Consumer-Driven Health Plans (CDHP) are a category of health insurance plans that combine a high deductible amount with a savings account to pay for a portion of medical expenses with pretax dollars. The pretax dollars set aside for medical expenses are kept in a Health Savings Account (HSA) or a Health Reimbursement Account (HRA). HSA savings accounts are only available to enrollees enrolled in a high deductible health plan.
If you are considering a health plan that offers the option of either a HSA or a HRA, see our article “HSA vs HRA” to determine which of these savings account options is right for your circumstances.
CDHPs can only use high deductible health plans to provide health insurance benefits. To qualify as a high deductible health plan for an individual, the deductible amount must be at least $1,250 in 2013. The minimum deductible for a family is $2,500 in 2013 in order to qualify as a high deductible health plan. High deductible health plans are associated with lower premiums as compared to health plans with smaller deductibles.
Three-Tiered Payment Systems
Consumer-driven health plans are sometimes referred to as three-tiered payment plans. This is because one of three entities can pay medical costs:
- The savings account associated with the CDHP (e.g. HSA or HRA)
- The consumer in the form of payments made out-of-pocket
- The insurance plan
In order for the savings account to pay for medical bills, it must have sufficient funds in it.
Once the deductible amount is satisfied, the CDHP operates similarly to a traditional health plan where the insurance pays the majority of a covered medical service and the enrollee pays a copayment or coinsurance fee.
Consumer-Driven Healthcare
CDHPs are part of a larger set of practices known as “consumer-driven heathcare.” Consumer-driven healthcare seeks to introduce competitive market forces to healthcare by exposing a larger portion of costs to consumers and, by doing so, encourage price shopping. While the consumer pays more out-of-pocket, they typically enjoy lower insurance premiums while still gaining protection from catastrophic healthcare costs associated with a major medical event or condition. However, in order for consumer-driven healthcare to be effective it requires consumer access to medical costs. At present this costs are not always available to consumers.
The opposite of consumer-driven healthcare is found in many pre-reform health plans where consumers have no incentive to comparison shop costs when healthcare prices are hidden from them by flat fee copayments that are the same regardless of which healthcare provider is used. Critics of consumer-driven healthcare argue that high out-of-pocket costs result in lower short-term medical utilization that results in more expensive lifetime healthcare costs. Present research has not been able to support that claim.