The managed healthcare failure of the 90s together with increased health expenditures had a significant impact on the formation of Consumer-directed health plans (CDHPs). CDHPs place a greater responsibility of decision making in health care related issues in the hands of the customers. They are intended to reduce health care expenditures that the consumers experience by exposing the financial repercussions of their treatment decisions. CDHPs have become popular since its inception, and the numbers of the participants have increased as well. However, the program faces several challenges such as demographic populations especially age and income levels.
History of CDHP
The first CDHP was introduced in the1990s by the health commerce ventures. These products were created to connect the consumers more directly while making purchases of healthcare products and services. They were further established to encourage and empower the members to examine their health care options with the aim of the making decisions wisely ( Beeuwkes et.al, 2011). The model highlighted quality information and costs to the consumers through the utilization of the internet and hence creating a more effective health care industry. However, the CDHP has evolved over the years since its inception and it concentrates on designing health benefits by combining a high deductible plan (HDHP).Today the most predominant models include the Health Savings Accounts (HSAs), Health Reimbursement Accounts (HRAs) and Flexible Spending Account (FSA) .
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CDHPs Geared Towards the Healthy and Young Population
A recent research discovered that members of the Consumer Driver Health Plans (CDHP) commonly comprises of integrated HSAs or HRAs and averagely the healthier and better-educated individuals who have high incomes forms the majority. The study conducted by Employee Benefit Research Institute (EBRI) in 2005 analyzed the population of the CDHP and found out that it differed from the traditional health coverage ( Beeuwkes et.al, 2011). The Institute constantly reported the CDHP members had a tendency of having better health status and the likelihood of obesity, smoking habits and lack of exercise were less. In most years the CDHP enrollees were likely to between the age of 21 and 34 compared to the traditional coverage. Additionally, the CDHP populations were characterized by households that had earned an average of $100,000 to $149,999 annually. The CDHP enrollees were also twice likely to be individuals who had college or postgraduate levels as opposed tit h traditional coverage.
CDHP Effectiveness towards Patients with Chronic Illnesses
CDHP participants decreased the risk of worsening and developing any chronic condition. Employees who have chronic illnesses have equal opportunities just like other employees to join a CDHP and internalize the features of plan coverage and report whether they have experienced positive and negative outcomes with their specific plans (Parente et.al, 2007). The CDHP participants who have chronic illnesses allocate high scores to their plans compared to other SDHP participants. Moreover, they are also more likely to use informational tools compared to the other participants.
Health Savings Account (HSA)
A health savings account is an account that his designed to assist individuals in covering their health expenses that are tax free. The individuals who create HSA cover the medical expenses which are not covered by an HDHP. The members of this plan are allowed to contribute either individually or through the employers, and they are limited to a certain amount annual ( Parente, 2006) . The contributions made over time can be utilized for medical expenses such as vision, dental and over the counter medical expenses. For a person to be eligible for an HSA, one must be covered by the High Deductible Health Plan (HDHP) and not enrolled in Medicare. For instance is a person’s annual income is $50, 000 and one saves $3000 in an HSA, then the taxable income will be $47,000. Moreover, if a person is in the 28% tax bracket, he/she can save at least $ 840 in tax payments.
Health Reimbursement Arrangements (HRA)
HRA is also known as Health Reimbursement Account and it is a health benefit plan that allows employers to contribute to an employee’s account and also offer compensations for eligible expenses. HRA health benefit plan is approved by IRS and it is tax deductible and funded by the employers ( Beeuwkes et.al, 2011) . HRA is a suitable plan that enables employers to pay for various medical expenses that are not covered by insurance. For instance, if a company’s employee is obligated to pay for a massage that has been particularly recommended by an orthopedic surgeon then the company may compensate the employee for the expenses incurred during the massage using an HRA.
Flexible Spending Account (FSA)
FSA is a savings account that enables the account holder to enjoy specific tax benefits. The employer creates the account, and it is tax deductible. However, the employees are the ones to determine which qualified medical expenses should be paid using the FSA ( Beeuwkes et.al, 2011) . For instance, an employee diagnosed with a chronic condition such as heart disease or diabetes can enjoy FSA to pay for the expense. These conditions are expensive and hence the FSA can ease an employee’s financial burden. ‘
Demographics of the CDHPs Population
None of the studies has been able to provide sufficient and detailed information on the population that enrolls for CDHP. Nevertheless, various literature reviews show that participants who enroll for CDHPs are relatively younger, have high wages and are more likely to be white. Compared to the traditional coverage, the CDHPs have high salaries. The study also indicated that persons who are in the bottom quartile of spending health care costs had a high possibility of switching to CDHPS just like individuals who have chronic health conditions. The research further observes that the whites were more likely to select to participate in FSAs. Other studies have also reported that individuals who have higher incomes have a high possibility of opening and saving accounts that are linked to CDHPs.
Types of Incentives to Providers
Health care providers widely agree that provision of financial incentives based on their performance is an effective method of improving heath car quality. Financial incentives, economic incentives, and performance incentives are some of the strategies utilized to increase performance and efficiency in the healthcare fraternity. Value-based purchasing determinations focus on providers through the utilization of evidence measure of quality to classify and decide how much they should be paid ( Bernstein, 2010) . These payment techniques are referred to as “ Pay for Performance ” (P4P) which may also measure consumers’ satisfaction and experiences. Most of the P4P utilize hybrid methods that couples fee for service treatment with bonuses payments and mirror the providers’ performance as well as patient satisfaction. P4P motivates healthcare providers to perform their duties effectively as well as ensure that the patients’ needs and expectations are met.
The patients bear a financial risk because the money that is found in these accounts is restricted for usage because the employees own the accounts The contributions made can only be used in qualifies medical and health related expenses. There are criteria and exclusions that a patient must fulfill so as to access money saved in the accounts. These requirements may limit a patient in seeking the right treatment or medicine.
Recommendations for Patients Considering a CDHP
Just like any insurance product, it is crucial for the patients to understand the financial risks associated with CDHP. These risks are often related to different demographics of patients’ income levels, age, health status and race are significant factors for CDHPSs participants. Arguably, the CDHP has been considered as a health benefit that features by high-income individuals and hence low-income individuals may face challenges ( Parente, 2006) . The reason why critics think the CDHP is not necessarily a good option for the low0-income individuals is that a great portion of their income is directed on healthcare for the low earning families. Thus it is essential for any patient thinking of a CDHP to consider the points mentioned above.
Through the utilization of HSA, the patient will be able to control the account because the employees own it. Furthermore, the patients can also decide to invest the money which is not allowed in HRA and FSA. The patient cannot be able to access the money before it is fully funded ( Parente, 2006) . On the other FSA allows a patient to access the account even if the account has not been fully funded. Therefore a patient can fall sick and requires immediate attention, and through FSA he/she can access the account, but the employer owns the account. Similarly, HRA is also owned by the employer and hence the patient’s power towards the account is limited. Therefore HSA is the best account that a patient should consider because its advantages outweigh FSA and HRA benefits.
Consumer-directed health plans have been successful, but there is still much to be done. On average the program has reduced healthcare expenditure. The program puts the decisions making process and financial implications in the mind of the consumers. HRA, FSA, and HCA have also become popular preferences among many individuals and businesses. Nevertheless, the program needs to address problems that have been recorded such as the effectiveness of the program towards low-income individuals/families. Several studies have indicated that CDHP is common to individuals who are young, healthy and have high incomes. Hence there’s need to address such problems to ensure that CDHP isn’t discriminatory.
References
Beeuwkes, B. M., Haviland, A. M., McDevitt, R., Sood, N. (2011). Healthcare spending and preventive care in high-deductible and consumer-directed health plans: The American journal of managed care , 17 (3), 222-230.
Bernstein, J., Chollet, D., & Peterson, S. (2010). Financial incentives for health care providers and consumers (No. 6327ab9c17e14a09b6f256953ce1e1ba). Mathematica Policy Research
Parente, S. T. (2006). Consumer Directed Health Plans: Evolution and Early Outcomes: Value-Based Purchasing Newsletter , 1 (2), 4.
Parente, S. T., Christianson, J. B., Feldman, R. (2007). Consumer-Directed Health Plans and the Chronically I11. Disease Management & Health Outcomes , 15 (4), 239-248.
