Consumer Driven Health Plans

Consumer Driven Health Plans

Consumer Directed Health Plans (CDHP) are a fairly recent development and are designed to involve consumers more directly in their health care purchases. They blend a high deductible policy with a form of spending or saving account.

A typical account might have an annual deductible of $2500 and a $1000 fund. The consumer’s first $1000 of medical costs are paid from the fund, then they’re responsible for remaining expenses up to the $2500 level where major medical coverage begins.

This shifts a lot of the cost to the consumer, and the theory is that, if it’s their money on the line, they’re going to be more careful spending it. The actual cost to the consumer is actually much less than it would appear because these policies generally have a much lower premium. This difference can be used to make up the gap between the $2500 deductible and the $1000 fund, or saved for future years.

That’s the theory, that it will make consumers more aware of health care costs and nudge them to shop for the best value.  Studies have shown that it helps a bit.  People have begun to think in terms of dollars and cents when discussing treatments.  It shows up especially in the switch to lower cost generic medications.  Unfortunately, the study (EBRI/Commonwealth) also shows that some people were skipping on needed care and follow ups.

Perhaps the biggest problem is that there isn’t a priceless for costs of medical procedures.  Providers are free to charge whatever they want with very little oversight.  In most cases, the cost is brought down substantially with the discounts that insurance companies have negotiated.  Some insurers can provide guidelines or ranges, and some may even be able to tell you where to go for the lowest cost services, but finding a price ahead of time is almost impossible.