As the cost of healthcare continues to rise, many people are looking for new ways to save on their insurance plans. One option to consider is a high-deductible health insurance plan. These plans feature greater deductibles than regular health insurance plans but also come with other benefits that can help make them more affordable overall.
Our independent insurance agents at McKnight & McKnight discuss what exactly makes a high-deductible health insurance plan different and look at some of the advantages and disadvantages associated with these plans.
Key Takeaways:
- A high-deductible health plan (HDHP) is a health insurance policy that has a lower monthly premium due to a high deductible.
- Covered individuals will be responsible for 100% of medical costs (except for preventative care) until they reach their annual deductible limit.
- The federal government defines the deductible amount limits for HDHPs.
Uncovering the Mystery of High Deductible Health Insurance
A high-deductible health insurance plan, also called HDHP, is a type of insurance plan that has become popular in recent years.
This type of plan requires the individual to pay for all medical expenses—including surgeries, in-patient, or out-patient procedures, and treatments—up to a certain limit (the “deductible”) before their insurance coverage kicks in. Deductibles can range from hundreds to thousands of dollars depending on the chosen plan.
Until you meet your annual deductible, you will cover 100% of the cost of all of your care, except for preventative care.
Once the deductible is met, the insurance company will cover a percentage of medical bills and related costs according to the terms and conditions outlined in the policy.
HDHPs are often more affordable than traditional health plans because they require lower monthly premiums; however, individuals should be aware that they are responsible for covering more out-of-pocket costs in advance.
What Does an HDHP Cover?
Thanks to the Affordable Care Act (ACA), you will have coverage with no copay for preventative care services with an HDHP.
All ACA-compliant insurance plans must also include coverage for the following 10 essential health benefits:
- Ambulatory services
- Emergency services
- Hospitalization such as surgery or overnight stays
- Pregnancy, maternity, and newborn care
- Substance use disorder and mental health services
- Prescription drugs
- Rehabilitative and habilitative services and devices
- Laboratory services
- Preventative and wellness services and chronic disease management
- Pediatric benefits, including vision and dental care
Note: Your HDHP will not start paying for these things (except preventive care) until you have met your annual deductible:
Are HDHPs Affordable?
If you don’t have any major medical issues, a high-deductible health plan may be a good choice for you. Since HDHPs have a greater deductible, they offer low monthly premiums, so if you don’t go to the doctor often, are overall healthy, and do not need to cover a large family under your plan, an HDHP could be an affordable option.
However, HDHPs become significantly less affordable if you or anyone in your family needs high-level medical care after a catastrophic medical event. In this case, despite the low monthly premium, you will end up incurring significant out-of-pocket costs.
Also, something to keep in mind; your annual limits will not include coverage for any out-of-network care.
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Health Savings Accounts (HSA) & HDHPs
If you are enrolled in an HDHP, you become eligible to contribute to an HSA. These “health savings accounts” allow you to move pre-tax earnings to an account that you can use to cover medical costs.
Qualifying medical expenses that an HSA can be used for range from:
- Copays
- Deductibles
- Hearing aids
- Bandages
- Acupuncture
- Therapy
- And more
Further, contributions carry over from one year to the next, so you don’t lose the money if you don’t spend it immediately.
Is an HDHP Worth It?
Your current health is a major factor to determine if an HDHP makes sense for you. If you are young and rarely see a doctor or take prescription medications, this type of plan might save you a lot of money.
However, there are other life events you must consider.
- If you are planning on getting married, you should consider your future spouse’s health and age before enrolling in an HDHP.
- If you are planning on starting a family, an HDHP might not be the right choice. The costs associated with hospital childbirth are high and you could wind up paying your plan’s annual out-of-pocket maximum.
- These plans may not be the right fit for families with young children as they may need treatment more often for common colds, the flu, etc.
- Finally, HDHPs are not ideal for anyone with a chronic condition that needs ongoing treatment.
No matter your age, if you’re in good health, and have no reason to anticipate any expensive healthcare costs, an HDHP might be the right choice.
Read More > 10 Ways to Reduce Health Care Costs
Making Healthcare Accessible to All
Choosing the right healthcare plan is an intimidating decision, and while HDHPs can offer flexibility and cost savings, they are not for everyone. It is critical to understand what your healthcare needs and budget are before making a decision.
Make sure to compare different plans, consult with your healthcare provider, and ask our team at McKnight & McKnight any questions you have before signing up for any plan.
Get started by scheduling a phone call with our independent agents today!
