 2004 on a tax-preferred basis was signed into law December 8, 2003 by President George W. Bush.

Medical Savings Accounts
The Health Insurance Portability and Accountability Act of 1996 permits eligible individuals to establish medical savings accounts (MSAs) under a pilot project that began on January 1, 1997. An MSA is a trust or custodial account established to pay medical expenses in conjunction with a high-deductible health plan. To be eligible for an MSA, an individual must be either employed by a small employer that establishes a high deductible health plan, or a self-employed person covered by a high deductible health plan.

Flexible Spending Accounts
Often referred to as flexible benefits plans, cafeteria plans or 125 plans, flexible spending accounts (FSAs) allow you to set aside a portion of your pay, on a pre-tax basis, to pay for certain out-of-pocket Health Care or Dependent Care expenses. If you anticipate out-of-pocket expenses for dependent care of health care expenses not covered in full or not covered at all by your health plans, you can save 28% or more by paying those expenses with money that has not been taxed. Amounts set aside in FSAs are not subject to federal or local taxes.

Health Reimbursement Arrangements
Proponents of consumer directed options have lobbied the departments for clarification of the tax treatment for new options that allow the carryover of unused funds to later years. Funds may be used under certain circumstances for health insurance premiums, including COBRA and Medigap coverage. Funds would be available to current employees and may also allow access by former employees, including retirees.

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