This week: Consumer Directed Health Care (CDHC) used to be the future of employee benefits. Today, many employers see it as old news — or worse, a failed experiment. But CDHC didn’t disappear. It changed.
What began as a strategy to empower employees gradually turned into a way to manage budgets. Now, whether employers intended it or not, millions of employees are living inside “consumer-driven” plan designs – higher deductibles and fewer first-dollar benefits – without the tools or education needed to navigate them.
So while the original vision of CDHC may not have played out as expected, the need to support employees as consumers has never been greater.
Two decades ago, Consumer Directed Health Care (CDHC) was one of the biggest ideas in employee benefits.
The theory was straightforward: if employees had skin in the game, paired with education and tools, they would become smarter health care consumers. High-deductible plans combined with HSAs or HRAs, transparency platforms, and ongoing education were meant to align employees and employers around better decision-making.
Adoption followed.
By 2024, about 50% of private industry workers had access to high-deductible health plans, up from 38% in 2015, according to the U.S. Bureau of Labor Statistics. HSAs grew right alongside them: by late 2024 there were roughly 39.3 million HSAs covering nearly 59 million people, holding close to $147 billion in assets, according to Devenir and the HSA Council.
On paper, consumerism had arrived. But implementation is where things started to unravel.
Giving someone a high-deductible plan doesn’t magically make them an informed consumer.
As my good friend Sharon Alt used to say, CDHC doesn’t just stand for Consumer Directed Health Care; it also stands for Consumers Don’t Have a Clue.
She wasn’t wrong.
The original CDHC vision assumed employees would change behavior once they had financial exposure. But behavior doesn’t change automatically — especially in a health care system that even professionals struggle to navigate.
Employers and advisors were supposed to reinforce consumerism year after year with education and guidance. In reality, that rarely happened consistently. Employees tuned out. Enrollment meetings focused on premiums instead of strategy. Tools went unused.
At the same time, health plans became more restrictive. Networks narrowed. Formularies tightened. HMOs expanded. Consumer choice quietly shrank.
Looking back, early CDHC shifted responsibility to employees without redesigning the system around them.
That’s when consumerism stopped being empowerment and started becoming cost shifting.
Fast forward to today, and most “consumer-directed” plans exist for very different reasons than originally intended.
- Employers are often reactive, not proactive, when moving to high-deductible designs.
- Many don’t fund HSAs or HRAs.
- Transparency tools, discount drug programs, and education are frequently missing.
Even incentives changed.
- Fully insured small groups are guaranteed issue and no longer rated on their own claims experience.
- Level-funded plans may offer year-end refunds for lower claims, but savings are often modest.
Small employers feel this most acutely. In 2023, family deductibles at small firms averaged over $5,000, compared to about $3,500 at large firms, according to the Commonwealth Fund.
Meanwhile, research suggests higher deductibles reduced unnecessary utilization but also reduced necessary care. Many employees simply delay or avoid treatment altogether. That’s not consumerism; that’s fear-based health care.
The real reason employers offer benefits isn’t cost control. It’s recruitment and retention.
If employees experience their health plan as confusing, restrictive, or financially stressful, they don’t value it. Some waive coverage. Others leave for employers with stronger benefits.
Today’s HSA-qualified plans, which frequently represent the “base plan” offering, come with deductibles that, without guidance, feel overwhelming for employees.
Whether employers planned it or not, more workers are already in consumer-style plans. So the question isn’t whether employees should be consumers. They already are.
The real question is whether employers will help them succeed — or leave them on their own.
In a high-deductible world, it’s no longer helpful to think of support services as optional add-ons.
For many employees, things like telehealth, advocacy, transparency platforms, and discount drug programs are the benefit.
When traditional copays disappear and out-of-pocket exposure rises, access to care becomes just as important as coverage itself. Navigation support replaces what used to be handled by simple plan design. Pharmacy discount tools often provide more immediate value than the drug benefit alone. Telehealth fills the gap left by missing office visit copays. Advocacy steps in where consumers lack the leverage or expertise to resolve claims and billing issues.
These aren’t peripheral features. They’re core components of the employee experience.
Employers who still view them as “extras” risk offering plans that look adequate on paper but feel unusable in real life.
Employers don’t need to spend a fortune, but they do need to add value where it counts.
- HSAs: Tax-advantaged accounts that give employees flexibility, even without employer contributions.
- HRAs: Employer-funded dollars that can offset deductibles and out-of-pocket costs.
- Transparency tools: Help compare prices for labs, imaging, and elective care.
- Discount drug cards: Often provide better pricing than the health plan and at least bring visibility to pharmacy costs.
- Telehealth: Replaces missing copays with affordable, convenient access to care.
- Advocacy programs: Help employees resolve claims, understand benefits, and find quality providers.
Tools only work if employees know how (and when) to use them.
“Consumerism” isn’t common sense; it must be learned. So education remains the missing ingredient.
Effective education should:
- Teach employees how to use the tools they’ve been given.
- Help them navigate a health care system that feels overwhelming.
- Cover practical topics we often assume are “common sense,” like trying generics first or choosing urgent care over the ER when appropriate.
When employees understand their options, they make better decisions, spend less unnecessarily, and feel more confident about their benefits.
Without education, consumerism doesn’t happen.
CDHC didn’t unfold as originally envisioned; but employees are now living inside consumer-driven plans regardless.
What began as a multi-year behavior-change strategy slowly became a funding approach driven by rising costs. Choice narrowed. Incentives shifted. Education faded.
But consumerism itself isn’t dead. It’s evolving.
The next phase may look less like price-shopping around for lower-priced MRIs and more like employee choice, ICHRAs, reference-based pricing, advocacy, navigation, and structural decision support. System-level consumerism, not individual heroics.
Employers who succeed won’t just buy a plan. They’ll build a strategy – pairing high deductibles with accounts, navigation, advocacy, and education to create a usable health care experience.
As Sharon said, Consumers Don’t Have a Clue. It’s up to employers, agents, and advisors to close that gap.
Quick Takeaways
- CDHC has become cost shifting more than consumer empowerment.
- Employees are already in consumer-style plans.
- Tools now serve as mitigation, not optimization.
- Education remains essential.
- Benefits are ultimately about retention and employee experience.
- The future of consumerism centers on choice, navigation, and structural support.