Traditional health insurance plans require you to pay a pre-determined amount in yearly premiums. But what if the amount of medical care you used that year was actually LESS than the amount of premiums you paid? It would have been cheaper if you had just covered the medical expenses yourself.

A consumer driven health plan, or CDHP, allows you to do just that.

Here’s how it works:

Instead of paying high insurance premiums, such as under traditional plans, you agree to pay for routine medical expenses yourself.

You cover these expenses through your own tax-free medical savings account. These include:

• Health Savings Accounts (HSAs)
• Health Reimbursement Arrangements (HRAs)
• Flexible Spending Accounts (FSAs)

If the balance runs out on these accounts, a high-deductible health plan provides traditional insurance coverage, protecting you from catastrophic medical expenses.

Any unused balance at the end of the year may rollover to the next year depending on the account, allowing you to build future funds in your medical savings account.

Consumer driven health plans allow you to budget your own healthcare spending. Since nobody cares more about your bottom line than you, CDHPs empower you to shop for the best value in medical care and choose less expensive treatment options if necessary. As with any purchasing decision, you decide how best to spend your money.