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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.