CONSUMER-DIRECTED HEALTH PLAN
What is a Consumer-Directed Health Plan (CDHP)?
How are Consumer-Directed Health Plans (CDHPs) different from my existing coverage?
What is a High Deductible Health Plan (HDHP)?
Why would I want a High Deductible Health Plan (HDHP)?
What is a Consumer-Directed Health Plan (CDHP)? (Back to top)
Consumer-directed healthcare was created to provide consumers with better access to reliable health information, improved resources for making healthcare decisions and more control over their healthcare dollars. There are two components to a CDH plan:
- Underlying health plan - these are typically a high deductible health plan that will cover bigger health expenses such as surgery or hospitalization
- Healthcare account - you manage the spending from this account for your smaller healthcare expenses such as office visits, routine care and prescriptions. You decide how and when your funds are spent. The healthcare accounts are tax advantaged - the funds are deposited in your account pre-tax, and you are never charged taxes on funds that are spent for eligible healthcare expenses.
Your healthcare account is either one or a combination of the following:
How are Consumer-Directed Health Plans (CDHPs) different from my existing coverage? (Back to top)
CDHPs typically have a healthcare account that is intended to provide you with greater control over your healthcare expenses and your healthcare spending. This account lets you choose what to spend your healthcare dollars on and saved or unspent dollars in the account can accumulate over time. CDH plans often require a high deductible health plan for participation.
CDH plans are designed more like your auto insurance policies. The higher the deductible you choose, the lower your monthly premium. With a CDH plan, as a consumer, you are willing to take more risk and pay out of pocket for minor expenses, if they should occur, and depend on the insurance for major expenses. This reduces your monthly premium to the insurance company. Most high-deductible plans do cover preventive care coverage before reaching the deductible. This is to encourage consumers to get their routine care, tire and oil changes in our auto insurance example, to prevent major repairs in the future.
What is a High Deductible Health Plan (HDHP)? (Back to top)
A deductible is the amount of dollars that you must pay for covered healthcare expenses before your health plan will provide coverage. A high deductible health plan (HDHP) is an insurance plan that has a higher than average deductible. Although there is no set amount that universally defines a plan as being high deductible, it is usually $1,200 or more per member. These types of plans also have annual limits on how much you have to pay out-of-pocket in the form of deductible, copayments and coinsurance fees.
For 2010 and 2011, in order for a health plan to be qualified as a HDHP, it must have at least a $1,200 individual deductible and a $2,400 family deductible. The annual out-of-pocket maximum (including deductibles, coinsurance and copayments) for 2010 and 2011 cannot exceed $5,950 and $11,900 for individual and family coverage, respectively.
Why would I want a High Deductible Health Plan (HDHP)? (Back to top)
The right HDHP can save you money, give you a larger role in your healthcare options and, more importantly, allow you to participate in an HSA. In addition, because these plans typically have higher deductibles and coinsurance responsibilities for major medical services, the monthly premiums are lower. Therefore, you can pay for healthcare when you need it, but save your money when you don’t.
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