The Value of a Consumer Directed Healthcare Account

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 2024 is $3,200
  • 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
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