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What is a consumer driven health plan?

A Consumer Driven Health Plan (CDHP) is a health insurance plan with a higher deductible than other types of health insurance. While the consumer’s annual deductibles and out-of-pocket expenses are higher, lower premiums are paid each month. A portion of the consumer’s health care expenses are paid for with a system using pre-tax dollars from an investment account. When the consumer reaches the annual deductible using that account, the CDHP kicks in to provide the remainder of the coverage. Most people with this type of coverage will spend less per year on health care than others with more traditional health insurance plans.


Learn more about a consumer driven health plan

When do I need to be aware of a consumer driven health plan?

Individuals who are typically healthy and cost-conscious are the perfect candidates for a consumer driven health plan. These people tend to make themselves more informed about managing their health and understand the tax benefits that come with CDHPs. If there are no serious health concerns, or the individual doesn’t visit doctors very frequently, they don’t have to worry about the higher monthly premiums from a more traditional plan.

What is important to know about a consumer driven health plan?

As with any decision you make, you should understand all you can about a consumer driven health plan when you’re considering coverage. There are three types of investment accounts that employers offer employees with a CDHP:

  • A flexible spending account is made up of pre-tax income and allows consumers an option to roll over a certain amount for the next year or lose the unused balance.
  • A health reimbursement arrangement is when the employer funds an account that offers employees reimbursement for qualified expenses related to health care.
  • A health saving account is an account owned by the employee and allows tax-free payment for medical expenses including all current and future costs that qualify.