The Curse of the Four Letter Acronym – What does CDHC Really Mean?
by Sharon Alt & Scott Mardis
It’s no secret that Consumer Driven Health Plans have emerged as the tool-of-choice for reducing premiums and controlling costs. By introducing High Deductible Health Plans (HDHPs), carriers have been hoping to stem premium increases and increased utilization by transferring costs to individual consumers. While some employers have been able to realize premium relief by moving to HDHPs, employees have resisted the change due to increasing out-of-pocket expenses and plan complexities. As a result, broad implementation of consumer-driven health plans has been limited and satisfaction levels among employees have remained low.
But what does CDHC really mean? Consumer Driven Health Care? Some feel use of the word “driven” sounds to too harsh, like we’re forcing people into a plan they don’t want to be in. Consumer Directed Health Care? That sounds a little more user friendly. Or, is it Consumer Doesn’t Have a Clue? Truth be told it is probably a little of all three. We are to some degree pushing people into plans they’d rather not be in. No one really wants to look at the cost of care, comparison shop, or pay more out of their own pockets. They’re also somewhat clueless when it comes to how to shop for care. A good deal of the responsibility for consumer ignorance falls to the industry, not necessarily to the consumer.
Whatever CDHC stands for either in reality or in the consumer’s perception, everyone is watching and waiting to see if it will work. Right now, it’s all up for debate. What we do know is that the current model for health care financing which isolates consumers from the cost of care is not working and that something must be done.
The logic behind consumer directed health plans is that they will force members to begin acting more like consumers of health care by giving them some “skin in the game.” If consumers start thinking before running to the doctor or asking for the latest, greatest, and not coincidentally, most expensive drug, we should see utilization decrease. As empowered stakeholders, employees should also have a vested interest in staying healthy.
While these are well intentioned outcomes and appealing goals, for many people, this is where the argument for consumerism in healthcare ends. But, if we focus solely on health insurance, we are missing the bigger opportunity - a total benefits solution capitalizing on emerging technology. CDHC alone is not the answer to the current healthcare crisis. Although it is an integral piece, brokers and agents need to focus on the bigger picture to succeed – Consumer Driven Benefits Solution. To unlock the full potential of these new plans, a total solution must include a comprehensive approach that keeps the consumer in mind and provides them with the tools necessary to manage their plans. This approach goes beyond spreadsheeting carrier rates, rather it involves delivering value-added benefits that capitalize on innovative technologies.
A perfect example of value-added technology that compliments a total benefits package is the emergence of flex-debit card integration. Recently, technology has enabled new flex strategies to emerge that incorporate FSA/HRA/HSA administration on a single-platform debit card. In this industry, it is unusual to introduce enhancements to employee benefits and simultaneously generate expense reductions and/or increased profit margins for employers. Utilizing a debit card with and FSA/HRA/HSA compatible health plan enables cost savings solutions to be implemented without significantly impacting the employee.
As with any emerging technology, the key to success is making a consumer’s life easier, more efficient and improving their experience. Although flex plans have been in use for a number of years, debit card technology has revolutionized the process in which participants utilize and access their dollars. It places the participant in the “drivers” seat and allows them to begin directing their own healthcare dollars – key steps for true adoption of consumer driven care. A fully integrated debit card allows the automatic electronic transfer of pretax dollars from an employee account when paying for qualified expenses. Employees are able to receive immediate reimbursement of their medical and dependent care expenses simply by using their card at the point of service. The normal paper claims process is eliminated, as are worries about forgotten purchases or lost receipts.
Use of the card has spread quickly nationwide. It can be used wherever credit cards are accepted, and all charges are paid electronically. For example, the MasterCard® system carves the world into more than 1,000 merchant category codes, each code reflecting whether the merchant is a restaurant, department store, gas station, pharmacy, doctor’s office, etc. The debit card recognizes applicable healthcare, dependent care, and transit MCC/SIC codes, allowing third party administrators (TPAs) to properly adjudicate claims according to IRS guidelines. Some debit card administrators who understand the importance of this technology have taken another step forward and linked their card to Inventory Information Approval Systems (IIAS) at major retailers. These systems are compliant with IRS requirements and exclude non-FSA eligible items from purchases made with the debit card.
Adding Flexible Spending Accounts (FSA), Healthcare Reimbursement Accounts (HRA), and Health Savings Accounts (HSA) in various combinations has made the Debit Card an even more compelling innovation. The key is to work with a TPA who can provide simplicity and plan customization from an integrated platform that includes a single debit card solution and pricing that allows for consolidated reporting and accounting. Selecting debit card technology that is flexible enough to handle a multitude of variations in plan structure is a prerequisite to achieving a seamless compatibility with the electronic payment systems that are critical to these types of plans.
As agents and brokers continue to search for new solutions in this competitive environment, providing access to these programs is critical to future success. Implementing a combination of Flexible Spending Accounts (FSA), Healthcare Reimbursement Accounts (HRA), or Health Savings Accounts (HSA), on a single debit card platform can significantly increase the value of a client’s benefit portfolio. These simple, cost-effective programs provide the keys to unlocking consumer-driven health plans and provide the platform to develop true consumer-driven benefits solutions.
About the Authors
Sharon Alt is President of Alt Benefit Consultants, Inc., and the host of a nationally syndicated internet radio show The Benefits Buzz: Inside Health Insurance in America at www.voiceamerica.com.
Scott Mardis is the President-Elect of the GPAHU and a Regional Sales Manager for AmeriFlex. He will be speaking on “The Evolution of Consumer Driven Benefits” at the upcoming National Association of Health Underwriters (NAHU) conference in Denver.
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