CDHC: The affordable in the Affordable Care Act

By Jody Dietel

July 14, 2013

"Traditional” health care benefits vs. consumer-directed benefits—that is the question.

Many employers and employees are grappling with the question of which plan is the best value for their company or their family.

With the Patient Protection and Affordable Care Act continuing to roll out, the confusion of one plan vs. a second vs. a third is multiplied. However, one thing remains clear: More employers are choosing consumer-directed benefits.

According to the 18th Annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care, account-based health plans are the only plans are on the rise. They’re increasing in popularity in part due to an excise tax inside PPACA that’s set to take effect in 2018.

Consumer-directed benefits are a strong piece of the ABHP puzzle to help companies deal with the increasing price of health care. Not only have employers adopted CDBs to control their costs and in response to PPACA, they’re easing the transition to this new model by subsidizing the premiums and contributing to health savings accounts or health reimbursement arrangements, the popular companion plans that often accompany CDBs.

These moves can mean savings for both the company and the workers. And there’s more than just one type of savings. Here are three examples of the types of savings that consumer-directed benefits can provide for both employers and employees:

1) Insurance savings

Companies that successfully move employees into ABHPs save big, according to the Towers Watson survey. The research shows that companies that have 50 percent or more of its workers with health savings accounts and other consumer-directed benefits report total costs per employee of more than $1,000 lower than companies without these types of health plans.

2) Tax savings

This is a no-brainer. HSAs, HRAs and other tax-advantaged accounts are just that: tax-advantaged. Employees keep more of their money; employers keep more of their money. It’s a win-win.

3) Health savings

The savings here are a two-fer. Many companies use positive employee actions and incentives to help get its workforce healthier. For the employee, that could mean additional incentive dollars into an HSA or other incentives, such as exercise equipment or gift cards, but the real health savings is the “health.” Healthier workers mean fewer health dollars spent by the company, and the health savings emphasis here is the “savings.”

The benchmark Towers Watson is using for which companies are outperforming others is the affordability for both employers and employees. The report shows that the best performers—those companies working toward bigger use of CDBs—are set up for long-term success. These companies are learning how to make the Patient Protection and Affordable Care Act not only affordable for their employees but also for themselves.

About the Author

Jody Dietel is chief compliance officer at WageWorks, Inc. and executive director of Save Flexible Spending Plans, an advocacy campaign to protect the accessibility and use of flexible spending accounts. Concurrently, she serves on the Board of Directors for the Special Interest Group for IIAS Standards (SIGIS), the industry group that determines standards for the use of Health Payment Cards at merchants without the need for documentation, and is a member of the board of directors for the Employers Council of Flexible Compensation and the HSA Council. A frequent speaker at industry functions, Jody is especially proud of being the only non-attorney to present at Employee Benefits Institute of America's conferences.

For more information visit, www.wageworks.com or www.savemyflexplan.org. To learn more about the proper use and advantages of tax-advantaged benefits, visit www.savesmartspendhealthy.org.