View the infographic below to discover the value of consumer-directed healthcare accounts. The graphic features an overview of HSAs, HRAs, and FSAs, along with other helpful information.
What is a Consumer Directed Healthcare Account?
A consumer-directed healthcare account is a type of medical savings account that:
- Helps pay for eligible medical expenses
- Can be set up by an individual or offered through an employer
- Gives account holders more control over healthcare dollars
CDH Account Types
1. Health Savings Account (HSA)
The participant owns the HSA, which acts like a regular bank account. Money deposited into the account pays for eligible healthcare expenses, including health plan deductibles.
- Must have an HSA-qualified HDHP to open or contribute to an HSA
- Maximum pre-tax contributions for 2024 are $4,150 for self-only coverage, $8,300 for family (age 55 or over can contribute an additional $1,000)
- Unspent funds may roll over into the following year
- Account funds earn tax-free interest
- All contributions are tax-deductible
- Funds used for eligible medical expenses are not subject to taxes
- Funds used for non-medical expenses are subject to taxes and IRS penalties
2. Health Reimbursement Arrangement (HRA)
In an employer-owned HRA, the employer deposits money into an account that the employee can use to help pay for qualified medical expenses, including deductibles and co-pays.
- Can be paired with any health insurance plan
- Employer decides which IRS-qualified expenses are eligible
- Optional rollover provision for any unused funds to the next year
- HRAs cannot pay for monthly health insurance premiums unless they are one of two HRA types created specifically for that purpose (ICHRAs and QSEHRAs)
3. Flexible Spending Account (FSA)
- Maximum pre-tax contributions for 2023 is $3,050
- FSA funds can pay for a wide variety of medical, dental, and vision care expenses
- FSA funds can pay for co-pays and deductibles but not premiums
- FSAs lower your income taxes by using pre-tax money
- Employers can contribute to your FSA, but it’s not a requirement
CDH Plans See Steady Growth
As of 2023, over two-thirds of all large employers (1000+ employees) offer an HSA-eligible plan.*
Growth in the percentage of large employers with CDH plans:
- 2014 – 45%
- 2015 – 52%
- 2016 – 57%
- 2017 – 58%
- 2018 – 64%
- 2019 – 62%
- 2020 – 67%
- 2021 – 66%
- 2022 – 66%
- 2023 – 69%
*Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2005-2017; KFF Employer Health Benefits Survey, 2018-2021
Employer Advantages:
- Reduce current healthcare plan costs
- Help limit future increases in plan costs
- Employee retention tool
Employee Advantages:
- Reduce income taxes
- Lower healthcare plan premiums
- Set aside tax-free money for medical expenses and retirement
Who Should Use a CDH Plan?
CDHPs usually have low monthly premiums, high deductibles, and out-of-pocket limits. They work well for people who:
- Want low monthly premiums
- Seek to reduce tax burdens
- Plan and track medical expenses effectively