This refers to a type of health insurance where individuals have higher deductibles and are given more control over their healthcare spending, often through the use of health savings accounts (HSAs) or health reimbursement arrangements (HRAs). The idea behind these plans is that by giving consumers more “skin in the game,” they will be more cost-conscious and make better healthcare decisions, ultimately leading to lower healthcare costs for everyone. However, there is still ongoing debate and research around whether these plans are actually effective in achieving that goal.
CDHPs are a type of health insurance becoming increasingly popular in the United States. These plans typically feature higher deductibles than traditional health insurance plans, with the idea that by giving consumers more “skin in the game,” they will be more cost-conscious and make better healthcare decisions, ultimately leading to lower healthcare costs for everyone.
CDHPs are often paired with health savings accounts (HSAs) or health reimbursement arrangements (HRAs). These accounts allow individuals to set aside pre-tax dollars to pay for qualified medical expenses, and the funds can be rolled over from year to year if they are not used. This gives consumers more control over their healthcare spending, as they can choose how to use the money in the account.
One of the main advantages of CDHPs is that they can provide consumers with a way to save money on healthcare costs. Because of the high deductibles, premiums for CDHPs are generally lower than those for traditional health insurance plans. Additionally, consumers can use the money in their HSAs or HRAs to pay for qualified medical expenses, which can help offset the high deductible cost.
However, there are also some concerns about CDHPs. One problem is that people may forgo necessary medical care because of the high deductibles. Additionally, CDHPs may not be the best option for people with chronic health conditions, as they may not be able to save enough in their HSAs or HRAs to cover the cost of their care.
There are two main types of Consumer-Driven Health Plans (CDHPs) in the USA:
- Health Savings Accounts (HSAs): An HSA is a tax-advantaged savings account used to pay for medical expenses. The funds in the account are owned by the individual and roll over from year to year. To be eligible to open an HSA, individuals must be covered by a high-deductible health plan (HDHP) and not enrolled in Medicare. The main benefits of an HSA include tax savings, flexibility in spending, and the ability to save for future medical expenses.
2. Health Reimbursement Arrangements (HRAs): An HRA is an employer-funded health plan that reimburses employees for medical expenses. Unlike HSAs, the funds in an HRA do not roll over from year to year and are not owned by the individual. HRAs are typically offered as a supplement to a traditional health insurance plan and are only available to employees. The main benefit of an HRA is that it provides extra financial support to employees for medical expenses not covered by their traditional health insurance plan.
In the UK, there is only one type of Consumer-Driven Health Plan (CDHP), also known as a Personal Health Budget (PHB).
Personal Health Budgets (PHBs): A PHB is a way for individuals who receive National Health Service (NHS) funding for their health and care needs to have more control over how that funding is spent. PHBs give individuals the ability to tailor their care and support to their individual needs and preferences. The funding for a PHB can be used for a wide range of health and care services, including equipment, therapies, and support from healthcare professionals. The aim of PHBs is to empower individuals to make informed decisions about their health and care and to help improve their quality of life.
In Canada, there are two main types of Consumer-Driven Health Plans (CDHPs):
- Health Spending Accounts (HSAs): A Health Spending Account (HSA) is a type of flexible benefits plan that allows individuals to set aside pre-tax dollars to pay for eligible health and dental expenses. HSAs are often offered by employers as part of a group benefits plan and are designed to supplement traditional group insurance coverage. The funds in an HSA are owned by the individual and can be used to pay for a wide range of health and dental expenses, including prescription drugs, vision care, and chiropractic services.
- Health Care Spending Accounts (HCSA): A Health Care Spending Account (HCSA) is similar to an HSA, but is offered as an individual insurance product. HCSAs are designed to provide individuals with more control over their healthcare spending by allowing them to pay for eligible expenses using pre-tax dollars. HCSAs are typically used to supplement traditional insurance coverage, but can also be used as a standalone health care solution.
It is important to note that CDHPs are not for everyone, and consumers should carefully consider their personal healthcare needs and budget before choosing a CDHP. Additionally, it is worth noting that even though these plans are becoming more common, they still represent a small fraction of the total health insurance market in the United States. Research on the effectiveness of these plans is ongoing and the jury is still out on whether they are a sustainable solution for controlling the cost of healthcare.