Health Spending Accounts

Good health care is a relative concept that cannot be universally agreed upon. How much should a pair of glasses cost? Is laser surgery a better option? How frequently should one get a massage?

Health insurance (defined benefit) plans use specific definitions and limitations to avoid over-utilization. Costs are controlled through deductibles, specific definitions of covered services, limits and numerous exclusions.

Health spending accounts (defined contribution) plans change the focus from reimbursing specified medical and dental services, to reimbursing any product or service, permitted by law, up to a certain maximum. This will allow employees to make personal health care decisions when they make purchases with their limited resources.

Health spending accounts can either supplement existing health insurance or replace it entirely. One approach is for the employer to decide on the core health insurance they want to provide (i.e. basic pharmaceuticals on a managed formulary and preventive dental) and supplement it with a health spending account to provide maximize flexibility and manage costs.

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