How do I set up CDHP health insurance?
Setting up a Consumer Directed Health Plan (CDHP) is fairly straightforward. Here is what you need to know:
Definition of CDHP
What is CDHP health insurance? First of all a CDHP or Consumer Directed Health Plan is a combination of 2 different things: a High Deductible Health Plan (HDHP) and a Health Savings Account (HSA). Don’t let all of the acronyms and fancy words scare you because they really are quite simple to understand and to use.
An HDHP is simply a health insurance plan that has a high deductible (the deductible is the amount that you have to pay apart from copays before the insurance company starts to pay for medical expenses).
An HSA is simply a type of tax advantaged savings account that you can open at almost any local bank.
The Advantages of a CDHP
There are some dramatic advantages to using a CDHP. First of all, premiums for a health insurance plan with a high deductible are very low and for the most part everything you would expect health insurance to cover is covered. Everyone enjoys paying as little as possible for health insurance while still receiving quality care.
The reason why the premiums are so low is because you are responsible to pay for all expenses until you reach you annual deductible. Once the deductible is met then
typically all covered expenses are paid for 100% by the insurance company. This is great because it forces people to be more responsible with their health care dollars and it also makes sure that if ever someone does incur a huge medical bill then they don’t have to worry because they will never have to pay more than their plan deductible in any one year.
Another great advantage to a CDHP is that an HSA has some tremendous tax advantages. All money contributed to an HSA (up to IRS limitations) can be taken as an above the line tax deduction, all money in the HSA grows tax free, and all money taken out of the account to pay for qualified medical expenses comes out tax free as well.
Getting Started With a CDHP
All you have to do to set up CDHP health insurance is to purchase a high deductible health insurance plan and then set up a health savings account.
Work with a health insurance agent that can show you many different options from both the CDHP health insurance world and also the traditional health insurance world.
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