Consumer-Driven Health Plans – Recognize the Impact On Your Practice

from Practice Update, Fall 2006

By Elizabeth W. Woodcock, MBA, FACMPE, CPC

Experts agree that we’ll soon be replacing the term, ‘managed care’, with ‘consumer-driven’ when we refer to health plans. Poised to dominate the non-government health-care insurance market after demonstrating cost savings to employers in desperate need of slashing health-care costs, consumer-driven health plans (CDHP) will impact medical practices significantly.

To Prepare Your Practice, Here’s a Primer on CDHPs

CDHPs are very similar to retirement plans.  Like retirement plans, CDHPs come in many different forms. Most CDHPs feature a taxadvantaged account for health-care expenses called a health savings account (HSA). The HSA serves as some or all of the deductible, which starts at $1,050 for individuals. After the HSA is exhausted and the deductible is met, insurance coverage kicks in.

Unlike traditional deductibles, however, unspent funds in the account carry over to the next year.  The funds are tax-advantaged. Furthermore, consumers can take the account to another employer if they change jobs and can invest the money in their account in mutual funds or money-market funds. Finally, consumers can withdraw funds from their accounts — with a small penalty if they are under 65.

Some consumers receive contributions for the account from their employers, some exclusively from themselves. Some CDHPs have carved out preventive service benefits from the account such that the health plan pays them directly outside of the HSA; others have not.

The design of each CDHP varies, but the intent is the same. In exchange for lower premiums, consumers get an account from which to pay for their health care themselves.

CDHP designers intended for consumers, faced with the prospect of using their own money, to make better decisions about health-care spending. 

It is important to understand CDHPs to identify their impact on medical practices. First, patients with CDHPs will have a greater financial responsibility to your practice. Second, even though there will still be an allowable, the responsibility will be with the patient to pay you, not the payer. Third, and most importantly, patients will have an economic incentive not to pay you. If they don’t pay you, they get to keep the money in their account, invest it, move it with them to another job, and even withdraw it to use for something else.

To Avoid Write-Offs, Follow These Steps to Get Smart About Consumer-Driven Health Plans

Teach your staff about CDHPs. They should be knowledgeable about the concept. Unfortunately, just like managed care, parents won’t understand the nuances of the health plan they chose. Direct parents back to their health plan or employer for questions about benefit design.

Obtain the technology you need to process the debit cards that many CDHPs provide.  HSAs are often tied to debit cards that can be used for health-care purchases. Ask for the guarantor’s “benefit card” or “HSA card” at check-out, and process the payment.

Develop a process to collect more from guarantors than just the co-payment. Review your contracts to determine your ability to collect coinsurance and deductibles at the time of service.

Tighten your collections process. If you’re in the habit of sending 20 statements before getting serious about collections, families with CDHPs will already be on to their next employer using their account elsewhere. Send three statements, and start pre-collections at 90 days.

CDHPs are the wave of the future. To avoid getting drowned, it’s time to get prepared.