What is a Consumer-Directed Health Plan (CDHP)?
Consumer-directed healthcare (CDH) 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.
What are healthcare accounts?
Your healthcare account is either a Flexible Spending Account (FSA), Health Reimbursement Arrangement (HRA), Health Savings Account (HSA), or a combination.
These accounts all offer consumers and businesses financial benefits, but there are components about each that set them apart. Because there’s so much to know about each account type, we’ve put together FAQs on each one:
Additional HDHP and CDH FAQs
CDH vs. “Traditional” Insurance Plans
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 to prevent major and more costly ailments in the future.
High Deductible Health Plans (HDHPs)
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 is an insurance plan that has a higher than average deductible. 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.
In order for an HDHP to be HSA-qualified, it must have at least a $1,350 individual deductible and a $2,700 family deductible. The annual out-of-pocket maximum cannot exceed $6,650 for individual coverage and $13,300 for family coverage.
Benefits of a HDHP
The right HDHP can save you money, gives you a larger role in your healthcare options, and allows you to participate in an health savings account (HSA) so you can save money tax free.
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.
ConnectYourCare Account and Dependent Care FAQs
Are you a plan participant interested in help and tips for making the most of your ConnectYourCare account? Have questions about dependent care? Or are you an employer with questions about implementing CDH and the potential impact for your business? If so, these FAQs are just what you’re looking for: