NCPA - National Center for Policy Analysis

Barriers to Consumer-Directed Health Care

October 19, 2001

An increasing number of U.S. employers are interested in switching to so-called defined contribution health plans -- both to increase the choices available to employees and their families, and to control rising health care costs. However, a group of experts called the Wye River Group on Healthcare says there are legal and regulatory obstacles to such plans that should be removed.

Among their recommendations:

  • Repeal "use-it-or-lose-it" rules that currently apply to Flexible Spending Accounts (FSAs), in which pre-tax contributions to a certain kind of health care savings account must be used by the end of the year or the money is forfeited.
  • Permit purchases of insurance through FSAs, which would "open up new avenues for employers who can't afford the entry cost of a health insurance policy."
  • IRS clarification of flexibility and tax treatment of funds accumulated in health care accounts.
  • Improving the portability of Personal Health Accounts via the tax code.

Also, they suggest improving the ability of healthmarts and association health plans to serve health care consumers -- that might involve, for instance, increasing the universe of consumers who could join group health plans unconnected to their workplace.

Source: Wye River Group on Healthcare, "An Employer's Guide to Consumer-Directed Healthcare Approaches," October 2001.


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