D. Consumer Driven Health Plans

Consumer Driven Health Plans (CDHPs) are plans that combine a high-deductible health plan with a tax-advantaged savings or reimbursement account, giving the insured greater control over how routine health care dollars are spent. A CDHP typically provides employer-controlled, first-dollar coverage through the linked account, letting the employer decide how much of the deductible gap is funded up front.

1. Medical Savings Accounts (MSAs)

A Medical Savings Account (MSA) is an employer-funded account linked to a high-deductible medical plan, used to pay qualified medical expenses. Contributions to an MSA are subject to annual limits, and the account may be paired with certain additional forms of coverage — such as dental, vision, or long-term care insurance — without disqualifying the underlying high-deductible plan.

2. Flexible Spending Accounts (FSAs)

A Flexible Spending Account (FSA) allows an employee to set aside pretax salary through a salary reduction agreement to pay for qualified medical or dependent-care expenses. FSA contributions are exempt from federal income and payroll taxes.

There are two main types of FSAs:

• Health FSA — used to pay for qualified out-of-pocket medical expenses not otherwise covered by insurance.
• Dependent Care FSA — used to pay for care of a qualifying dependent, such as a child under 13 or a disabled spouse or relative, so that the employee (and spouse, if married) can work.

FSAs are generally subject to a "use-it-or-lose-it" rule: unused funds remaining in the account at the end of the plan year (subject to any grace period or limited carryover the employer allows) are forfeited. Because of this rule, employees may only change their FSA contribution election during the plan year if they experience a qualifying life event, such as marriage, divorce, birth or adoption of a child, or a change in employment status.

3. Health Reimbursement Arrangements (HRAs)

A Health Reimbursement Arrangement (HRA) is an employer-funded account used to reimburse an employee for qualified medical expenses and, in some cases, insurance premiums. Key characteristics of an HRA include:

• Funded entirely by the employer — employees may not contribute;
• Reimbursements to the employee are generally tax-free;
• Unused funds may be permitted to roll over to the following year at the employer's discretion; and
• The employer retains the funds if an employee leaves the company.

An Individual Coverage HRA (ICHRA) allows an employer to reimburse employees for premiums the employee pays on an individual health insurance policy purchased on their own, rather than the employer sponsoring a traditional group plan.

4. High Deductible Health Plans (HDHPs) and Health Savings Accounts (HSAs)

A High Deductible Health Plan (HDHP) is a medical expense plan carrying a higher-than-typical annual deductible in exchange for a lower premium. An HDHP is often paired with a Health Savings Account (HSA), a tax-advantaged account that either the employee or the employer (or both) may fund, and which the employee owns and keeps even after leaving the employer.

To be eligible to contribute to an HSA, an individual must be covered under a qualifying HDHP, must not be covered by any other health plan that is not an HDHP, must not be enrolled in Medicare, and must not be claimed as a dependent on another person's tax return.

For 2026, HSA contribution and HDHP deductible limits are adjusted annually for inflation. An HDHP with a family deductible structure may use either an embedded deductible, under which each covered family member only needs to satisfy an individual deductible amount (lower than the full family deductible) before that person's benefits begin, or an aggregate deductible, under which the full family deductible must be met — by one member or a combination of family members — before any benefits are paid for anyone in the family.