What Is CDHP Health Insurance?

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   Marlin McKelvy

   President, Consumer Directed Benefit Solutions, Memphis, Tennessee

   We insurance people like to use all sorts of acronyms, it keeps us mysterious and sexy. CDHP is the abbreviation for Consumer Directed Health Plan. This is a bit of a fuzzy designation but it is generally used in reference to a high deductible health insurance policy meant to be tied to a Health Savings Account (HSA - see more mysterious letters). An example would be a health insurance policy with a deductible of $6350 for an individual followed by 100% co-insurance coverage after that (this is the maximum allowable in 2014). This plan would have no office visit, emergency room or prescription copayments with all covered services subject to the $6350 deductible. The premium for such a plan design should be meaningfully less than that of a lower deductible plan with copayments. The high deductible health plan policyholder is supposed to take their premium savings and set them aside in a Health Savings Account from which they pay for their routine expenses such as office visits and prescriptions. The amounts a person sets aside in an HSA reduce their net taxable income which reduces their taxes thus saving them not only premium dollars but tax dollars. Unused funds in the HSA can rollover from year-to-year and accumulate on a tax deferred basis over time to build up a financial nest egg that can be tapped into in a person's Medicare eligibility years to pay for future medical expenses.

   Answered on September 12, 2014

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