Consumer-Directed Health Plan

High-deductible medical coverage paired with a tax-advantaged account such as an HSA, HRA, or FSA that the consumer controls for out-of-pocket expenses — A consumer-directed health plan couples a high-deductible health plan with a consumer-controlled, tax-advantaged account — an HSA, HRA, or FSA — used to pay qualified medical expenses before the deductible is met. The design philosophy is to make consumers cost-conscious shoppers of health care by giving them visibility into, and control over, the first dollars of spending while preserving catastrophic protection once the deductible is exhausted. The account component, not the network or the payer, is what defines the consumer-directed model, and it is the element that distinguishes a CDHP from traditional managed care products.

National insurance concept

It is funded solely by employer contributions, and unused employer amounts generally revert to the employer at the end of the plan year or when employment ends — A health reimbursement arrangement (HRA) is an employer-funded account used to reimburse employees for qualified medical expenses. Because the money comes from the employer, the HRA belongs to the employer: unused balances generally revert to the employer at the end of the plan year or when the employee leaves the job, and the account is not portable. This is the fundamental contrast with an HSA, which is owned by the individual and travels with the employee. The exam pairs HRA with HSA and FSA as consumer-directed health plan (CDHP) accounts.

National insurance concept