What are Consumer Driven Health Plans?
Consumer-driven health plans, or CDHPs, are designed around the idea that an individual should be more involved in choosing their health care providers and controlling medical expenses. They also help employers keep rising health care costs at bay.
CDHP Payment Structure
A CDHP generally employs a three-tier structure payment structure. This includes:
- Tier One – A tax-exempt health account which you would use to pay expenses up to a certain dollar amount;
- Tier Two – a high-deductible health insurance policy. Once you reach the deductible, the policy will pay for expenses;
- Tier Three – the gap between the health account and the high-deductible policy. You would be required to pay any health care expenses in this gap out of your pocket.
When Do People Use CDHPs?
CDHPs are mainly used in conjunction with Health Savings Accounts (HSAs) or Health Reimbursement Arrangements (HRAs). Employers and employees can contribute up to a yearly maximum to these accounts, which you can then personally decide how to allocate amongst different medical expenses. These are combined with high-deductible health plans (HDHPs). With HDHPs, premiums are generally low, but the deductible you will be required to pay out of pocket for a service or procedure will be higher than that of a preferred provider organization (PPO) or point of service (POS) plan.
What are the Benefits of Having a CDHP?
Proponents of CDHPs feel that many Americans use too much health care or too little relevant health care. They believe that with a higher deductible and the individual weighing the expenses of what they will and will not pay for, Americans will choose their health care more wisely and only use what is needed, saving employers and insurers money.
Opponents feel that CDHPs will take the focus off of preventative care, and that many individuals will not seek treatment until they are in severe pain or in need of an expensive procedure. Critics feel that the public will not seek needed health care due to out-of-pocket costs.
Surveys have shown mixed reactions to CDHPs; however, many people tend to compare them with the traditional health care plans of the past rather than judging them independently.
If you are young and generally healthy, a CDHP may be a good option for you. However, older people or people who undergo a lot of specialized treatment or procedures may find themselves buried with the high deductibles and out-of-pocket expenses.