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Improving Value

High Deductible Health Plans/Health Savings Accounts (HSAs)

Research suggests that high-deductible health plans (HDHPs) are inappropriate for many consumers, leading them to cut back on both necessary and unnecessary care, as well as leaving them with unmanageable amounts of medical debt. Given the numerous alternatives to address high healthcare costs, it is curious why these plans continue to be so vigorously defended.

Consumer Directed Health Plan (CDHP) is a term often used interchangeably with HDHP but is sometimes used to indicate the plan qualifies for a tax-advantaged savings account or that additional decision aids are present to help consumers shop for care.

When high-deductible health plans meet certain criteria, they may be accompanied by a tax-advantaged health savings account designed to encourage consumers to reduce the use of (unnecessary) health services in order to build up the balance in their account, such as an Health Savings Account (HSA) or Health Reimbursement Account (HRA).

These tax-advantaged savings vehicles may be appropriate for higher-income families that can afford the plan deductibles and might benefit from the tax treatment of these accounts. However, a sense of fairness suggests regular accounting of the tax expenditures that are accruing by income level, to ensure that these expenditures are appropriate given the competing needs we have for our tax dollars.