• CDHPs put the individual consumer in charge of paying for health care costs out of accounts funded by the individual.
• These plans are generally favored by young, healthy employees who use little health care and have sufficient time to accumulate funds and higher income employees who can afford to allocate enough to pay for medical care.
• CDHPs generally have low premiums, high deductibles, and the contributions to the accounts are tax-exempt.

The cornerstone of consumer-driven health care is the consumer. For decades, individuals, many of whom were employees in a group health plan, were not part of the equation. In fact, plans were designed in ways that shielded individuals from cost information of health care. Employees paid their deductible and their co-pays without ever realizing the true costs incurred. Now that many people have gotten accustomed to $25 co-pays, many companies have seen fit to turn the tide and help make employees aware of the true costs of health care.

Types of consumer-driven health plans

One tool that employers are using to help employees see the true costs are plans that involve the individual as a consumer, known as consumer-driven health plans (CDHPs). These types of plans generally involve:

• A high deductible health plan (HDHP), along with:
  • A Health Savings Account (HSA), or
  • A Health Reimbursement Arrangement (HRA).

There can also be supplemental plans that fill in gaps between account balances and the deductible.

With these types of plans, the individual consumer is in control of paying for health care. The plans generally accumulate funds for paying medical costs, and the consumer has the option of using the funds when they wish, up the limits of what has been deposited in the account. The accounts accumulate over the years — there are no use it or lose it elements.

What type of workers favor CDHPs?

In considering if these types of plans are right for your employee population, it may help to note that:

• They work best for younger, healthier individuals who have fewer medical problems and can take some time to build up a sufficient fund.
• If you have an older, or less healthy employee population, such a plan may not be as well received.
• CDHPs also appear to be favored by higher income individuals who are in a financial situation to easily allocate appropriate amounts of funds to pay for medical care.

CDHP benefits

Benefits of such plans include the low premiums paid for coverage. Despite the plan having high deductible, low premiums may help individuals put more of their income into their medical accounts. Another benefit, as was discussed earlier, is that such plans are designed to help individuals become very savvy medical consumers. Perhaps they feel they won’t need to run to the doctor for every sniffle, but rather, turn to online information or nurse hotlines for information. In addition, such accounts are tax-exempt.

Some CDHPs are set up such that preventive care is funded separately to avoid having individuals forego such care and risk missing early detection.

Cautionary note

CDHPs do require a high level of communication to plan participants. Many individuals are not well versed in medical information, and they will need this to make wise medical choices. Consumers will need to understand how the plans work, what the short- and long-term costs may include, and who can be turned to for assistance.