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Self-Directed Health Plans

A Self-Directed Health Plan (SDHP) blends features of a PPO plan with those of a Self Directed Account (SDA). It is funded when a member pays the maximum quarterly allowance and annual balance. This amount goes for medical, health, and preventive care services. Any money deposited to the account but not spent on health care is carried over to the following year. In this way, members can save money for paying their medical costs.

Self-Directed Health Plans come with high deductibles. Although an SDHP does not cover inpatient surgery and emergency room visits, the member’s plan covers what is not paid for by the high deductible. Prescription drugs are covered by pharmaceutical benefits. Members are free to visit the physician of their choice, but lower costs are available for approved medical providers within the network. A Self-Directed Health Plan may cover services that include consultations, physicals, baby check ups, women’s annual check ups, office visits, home visits, immunizations, and x-rays.

Self-Directed Health Plans are most ideal for those who do not require regular health care beyond the usual check ups. Those who do not need to visit the doctor’s office often benefit from an SDHP because this plan allows its members to have health insurance but not to overpay for services that they do not require.

An SDHP does away with most elements of managed care, including gatekeepers, pre-certification review, second opinions, concurrent review, and case management. On the contrary, these plans allow patients and physicians to decide how insurance funds should be spent. While this approach might intuitively result in escalated health care costs, the actuarial strategies employed by it help to reduce the cost of insurance.

If we divide health care spending into routine services, acute and chronic care and catastrophic care, it becomes easier for us to understand how it is possible for SDHPs to manage costs. These plans employ different strategies for each of these categories.

Routine services, for example, office visits and diagnostic tests, are difficult for managed care organizations to control. Gatekeeper strategies and capitation arrangements in most cases cost as much to administer as they save in medical expenditure. Simultaneously, they aggravate a large number of insured subscribers who consume less than $500 yearly in health care services. It is clear that any attempt to control routine services is a waste of time and it is better to simply reimburse providers on a fee-for-service basis.

While the managed care model attempts to control variance of expenditure in acute and chronic care services by controlling physicians’ behavior, Self-Directed Health Plans try to manage these conditions in a different manner. For instance, a patient who decides to have a radical prostatectomy for his prostate cancer would get an allowance equal to the average cost for treating this condition in his geographic region. Depending on the design of his plan, expenditure beyond this allowance may be borne entirely by the patient, or for a slightly higher premium, he may have a maximum exposure of $500 to $1,000. In both cases, the patients feel an urge to pay attention to the cost of health care and to work closely with physicians in making sure they are not wasted

As far as catastrophic care services, including neonates, transplants, and traumas, are concerned Self-Directed Health Plans are contracting with the best possible health care providers for their treatment. Subscribers are still free to opt out of the program and seek service wherever they choose, although their reimbursement will be limited to an episode allowance.



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