Alternative Payment Plan
- Generally, how can alternative payment plans be beneficial?
Over the years, the cost at which the employers have been offering health insurance to employees has been rising, and most of them are considering shifting to consumer-driven health plans. The core objective of this is to lower the costs of providing employee health insurance as they have lower premiums.
- Explain new information about the selected two plans discovered through research.
Health saving account, like any other alternative payment method, consists of several advantages and disadvantages to the account owner. One of the merits associated with the plan is that it allows both the employee and employer to fund pre-tax dollars until the set limit by the Internal Revenue Service. As such, the account holders do not lose any amount left in the account annually because they are rolled over to the following year without penalties. Consequently, if the money is withdrawn after the age of sixty-five, it can be used for retirement income where income tax is deducted yearly, and if withdrawn before that age, it is subject to a ten percent tax penalty. The account, the same as HSAs and IRAs, also allows the participants to either choose to invest the money in stocks or other financial organizations. Moreover, the interest and other earnings in this account are free from tax if the money is withdrawn to settle medical bills rather than retirement income.
Another alternative payment method is a medical savings account (MSA), which is a predecessor of a health savings account (HSA). It was founded in 2003 as a section of medicare prescription drug improvement and modernization act. These accounts have the benefit of reducing the high cost of health care costs as they are deductible to tax allowing account holders to utilize qualified health costs without being subject to penalties or taxes. Similar to HSAs, these accounts also serve as a retirement account that can be used without any penalties from age sixty-five and older. Finally, the funding of these MSA accounts is made by the employer or the individuals but not by all of them.
Lucille Islom
Excellent research Islom. I like how you have elaborated on the two payment methods, Health Saving Account and Health Reimbursement Arrangement based on Exhibit 1 in comparison of various pre-tax saving accounts and its relationship to a high-deductible health plan. Apart from the disadvantage of the HSAs of not being able to pay by one’s HDHP for future health care expenses, I think you could have explained the advantage of the account. Similarly, the explanation on HRAs is sufficient as it highlights the account is an employer-funded plan that reimburses employees for qualified medical costs.
Kylie Hammill
Well-researched response Hammill, a Health savings account, enables the account owner to save money in the account on a pre-tax basis to reduce the expenses incurred in health care. Only individuals with high deductibles are allowed to fund the account, and they cannot pay a premium even though it can be used to pay for health care expenses. Also, the elaboration of flexible spending accounts is substantial, considering that it explains that the account provided for employees by employers to help them put money aside yearly for their medical costs. Additionally, the account is governed by certain regulations such as use-it-or-lose-it law, where individuals are to utilize their funds annually, or they can lose it at the beginning of the following year.
References
Fan, R., Chen, X., & Cao, Y. (2012). Family-oriented health savings accounts: Facing the
challenges of health care allocation.