Consumer-Driven Health Care: The Changing Nature of Health Insurance

Consumer-driven health care (CDHC) plans are a new health insurance paradigm that lets consumers control some of their own health care dollars. It also provides financial incentives to manage medical spending wisely while affording consumers greater choice and control over the types of medical services received. The premise of CDHC is coupling a tax-preferred, personal health account, used to fund day-to-day medical expenses, with a high-deductible health plan to fund care of a catastrophic nature. When individuals enter the medical marketplace, they will spend first from their health savings accounts, health reimbursement arrangements, or flexible spending accounts. Once they reach their deductible, insurance pays all remaining costs. CDHC plans are relatively new to the market, and the market share is still quite small compared to traditional forms of health insurance. CDHC is not for everyone-and not everyone wants to take greater control of health care spending. However, early evidence is encouraging. Virtually all the studies have found that people treat their own money with more care than funds belonging to someone else. Many individuals will appreciate the flexibility in benefits and the added convenience that controlling health care dollars allows.