Consumer-driven health care

Consumer-driven health care (CDHC) is based on a basic belief that if individuals play more of a direct role in managing their own health care costs, they will make wiser decisions about the use of their health care system. This idea has been slowly gaining acceptance for years, in part due to the escalating costs to employers of other forms of health insurance. So far, CDHC is more common in very large companies, but is slowly trickling down to smaller companies.

The term “CDHC” can include a wide variety of plans. The most common consumer-driven plan pairs a health savings account (HSA) with a high deductible ($5,000 or more) insurance plan. Employers and employees make pre-tax contributions to the HSA that can be used to pay for routine and preventative medical care. The insurance provides coverage for catastrophic or high-cost events. Typically, any unused amounts in the savings account can be rolled over and used in subsequent plan years.

Another so-called CDHC plan design offers a broad menu of health care choices with varying contribution levels that an employee can choose from at enrollment. This is more accurately referred to as a defined contribution plan, but it is often described as consumer-driven, since the employer gives each employee a fixed dollar amount to apply to the available health care options.

Because each employee is responsible for more of their own decisions about health care, a key component of successful consumer-driven health care plans is providing a set of tools to help employees understand the complex health care system. While the lower overall costs of CDHCs may seem attractive to budget-minded benefits managers, employee satisfaction can suffer if workers feel they are being left on their own.

The level of interest shown by many large companies suggests that these plans will quickly become more popular. In fact, some experts predict that CDHC will almost completely replace managed health care plans in just a few years, much like managed health care did to conventional insurance.