Consumer-Driven Health Plans
What is a Consumer-Driven Health Plan (CDHP)?
Consumer-Directed Health Plans, or CDHPs, use federally-established funding tools, such as Flexible Spending Accounts (FSAs), Health Savings Accounts (HSAs), and Health Reimbursement Arrangements (HRAs), to give the consumer more power in managing health care and its associated costs. Each funding mechanism has tax advantages, contribution and expense guidelines and plan and eligibility requirements.
Patients become educated consumers about how their medical plan works, how to learn about needed care and coordinate delivery and the financial side of health care. Health Plans provides expert account management assistance to plan members, processing eligible expenses for reimbursement, providing secure online account access, and for FSAs and HRAs, offering the convenience of the Benny™ Prepaid Benefits Card, which enables members to access their funds on the spot at the time of service.
Funding Tools for CDHPs
Flexible Spending Account
A Flexible Spending Account (FSA) is a way to pay for out-of-pocket health-related costs using pre-tax dollars. The account is funded through payroll deduction before taxes are calculated and withheld. Participants can use that money to pay for eligible health care expenses that are not paid for by any medical or dental insurance, including office visit copayments, prescription drugs and durable medical equipment. Some over-the-counter items are also covered under an FSA plan.
Prior to the start of a new plan year, participants elect an annual contribution to their FSA plan, and that amount is deducted from their payroll over the course of the year in equal installments on a pre-tax basis.
Health Reimbursement Arrangement
A Health Reimbursement Arrangement (HRA) is a tax-favored employee benefit plan that is owned and funded by an employer, and is used to reimburse participating employees for eligible health care expenses, as defined by the employer. To receive reimbursement, the HRA participant submits valid receipts for eligible expenses to the HRA Trustee, who then issues payment from the employee's HRA Account.
Health Savings Account
A Health Savings Account (HSA) is similar to a Flexible Spending Account (FSA) in that pre-tax contributions may be made to a specified account to be used to reimburse the employee for qualified medical expenses on a tax-free basis. HSAs operate in conjunction with an HSA-qualified High-Deductible Health Plan (HDHP), unlike FSAs which can operate as a stand-alone account. An employer may also elect to contribute to employees' HSAs.
Want to compare?
CDHPs share certain commonalities, but are very different. Review our Comparison Chart to evaluate FSAs, HRAs and HSAs.