Health Insurance Articles
Everything You Should Know About Self-directed Health Plans
2009-12-26
As consumers become savvier about health care insurance, they have begun to demand a greater freedom in the direction of their health care plans. One response to this new consumer need has been the creation of self-directed health plans. These plans are provided via the same insurance companies that have provided traditional health care, but eliminate some of the administrative costs that drive up premiums.
A self-directed health plan functions like a tradition health care plan, providing services in a PPO or "preferred provider organization" framework. This means that there are certain doctors, care centers and medical retailers that the insurance company has partnered with to offer the client discounted services. As well, in the vein of a traditional plan, a self-directed health plan, or SDHP, will pay out for unexpected costs, such as trips to the hospital or sudden illnesses, but will require the payment of a deductible. This allows to SDHP to remain cost-effective, while still providing a high standard of care when necessary.
What makes this plan different from typical health insurance is the creation of a "self-directed account." This is a storage of funds that the client can use to pay for routine medical services, such as checkups, diagnostic tests or immunizations. A self-directed plan will ordinarily operate on a quarterly system, depositing funds into the self-directed account every quarter. If the funds are not used at the end of the quarter, they will "roll over" into the next year, allowing policyholders to save up for large medical expenses. This allows the patient and their primary care provider to determine how best to spend the funds in the SDA, rather than leaving it to the insurance company. It also means that a patient can see any doctor they wish, although they will receive a discount if using a doctor under the PPO of their plan.
In addition to their basic services and the SDA, self-directed plans also allow for chronic care and critical illness services. Chronic care is handled by determining the average cost for a procedure in the patient's area, and then assigning them an allowance based on that average. Critical care is handled by what self-directed plans term "centers of excellence," health providers the insurance company has negotiated with to provide high-cost services. If the patient chose to go elsewhere for treatment for a critical care incident, they would be given an allowance to do so. Self-directed plans have an advantage over traditional plans in that the monthly premiums will be far lower. However, medical expenses can add up quickly, outstripping the balance of the SDA, and while insurance coverage can be provided for unexpected medical issues, the deductible in such cases is quite high.
