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IRS to rule on consumer-directed plans

The AMA hopes the government decision will encourage employers to embrace this health insurance option.

By Amy Snow Landa, amednews staff. June 3, 2002.

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Washington -- The Internal Revenue Service is expected to announce a long-awaited ruling this summer that could boost employers' interest in shifting to consumer-directed health benefits for their employees.

The ruling is intended to clear up confusion about the tax status of employer-funded health spending accounts -- a key feature of most consumer-directed health plans.

With health insurance costs climbing steeply, more businesses are beginning to explore this insurance option, which gives workers greater responsibility for their health care spending and may prove to be a cost-saving alternative to managed care plans.

The AMA, which strongly supports the movement toward consumer-directed health benefits, is "very much interested" in the IRS ruling, said Donald J. Palmisano, MD, the Association's secretary-treasurer.

The business community, physician groups and other supporters of the trend are hoping that the ruling will not cut off new forms of health insurance that have already begun to emerge in the marketplace.

A growing number of companies already offer their employees consumer-directed health benefits that combine a high-deductible health plan with an employer-funded account that workers use to pay for out-of-pocket medical expenses.

However, some employers continue to hesitate because of lingering uncertainty over the tax implications. Employers are less likely to be interested if it means giving up the favorable tax treatment they receive for traditional health insurance. [...]