Why CDH? (Consumer Driven Healthcare)

Consumer Driven Healthcare, also known as CDH started in the U.S. around the year 2000 in the form of HRAs (Health Reimbursement Arrangements). In late 2003, HSAs (Health Savings Accounts) were legislatively enabled for 2004. However, since a new product takes time for insurance companies to build and file, it was not until 2005 that multiple offerings were available in the marketplace. At this time there are many fully insured and self-insured options for employers and self-employed individuals.

Since its beginnings, CDH, HSAs and HRAs have conjured up great emotions. It is one of those bipolar issues where people are either for or against this new form of health care — and are often passionate about their beliefs. However, most Americans agree that we need to have a paradigm shift in the how health care is delivered and consumed in the U.S. Health care inflation is out of control and utlization is way up. In fact, emergency room utilization for non-emergency services is way up too.

Somewhere along the way from indemnity plans to managed care, Americans began to view their health insurance as a ‘consumable product’. Employers and employees rationalize the amount of health care they ‘use’ (consume) compared to their premiums and whether they are getting a good deal. However, in the most basic form, insurance is a ‘transfer of risk’ to an insurance company in return for ‘peace of mind’ and to ‘protect against large losses’. Think of your homeowners insurance or your auto insurance. We hope we do not have to use these benefits, and if we do not use them, we do not expect to get a refund or rebate at the end of the year. Disability insurance is under-utilized, but again we don’t expect to get money back at the end of the year if we do not have a claim. We certainly don’t want to use our Life Insurance benefit. But again, many people want to get more than a dollar in annual benefit (consumption of services) for every dollar spent on health insurance premiums. This is not sustainable. On the other hand, we are talking about people’s lives and their personal health, so not fair to compare that to homes or autos, however, the general public’s ‘basic premise of insurance’ for ‘health insurance consumption’ is broken. A paradigm shift is necessary so the insured public sees their health insurance as a way to both prevent and treat health related issues, but not expect more than a dollar in consumption for every dollar spent, similar to how we all view our auto insurance. Many see CDH, HSAs and HRAs as the first step towards that shift. It will likely morph and change over time, but bringing the consumer to the table is necessary medicine because healthcare is not free and someone else (the insurance company or employer) is paying the difference between the copay and the actual cost of services..