In this 3-part series, we’ll explain 3 different types of health insurance plans: CDHP, PPO, and HMO. Today, let’s talk about the CDHP.
What is a CDHP?
A consumer directed healthcare plan (CDHP) typically has a high deductible and a lower premium. CDHPs usually work in connection with a HSA (health savings account) that is either funded by the employer or employee. The money in this HSA is tax exempt and can usually be rolled over to the next year if it’s not used (unlike an FSA that expires if you don’t use it during that calendar year.)
These types of plans are great for people who are generally healthy and don’t have many healthcare expenses throughout the year. They also work well if you can afford to pay a large deductible up front. That way, you can save on your premiums. Learn more about the difference between premiums and deductibles.
CDHPs Put You In Charge of Your Healthcare Spending
The idea behind a CDHP is that it puts you, the consumer, in control of how your healthcare dollars are being spent.
Instead of simply going to the ER for a cold, you’ll start to think twice about expensive treatment options. You might ask yourself:
- Is this treatment really necessary? Should I wait a few days to see if I feel better?
- Where would I receive the most cost-effective care? I should probably visit my primary care doc first instead of the ER.
- Can I try a less costly treatment first? Have I tried an OTC medicine first?
Managing Your Healthcare Costs with CDHPs
When most people choose a CDHP, they’re just happy that less money is being taken out of their paycheck each month. The problem is, when they do need care, they have to pay for everything before their insurance/employer starts paying their portion.
- Sam has a CDHP with a $5000 deductible.
- She needs a $3000 surgery.
- She hasn’t had any other care this year, so she has met $0 of her $5000 deductible.
Since Sam hasn’t met her deductible yet, she has to pay the full cost of the surgery up front. We’re hearing from HooPayz members that they are being asked to pay up front before surgery. We heard from one lady who told us the surgical center would not perform the surgery unless she could come up with the full amount on the day of the procedure.
For most people, coming up with that much money at once is unrealistic. Keep these things in mind next time you choose your health insurance plan.
- Many employers are offering CDHPs, some ONLY offer this type of plan. If that’s the case, start saving a little extra money each month so you’ll be ready to pay for care when you need it.
- If your provider is asking you to pay in full up front, ask if they have a financial counsel you can speak with about setting up a payment plan.
Join us next Thursday as we continue our series on types of health insurance plans.