Are Consumer Driven Health Plans the right FEHB plan for you?

Consumer Driven Health Plans or CDHPs have been around for a while, but we still get lots of questions about how they work. Here’s what you need to know about CDHP’s and why they are one of the lowest cost plan types in FEHB.

How CDHPs work

CDHPs have much higher deductibles than traditional HMO and PPO plans found in FEHB. Depending on the CDHP, the deductible ranges from $1,600 to $2,200 for self-only coverage and $3,200 to $4,400 for self-plus-one or self & family coverage. Before you meet the deductible you’ll pay the full allowed charge for a medical service, and after you meet the deductible you’ll generally pay a percentage of the service which is called a coinsurance amount. The coinsurance amount differs by plan but is generally around 15-20%.

While having a higher deductible can lead to higher out-of-pocket costs, keep in mind the following. CDHP’s tend to have lower premiums than other FEHB plans so many people will save on the for-sure expense of premium. Also, all preventative care is free, before and after the deductible, in CDHP’s. This includes free annual physicals, well child visits, immunizations, mammograms, and more. And finally, CDHP’s fund a savings account that helps you pay for out-of-pocket costs. The combination of lower premiums and the savings account contribution from the plan, make CHDP’s one of the lowest cost plan types available to federal employees and annuitants.

How the Health Reimbursement Account Works

The savings account used with CHDPs are Health Reimbursement Accounts, or HRA’s, in some CDHPs they can also be referred to as a Personal Care Account or Medical Fund. On day 1 of a new plan year, the CDHP will deposit the full amount of the yearly contribution into the HRA. The amount that is deposited varies by plan but ranges from $900 to $1,200 for self-only coverage and $1,800 to $2,400 for self-plus-one or self & family coverage. Qualified medical expenses covered by the plan are automatically deducted from the HRA at the point of service. This continues to happen for any other medical expenses you incur throughout the year until the HRA balance is exhausted. If you exhaust your HRA in a year, then you would pay out-of-pocket for your share of expenses. If you have any money left over at the end of the year, that unused amount will rollover to the next plan year. There is no use or lose penalty with HRA’s. However, HRA’s do have a rollover max of $5,000 for self-only enrollment or $10,000 for self plus one or self & family enrollment. The rollover max will not impact most since any eligible expense will be automatically drawn from the HRA, decreasing the amount that can be rolled over into the next plan year.

There are a few other HRA details that you need to know. You cannot contribute additional funds to the HRA, only the plan at the beginning of a new plan year can fund the HRA. Non-medical distributions are not allowed. Finally, there is no portability of the HRA, the plan owns the account. What that means is that if you enroll in a CDHP and decide to enroll in any other plan in the future, any unused funds in your HRA will be forfeited once you switch plans.

CDHPs with Medicare

There are three national CDHPs with low plan premiums to choose from—Aetna Direct CDHP, APWU CDHP, and NALC CDHP. Of the three, Aetna Direct offers tremendous value to annuitants with Medicare. Aetna Direct waives the deductible and copayments for medical services when Medicare is primary and you use preferred providers. That leaves prescription drugs as one of the only out-of-pocket costs you’ll face in the plan. Aetna Direct offers a Part D prescription drug plan for plan members with Medicare. The Part D plan from Aetna Direct has a $2,000 out-of-pocket catastrophic maximum, something all Part D plans will have in plan year 2025, which reduces how much you’d have to pay out-of-pocket for prescription drugs.

With Aetna Direct, annuitants can choose to use the plan funded HRA contribution of $900 for self-only enrollment or $1,800 for self-plus-one or self & family enrollment to reimburse a portion of the Part B premium. However, keep in mind that any prescription drug costs you incur in the plan will be drawn from the HRA, so you may not be able to use the full HRA contribution for Part B premium reimbursement alone.

The combination of a low plan premium, few out-of-pocket costs besides prescription drugs, and the plan funded HRA, makes Aetna Direct one of the lowest cost FEHB plans for annuitants with Medicare.

The Final Word

CDHPs are one of the lowest cost FEHB plan types for both active federal employees and annuitants. Before deciding to enroll in one, carefully consider your predicted health care expenses to see if the CDHP benefit structure will work for you. Also, before enrolling make sure to check the provider directory found on the plan website to see if your current doctors will be in-network with the plan. Many federal employees and annuitants could save thousands of dollars in estimated yearly costs switching from their current plan to a CDHP.

Kevin Moss is a senior editor with Consumers’ Checkbook. Watch more of his free advice and check if the Guide to Health Plans for Federal Employees is available for free from your agency. You can also purchase the Guide and save 20% with promo code GOVEXEC.