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Labor Law for All Employers

Howard L. Steele Jr.

CDHP - Consumer-Driven Health Plans

The term "Consumer-Driven Health Plan" (CDHP), is used to describe a variety of mechanisms for providing health insurance or funding healthcare costs, all of which encourage individuals to become actively involved in making their own healthcare decisions (e.g., designing their health insurance coverage, choosing their service providers, selecting healthcare services, and managing their own fitness and wellness).

A Consumer-Driven Healthcare Plan (CDHP) is a broad definition incorporating several emerging healthcare strategies that heightens consumer awareness of the cost and utilization of healthcare services through plan design incentives. In practice, a CDHP could encompass any of the following strategies.

  • Modifications to traditional HMO, PPO, and POS benefit plans using plan design elements such as high-deductible, co-insurance, co-payments to provide incentives to plan participants to take a more vested interest in the cost and frequency of services utilized.
  • Tiered Networks within an HMO, PPO, or POS network where participants, pay higher co-payments or co-insurance when using higher cost providers.
  • Personal Health Savings Accounts (HSAs) type plan where an account, either Health Savings Account, Health Reimbursement Arrangement, or a Flexible Spending Account, is combined with a high-deductible PPO plan to empower the plan participant with greater flexibility and Financial Savings Accounts or Health Reimbursement Arrangements may be rolled over into subsequent plan years.
  • Information systems (web and voice) that enable consumers' greater price transparency in purchasing care along with tools to make prudent decisions about accessing healthcare services.
  • Provision(s) within a plan or an employee contribution strategy where the plan sponsor makes a Defined Contribution toward all or a portion of the cost of benefits. Defined Contribution can have many interpretations as it's applied to healthcare

Consumer Driven Healthcare Plans offer several different options such as:

  • Offers greater choice. Members seem to be moving away from managed care restrictions as HMO enrollment continues to decline while enrollment in PPO style plans is increasing.
  • Incentives for employees become more involved in making economic decisions about the utilization of healthcare resulting in more educated purchasers demanding lower cost and higher quality service from their providers.
  • Address cost and access problems within the current healthcare system.

When the question comes about as to what size of company and type of company would offer a consumer-driven, the answer is many types of employers are implementing strategies that are in some fashion consumer-driven programs. Larger employers have more options, as the more progressive plans may only be available on a self-funded basis. Many providers have begun to offer these progressive plans on an insured basis in some form or fashion, but enrollment remains a fraction of traditional plans.

As to the requirements, they vary as to employer size and vendor. Adverse selection, where health employees move to Consumer-Driven plans, while high-end users stay in more traditional plans, is a significant concern. After all is known about consumer-driven and the full range of capabilities, even the high compensated employees who utilize this type of program will find that this type of healthcare program is designed also for them, not only in their particularly health situation but also in the cost savings capability.

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