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The basics of consumer-driven health plans

Health care costs are increasing even as more people lose their jobs or suffer pay cuts. According to the Centers for Medicare and Medicaid Services (CMS), Americans spent more than $2.5 trillion on health care in 2009 -- or $8,160 per person. One way people are trying to keep some of that money in their own pockets is through consumer-driven health plans (CDHPs), sometimes known as high-deductible health plans (HDHPs). Many insurance companies offer these plans in addition to traditional group plans or health insurance for individuals.

What is a consumer-driven health plan?

consumer driven health insuranceCDHPs, as defined by the Employee Benefits Research Institute (EBRI), are health insurance plans with an annual deductible of at least $1,000 for an individual and $2,000 for a family. CDHPs must be tied to a tax-exempt health savings account (HSA) or health reimbursement account (HRA), in which you or your employer deposit money to use for medical expenses. The HSA is used by the employee to pay medical expenses on a pre-tax basis, which results in greater savings, but the plans can have a "use it or lose it" policy. This means employees must use all the money they've set aside for that year or lose the remaining funds in their account. Employers can also contribute to the HSA as an additional employee benefit.

Who benefits from a CDHP?

Traditional health insurance plans generally offer lower deductibles and higher premiums, plus small doctor visit copays. The idea behind CDHPs is that people will act more like consumers when it comes to their health care if more of their own money is on the line -- thus saving themselves, their employers and their insurance companies money in the long term.

A survey by the EBRI shows that people who participate in CDHPs indeed act in more cost-conscious ways than people insured by more traditional health insurance plans. For instance, someone insured under a CDHP is more likely to probe whether a proposed medical test is duplicative, or to ask where a test can be conducted at the lowest cost.

If your medical insurance offers a CDHP, you should ask yourself a few questions to determine if it’s right for you.

Do you make frequent visits to the doctor? The AARP notes that these types of health insurance plans work best for people who don't use a lot of health care.

Are you willing to ask your doctor questions about recommended tests or procedures? If you are comfortable asking for cheaper options, or questioning the necessity of proposed treatments, you might save money.

If you have chronic health conditions, is your current out-of-pocket expenditure higher than the limit imposed by the CDHP? Many of these plans have a fairly low cap on what the patient must spend before the plan takes over entirely.

Do you like taking control of your finances and expenditures? Managing an HSA takes attention and time, but if you like to manage your finances and health insurance budgets, these plans could work for you.

The drawbacks

Not everyone is a fan of CDHPs, which some say keep people from seeking medical attention or filling prescriptions in order to avoid the higher initial costs. The EBRI survey found that those covered by CDHPs were "significantly more likely" to defer or avoid medical care -- particularly in cases where the insured had a household income below $50,000 or a chronic health condition.

However, the Kaiser Family Foundation noted that the percentage of workers who have a health insurance plan with a deductible of $1,000 or more for single coverage increased 22 percent in just three years, from 2006 to 2009. While a CDHP requires more time and input from the patient, its increasing popularity may indicate that more people want to take control of their health care costs.

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