What are consumer-directed health plans?

Consumer-directed health plans* are health plans that are designed to help consumers become smarter and more financially responsible about their health care choices, and they’re quickly becoming more popular among employers. A consumer-driven health plan is often a high deductible health plan, or HDHP, that is combined with a pre-tax spending account.  The account may be funded by the employer or the employee, depending on the type of account. Examples of these spending accounts include the health reimbursement account** (HRA), health savings account (HSA) or an Archer medical savings account (MSA).

Consumer-driven health plans are often broken down into three parts.

1. The first part is the pre-tax spending account that helps employees pay for eligible medical expenses. The money in the account can be used to pay a portion of the plan deductible.
2. The second part is the employee’s responsibility to pay out-of-pocket for care until they reach their deductible.
3. If the medical expenses are higher than the deductible amount, then the third part, the health plan, starts paying. At this point, the plan works like a traditional health plan. The plan will usually pay a big percentage of the costs. This is called coinsurance. For example, if the plan pays 80% of the cost, you will pay the remaining 20%. And if a serious medical event happens, you can rest easy. Once the deductible and coinsurance payments add up to the plan’s out-of-pocket maximum, the plan will usually pay 100 percent of all eligible expenses for the rest of the year.

Also known as consumer-driven health plans.

Also known as a health reimbursement arrangement.