Employee Benefits: Consumer-Driven Health Care Plan (CDHP)
September 4, 2017
Although Consumer-Driven Health Care Plans have been around for a while as an option for employee benefits, many employers don’t fully understand how they work. CDHPs were designed to help small to medium-sized employers pay for health care benefits for their employees. Essentially, a CDHP is a high-deductible health plan, but to help employees afford out-of-pocket health care expenses, it’s coupled with a spending account such as Section 125, Health Savings Account (HSA), Health Reimbursement Arrangement (HRA), Dependent Care, and Commuter Benefits.
Many employers prefer CDHPs because they save more money compared to lower-deductible plans. In addition, the plan encourages employees to make educated decisions when spending their health savings so the company typically saves money because employees don’t spend the entirety of their account savings.
CDHP is a popular choice among employees, especially Millennials (age: 19-38), for many reasons. Participants own the savings account, so they can use it in many different ways. They take it with them if they change jobs, and the remaining balance is rolled over year after year (unlike FSAs, which are restricted to a time frame). They can choose to spend their savings on an eligible healthcare expense, or they can let it earn interest and watch returns grow tax-free.
Employee benefits in the following accounts have undergone some recent changes that may affect your business.
Flexible Spending Account (FSA)
Flexible Spending Accounts often bring up a lot of questions among employers and employees alike. The reduction limit on an employee’s pre-tax salary for health FSAs is not affected by their employer’s contribution. The employee’s available reimbursement for qualified medical expenses can exceed $2,600 if their employer’s contribution is factored into the plan design. The savings amount in the health FSA can roll into the new year if the employer has opted in for the up to $500 carryover.
Health Savings Account (HSA)
Trump has been trying to make some changes relating to HSA. In an effort to grow HSAs as a replacement package for Obamacare, Republicans want to raise the ceiling of HSA contributions to match the out-of-pocket contributions for high-deductible health care plans – from $3,400 to $6,550 for individual plans and $6,750 to $13,100 for family plans.
Qualified Small Employers Health Savings Account (QSE-HSA)
A new plan that just recently came out in 2017 is the Qualified Small Employers Health Savings Account. For small companies (10-500 employees depending on the industry) that are unable to offer a helpful employee benefits package because of their size can reserve an amount of money to put toward an employee’s health benefits for the year. Employees can then purchase their own healthcare plan through the New York Exchange. If the employee doesn’t want to purchase insurance, they can use the money for various medical expenses.
Commuter benefits help telecommuting employees pay for transit and parking costs. Out-of-office employees who use Uber now qualify for commuter benefits. As opposed to FSAs, an employer’s contribution to a Transportation plan reduces how much an employee can elect as a pre-tax salary contribution.
Why Opt for Employee Benefits from USA Payroll?
We understand that employers have a multi-faceted tasklist. You need more than just payroll services – you need a full suite of human capital management services. That’s why we offer all-encompassing workforce management solutions to our clients, including payroll, employee benefits, human resources, time and attendance, free quotes, and much more.
We’re also excited to announce our new product launch of Consumer Driven Health Care (CDHC) Plans. USA Payroll now offers Section 125, FSA, HSA, HRA, Dependent Care, and Commuter Benefits.
If you have any questions about employee benefits, don’t hesitate to contact us! We’re happy to help and make sure you have everything you need for your organization to succeed.