Question

What are some overall advantages and disadvantages of pursuing consumer-driven health-care options?

The actual subject is Human Resource Management

Answer 1

The advantages of consumer driven healthcare option includes that it helps to control the healthcare cost for the employer but also provide greater choices for the employees regarding healthcare. This method helps employers to reduce the cost of insurance premiums through selecting the plans with higher employee deductibles. One of the most common forms of consumer driven healthcare option is flexible spending accounts or FSA and it permit employees to pay for specified healthcare costs that are not covered by an employer’s insurance plan. Employees can elect the amount and allocate for the plan and employers can use this money to reimburse the employees who qualify for repayment during the plan year. Another advantage is that employees can make the contributions to FSAs on a pretax basis.

The disadvantages include the ‘use it or lose it’ provision of FSA as it is difficult to estimate the costs of anticipated medical needs. Employees may lose the contributions if they overestimate the amount because employers do not allow carrying the balance to next year or reimbursing the remaining amount. Employers also have some risk in pursuing this plan as the maximum amount of expenses for which an employee can be reimbursed is fixed and there is no statutory limit on the reimbursement employees can receive under a medical FSA. Employers set the maximum limit to protect themselves from major losses under the uniform coverage requirement and under this requirement, they should make the full amount of benefits and coverage based on the selected plan from the first day the plan has become effective irrespective of the employee contribution. But another form of consumer driven healthcare option, health reimbursement accounts or HRAs eliminate some of these disadvantages as the employers are making the contribution and also allows carrying over the unused account balance from year to year.