Consumer Driven Healthcare

For many people – including the media – the term "consumer-driven healthcare" or CDHC describes certain types of insurance plans. But consumer-driven healthcare is more than that. It’s about giving average people information and tools to help them make informed decisions.

Here are some ways you can be more "consumer driven" in your healthcare decisions:

Put money in a healthcare spending account

Choose and use your health benefits wisely

Shop around for healthcare

Put your health first

Enrolling in a CDHP anchor: CDHP

The term "CDHP" stands for "consumer-directed" or "consumer-driven" health plans. The common thread in this type of plan is that it comes with a "personal" bank of funds, which gives you more control over how you pay for healthcare. The most popular types of CHDPs:

  • HDHP - A High Deductible Health Plan (HDHP), which often comes with a Health Savings Account (HSA)
  • HRA - A health plan, usually a PPO, paired with a Health Reimbursement Arrangement (HRA)

High-Deductible Health Plan (HDHP)

An HDHP is a health insurance plan. According to the IRS, an HSA-compatible HDHP has certain features:

  • Certain minimums and maximums - The IRS sets the minimum deductible and maximum out-of-pocket expense amounts, which are subject to change every year. In 2009, the minimum deductibles are $1,150 for single coverage and $2,300 for family coverage. In 2010, the minimum deductible goes up to $1,200 for single coverage and $2,400 for family coverage. The 2009 maximum out-of-pocket expense amounts are $5,800 for single coverage and $11,600 for family coverage. In 2010, those numbers go up to $5,950 single coverage and $11,900 for family coverage.
  • Integrated deductible - All covered expenses, including prescriptions, have to apply to the same deductible and out-of-pocket maximum. Preventive services like yearly checkups may be covered before you meet the deductible; you may have only a small copayment for these services, rather than paying the full cost. After you've met your deductible, your plan begins to pay for all or a portion of your health plan services - check your Benefit Plan Document for specifics - until you've reached your out-of-pocket maximum.

With an HDHP, you don't have copayments for most services. Instead, you pay all medical expenses out of pocket until you meet your deductible. That's why it's a good idea to have an HSA to cover your deductible expenses. With an HSA, you can set aside tax-free money for current-year healthcare expenses and build savings for the future.

Health Reimbursement Arrangement (HRA)

A Health Reimbursement Arrangement is another kind of spending account that helps you manage your healthcare costs. An HRA is like an "expense account" your employer puts money into. You can use the funds for qualified medical expenses like doctor's office visits, as well as other eligible healthcare costs. With an HRA, you pay your medical expenses out of pocket and your employer pays you back.

An HRA typically is combined with a Preferred Provider Organization, or "PPO," plan. You may have a higher deductible than with other plans - but HRA funds can be used to cover part of your deductible.

HRA/PPO plans don't require copayments for doctor's office visits, preventive care, and hospital services. In most cases, your provider will bill you after your insurer processes the claim and calculates your member discount - then you can use your HRA to pay the bill.

You can spend HRA funds on items approved by your employer and the IRS. Most employers typically allow:

  • Medical services like doctor's office visits and hospital services
  • Prescription drugs
  • Durable medical equipment

IRS rules also allow the following:

  • Dental services
  • Vision care, including eye exams, eyeglasses, contact lenses and solution, and laser surgery
  • Qualified over-the-counter healthcare items

Watch Healthcare Video: What is consumer-driven healthcare?