consumer directed health plan

What is a Consumer Directed Health Plan (CDHP)?
A CDHP is a health plan option for which the family usually has a high deductible of $1500, $2500, $3000 or higher. The individual that has this high deductible is ‘trading’ the high deductible for lower Health Insurance Premiums. Additionally, a family might save money in a health care savings account for use when in the deductible phase. The family can roll over money from year to year in the Healthcare Savings Account.
Do all CDHP plans have a high deductible for well visits at a primary care Pediatric Office? No. Many CDHP plans cover well visits which usually includes vaccines. In most cases, the deductible/co-pay is $0.

How common are CDHP plans?
CDHP plans, due to the ability to save the employer and employee cost on the premium are growing in popularity. It is estimated that approximately 50% of small employers offer this option and between 20-30% of Medium to large employers. Many employees prefer to work with the ‘known’ and therefore select the traditional HMO and PPO plan. In Pediatrics, parents usually try to offer a plan that has more coverage due to the need to treat their sick kids. We evaluated some of our Pediatric groups and noticed that CDHPs are significantly below 10% currently.

How might CDHP Plans impact my Pediatric Practice?
Studies show that patients whom are insured using CDHP plans have between a 10% and 20% utilization rate of outpatient care. These studies do not look at the impact of Pediatrics versus specialists and other forms of outpatient care. Parents with this type of insurance are much more knowable of what their policy covers versus parents whom have traditional HMO/PPO coverage. Many will check to see what the plan covers as well as request generic medications versus branded medications.

How might CDHP Plans impact my collections and AR Rate? If a pediatric practice did not have strong patient responsibility follow-up as well as a high penetration of CDHP plans, the practice might see the collection rate reduced as well as an increase in AR days. The Medical Group Management Association as well as other organizations provides benchmarks for collection rates and AR days. The average collection rate is around 95% of the contract amount with 97% used by many groups as a benchmark. Achieving well above 99% consistently should be the minimum benchmark for each Pediatric Practice. Related to AR days, a pediatric group should have AR days less than 30 (less than 30 days of Accounts receivable) with the goal of being at 25.

Although CDHP plans are just starting to penetrate the market place they will continue to be an offering as the country struggles with rising healthcare costs. Monitoring and Management of CDHP plans is one component that will help improve the success of a Pediatric Practice.

Both cost and quality are important in the Healthcare system. Patients want to be treated and maintain their health with minimal costs to them. Employers want to reduce expenses like Healthcare costs. Health Plans want to provide a product that meets the needs of their employers and patients. The Consumer Directed Health Plan option provides deductible for all services (except well visits) in the range of $1000-$2000 per year. Services include: sick visits, hospital, specialists, as well as medications. A consumer that rarely engages with the healthcare system, could place $2000 in an account and just use the funds as needed (might even last for years). With the change in Healthcare laws, well visits are usually covered with no cost. The value proposition is that the employer and employee save on the monthly premium (or maintain the premium cost), planned/well visits to the physician are usually no cost and the employee can save the money to use for items not covered via the deductiable for the times they access their physician. Sounds like a win! Not so fast…..individuals with chronic conditions, medium and high users of the healthcare system are burden with the $1000-$3000 deductible every year so their total cost might increase (or they ‘avoid care’).

Let’s look at this for a Pediatric Practice. A parent would usually experience $0 co-pay/cost on all well checks and need to pay out of pocket (at the contract rate) for sick visits until their healthcare deductible is established. For patients that do not have chronic conditions whom are not on routine branded medications, this option can save total costs. The issues that this plan design can cause with appropriate Medical Care and/or operational issues to the Pediatric Practice include:
• Patients in the practice that have asthma will need to pay for sick/treatment patients out of their budget (not the plan). This might cause many to not seek routine asthma treatment at the Pediatric Office and instead wait until ‘crisis’ mode. Does this lead to higher ER costs? Does the ‘disincentive’ to gain treatment endanger patients?
• Patients in the practice with ADHD whom also have a CDHP will either spend the $1000-$3000 per year to hit the deductible or will forgo treatment due to the high cost of the treatments.
• In a well-managed Pediatric Practice, the practice should maintain >99% collection rate to contract amount. There will be an extra cost burden with the billing team sending statements to patients as well as follow-up calls. Patients have a much higher default/no-pay rate than insurance companies.

Employers seem to be leaning more toward options like CDHP to control the rate increase in premiums. What are some steps that your Pediatric Practice can take to monitor and manage this trend?
• Benchmark the number of patients with either H.S.A. or CDHP plans.
• Identify if these patients come to the office for both well and sick visits
• Confirm the current collection rate for this subset of insurances. Is the rate the same as the overall practice?
• What is the billing team handling time for managing H.S.A. and/or CDHP plans?

Some employers share in the Health Plan decision making with employees. Most employees do not want any cost increase (similar to employer). When the decision is shared between staying with the traditional plan with a co-pay (no in-network deductiable) and the employee paying an extra $100/month or moving to a CDHP, most employees would pay the extra money per month out of their paycheck. Although this might be the best financial move from them if they rarely use their insurance except for well checks, individuals are usually not comfortable with the change in payment system. As the Health System moves forward, the CDHP is a growing option.