July 12, 2007

A Consumer Driven Health Plan (CDHP) is a broad term used to describe health insurance plans with a Health Savings Account (HSA) or Health Reimbursement Account (HRA) component. CDHP's were first introduced in the 1990's, but they have recently become one of the latest trends on the health insurance market. President Bush is an advocate of the CDHP, and encourages Americans to take advantage of the benefits such a health insurance plan offers.

Consumer Driven Health Plans: The Basics

There are two components to the CDHP: the high deductible health insurance plan (HDHP) and the HSA or HRA. It is important that the two components are paired together in order to insure maximum benefit to the consumer. An HSA is a tax free savings account in which the consumer can set aside money he/she may need for future medical care. The high deductible plan comes with lower monthly premium payments, and it is presumed that the consumer will put the money he/she saves with lower premiums into the HSA. The main concept behind the combination of the high deductible health plan and the HSA is that the consumer is in charge of how his/her health dollars are spent. It is a Consumer Driven Health Plan.

Many major health insurance companies offer CDHP's. Some of the companies that offer such products are: Lumenos, Kaiser Permanente, Humana-One, and State Farm Insurance. Corporations such as Target are increasingly offering CDHP's as part of their employee benefits packages.

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Consumer Driven Health Plans: Caveats

One thing to keep in mind about a Consumer Driven Health Plan is this: it may take a few years before the plan becomes helpful to you because it may take a little while to build up some funds in your HSA. If you become seriously ill within the first few years of your CDHP, you may have a hard time paying for your medical care. If you are considering buying a CDHP, be sure that you are in good health and/or have a good portion of money already designated for medical care purposes.

Consumer Driven Health Plans: Who Do They Work For?

The CDHP is a product that works most effectively for the wealthy. When the consumer is not in a tight financial situation, he/she will be more able to truly "save" money with a CDHP by paying smaller premiums. For those who are not as financially secure, the CDHP may not end up being beneficial in the long run.

An additional benefit that Consumer Driven Health Plans offer is the freedom to choose medical care. Most CDHP's allow consumers to choose out of network care. In other words, with a CDHP, you can choose to see any doctor you like, and can receive care from any hospital without economic penalty.

Is a CDHP Right for Me?

In conclusion , there are many factors to take into account when choosing a health insurance plan. To determine if a Consumer Driven Health Plan is something that will work for you, consider the following:

• Does your income level allow you to save a substantial amount each month to build up funds in a Health Savings Account?
• Do you feel that the benefit of having a lower premium outweighs the costs of a higher deductible?
• Do you require the freedom to receive care from the doctor and hospital of your choice?

If you answered yes to the above questions, a CDHP could be a good option for you. Request a free health insurance quote today and get in touch with an agent who can help you find the health plan that works best for you!

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