Are Consumer Driven Health Plans in Your Future?

If you work for a large company or are a member of the healthcare field, you have most likely heard of the new type of health insurance plan called "Consumer Driven Health" or "High Deductible Health" plans. Consumer Driven Health Plans (CDHP's) are health benefit plans in which the employees or members are more involved in choosing their medical providers and managing their own healthcare expenses that traditional health plans.

The ultimate goal of this self-directed healthcare is cost control, for both the employer and the individual. There are three tiers in the CDH plan payment structure. The employer first sets up a tax exempt savings account specifically to pay for health insurance costs, up to a certain amount. For example, my employer deposits $500 annually in the Health Savings Account for individual coverage and $1500 annually for family coverage.

If an employee uses this type of plan, there is a high deductible to meet until the insurance program kicks in. This annual deductible can be anywhere from $1000 for an individual to $3000 for an entire family (these are the amounts of the deductible offered in my employer's CDH Plan).

As you can see, there is a gap between the amount my employer contributes to the tax exempt Health Savings Account and the amount of the annual deductible. If the member does not spend the entire amount of the employer contributions to the health savings account, the balance may be carried over to use for health care expenses in future years.

If a member meets the deductible in a given year, co-payments start to apply, according to whether the provider is in network or out of network. Typically, there is a higher co-payment for out of network providers. The co-payments vary according to the employer.

An example of a co-payment could be that the plan pays 80% of the costs for in network providers after the deductible is met and the member pays 20%. For out of network providers, the plan may pay 60% of the costs and the member pays 40%.

Many critics of this plan argue that Consumer Driven Health Plans benefit the "healthy and wealthy". If you have a large family or a chronic medical condition that requires consistent care and check-ups, you will end up paying perhaps thousand of dollars out of pocket for your family's healthcare.

The best candidates for this type of plan are single, healthy adults who rarely need to see a doctor. For other types of employees, the employer is coming out ahead because companies rarely fund the entire amount of the deductible and the employees end up paying more out of pocket expenses than traditional health plans.